Who is the Right Person to Buy Your Fix and Flip Project Materials?

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Some gurus will tell you to let the trade people buy the materials for themselves. There apparently have been some issues in their experiences that have supposedly clouded the issue of whether these people are employees or contractors. Apparently, this issue went deeper than material acquisition.

For Example:

If you tell someone that they must be on the job from 9 to 5 and you will be paying them an hourly wage, they will be viewed as an employee. The material purchases will be irrelevant. However, if you buy the construction materials and the trade people set their own time of when they come and go, and charge by the job, they should be viewed as contractors. My experience as a flipper and accountant tells me that whoever bought the materials is irrelevant to determining whether someone is a contractor or an employee.

Knowing whether a worker is an employee, or a contractor is relevant from a tax perspective. If the person is an employee, you have social security taxes and Medicare taxes that must be withheld and paid. You also must withhold income taxes. You really don’t want to have to deal with that situation if you can avoid it. At year end you must provide a form W-2 as well.

On the other hand, a contractor is on his own for paying the appropriate taxes. The contractor is in business and must fill out his own tax return forms and account for the taxes appropriately. You only need to provide the contractor with a form 1099 if you pay that person $600 or more.

You can make your purchase from Big Box Companies, which are places like The Home Depot and Lowe’s. These are good places to go to when purchasing quite a bit of material for your rehab project. Some items need to be picked up at specialty stores or outlets, but for the most part you can get most construction material at The Home Depot and Lowe’s.

There are some things from these places that some of the trades people do not like using. Some sheetrock installers complain that the heads of the sheetrock screws from Lowes were snapping. So, we got them elsewhere. Also, there may be a preference for some electrical and plumbing supplies at places other than The Home Depot or Lowe’s. The complaints, however, are few.

There's one thing that is very important for you to know - you should be aware of the bid room. Not many people know that The Home Depot and Lowe’s have something called the “Bid Room.” If you have an order of more than $2,500 at Lowe’s or The Home Depot you have to tell them, you want to go to the Bid Room. When you tell them that they will check your order and give you a discount that can be significant. The best way to handle a potentially large order is to take time to walk around the store and identify items that you may use. Keep a list for all current and future projects. Do a spreadsheet and Identify the item, the item number and SKU number as well as the current price. This may take some time, but it will pay off.

Try to order as much as you can in one order. All the appliances, lumber, lighting, carpeting, hardwood flooring, electrical supplies, plumbing supplies, roofing materials, paint and other things that you may need. Once you know what you need and place the order you can take delivery in phases. You do not have to have everything delivered at one time. In addition, if you overorder you can take items back for a credit. If you get a Lowe’s credit card you can get a quick 5% discount on any purchase, large or small. If you go to the Home Depot and show them your Lowe’s card you can get that same 5% discount.

They will never tell you that, but you will get the discount. Some contractors who have had very large orders will check at The Home Depot to see what the discount is then go to Lowe’s. Lowe’s will try to beat the price from The Home Depot and, if the order is large enough you can end up with a 20 or 25% discount.



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