Property Owner Guide

Investment Property Material Costs: Who Should Pay?

As a real estate investor, landlord, or property manager, talking to a home renovation contractor about paying for materials on an investment property improvement project can feel unpleasant. As a property investor, you want to minimize your costs to keep your margins high. Additionally, you may have had materials missing or stolen in the past by bad home improvement contractors, so you’ve now taken the approach of asking home improvement contractors to cover the costs of materials. This approach may not sit well with seasoned home improvement contractors, and you could be losing out on thousands of dollars.

Here’s an example of a real estate investor seeking home improvement contractor referrals on Facebook and requesting that the home improvement contractor cover the cost of materials:

As you can see in the example above, the home improvement contractor communicates that he will have to charge a markup on materials if he must cover the costs.

How Much do Home Improvement Contractors Markup Materials?

First, let’s start with why home improvement contractors charge upfront down payments and material markups. Material markups vary from one project to the next, but it’s typically related to how much of the home improvement contractor’s own money they will have to put up if you’re requesting them to cover the cost of materials. You will find that many home improvement contractors will be hesitant to cover the material cost because if the project doesn’t work out, then they’re stuck with the materials and will be financially at a loss. Additionally, they would be at a loss without a markup due to time and gas money shopping for and hauling materials.

Home improvement contractors markup materials as much as 35% so be sure to know what you’re getting into when you request that they cover material costs.

Material Costs Have Increased in 2022

The cost of certain materials has gone up and the cost of lumber has been volatile. One reason materials have gotten more expensive in recent years is due to supply chains being disrupted by COVID. Contractors continue to experience the after-effects of the pandemic, including a shortage of construction materials and a sharp increase in construction costs that can lead to decreased profits.

The cost of home improvement materials normally increases annually due to inflation (an issue that contractors faced even prior to the pandemic). However, the inflation that accompanied the pandemic has been significantly different and has largely impacted material costs. The U.S. home improvement industry is heavily dependent on foreign construction materials. Because COVID-19 is a global pandemic, it caused closures and delays at international factories that produce these materials. As a result, the supply of home improvement materials dramatically decreased in the U.S, and what remained became much more expensive.

Way’s To Save Money on Materials

While you can’t control the supply chain issues, you can find ways to save on your material costs.

Use the FREE Renozee App and get competitive bids directly from immediately available home improvement contractors that compete to win your business. All bids submitted must show if material costs are included for full transparency. Thanks to the free Renozee App, it is easier than ever to find and hire home improvement contractors for completing any home and investment property renovation project. Simply post your project and receive unlimited live bids through the app directly from local home improvement contractors. Using the FREE Renozee App can save you time, money, and headaches when turning rentals between tenants or renovating properties for flips.