Today, we are going to take a deep dive into how you can save some serious money, potentially thousands of dollars, when you're buying material for your flips, repairs, or renovations. This is going to be part 1 of a 2 part series. So, check back in next week as well.
How do you save money, and some really big money, when you're doing renos and flips? When you are first starting out, you are rely on your sub-trades to supply labor and material. The trouble with that is that they will charge a markup, and sometimes a really big markup. That's fair game, as people have the right to make a living too, but you also have the right to save money as best you can. The quicker you can wean yourself off of sub-trades supplying your material, and you supplying your own material, the better.
The trouble is, when you are just starting out, there are no real discounts to be had. As you go around to the various wholesalers and suppliers, they don't know you, you haven't bought from them before, why should they give you a big discount? We always want to use the best quality materials we can buy at the lowest price you can afford. How do you do that?
One way is to flip the thinking around. Typically, when you go into a reno situation, you walk into the building and decide on colors, and flooring and cabinetry etc. Then you go shopping and try to find those materials at a discount. That's hard because you have a limited time to do the renovations and you have a specific shopping list. The chance of you saving money under those circumstances is low. The secret is to go the other way, and have the material already on hand and ready to go. Material that you previously bought at a discount.
A long time ago, I had an interior designer pick out three different color schemes for me. She picked out a gray scheme, a green and a brown. Those are pretty universal, and they work most of the time. She picked the wall paint, flooring, counters, and cabinetry, for these three colors. That saves me the trouble of having to reinvent the wheel on each new job. For example, if I bought one hundred boxes of a really nice sand colored tile a few weeks ago, guess which color palette is going into my next project?
Working backwards like that requires that you have some place to store your materials until the time comes to use them. As soon as you get to a certain volume, I recommend you get a storage locker or garage. That way when you buy pallets of materials, that you know you are going to use, you now have a place to put them. Another example is toilets. You know you will always use them, so when you get a really good deal, buy a few of them.
I tend to use the same lighting and plumbing fixtures, as well as baseboard and casing, all the time. Using the same colors, materials, and fixtures consistently really helps save time and money on repairs in your rental units too. Your repair person automatically knows what parts to bring when they get a service call, and they can use the parts you have in storage so you don't have to pay retail. If you always use the same Moen faucet in your rental bathrooms, have a few of those on hand. They can be used on a new reno or on a repair in an existing rental. Another example is when a dishwasher leaks and ruins a ten-by-ten square foot piece of laminate flooring. The old way, you would be screwed trying to match that exact piece of laminate. You either can't find it in the store, it's been discontinued, or the color is slightly different. My way, you know you have boxes of the exact same thing in storage.
One other tip. Keep track of what you have in storage: quantities, make, model and a picture. That way, whey you need something you can see if you already have it. I was bad for that. I would have something in my garage but forgot I had it. I would then run to Home Depot for a new one and then the next time I was at the garage I would see I already had 4 of them.
In part two, we will talk about how you get discounts. For now focus on:
- Getting away from a reliance on trades supplying materials to you,
- Getting a storage facility as soon as it makes economic sense for you,
- Focus on 2 or 3 colors,
- Buy in bulk when the opportunity presents itself,
- Use the same materials and fixtures on all of your jobs.
For more tips like these or advice on which strategy might suit you best, please read my book on "Comparing Real Estate Strategies"
For more advice on how to increase cash flow with your real estate investments, check out my book on "Cash Management in Real Estate Investment"
Or you can always contact me directly and "Book a Chat"
I look forward to hearing from you.