Rehab Tip: Materials Discounts

October 2, 2008 · 7 comments

One of the big advantages I believe I have in this business is that I am planning to scale quickly; if leveraged properly, that scale should provide me the ability to attract good team members, good deals, and good discounts. This week, I realized that leveraging that scale for good discounts may be even easier that I expected.

I’ve been buying most of my materials for my first three rehabs from Home Depot. With the exception of some flooring (carpet, hardwood) and some special-order items (countertops, cabinets), everything has come from Home Depot. In fact, I’ve spent over $10,000 at Home Depot in the past two months.

This week my brother and I walked into Home Depot again to place an order for doors and windows for The Second Chance house. I expected the order to come to about $1500, and while I didn’t know exactly what to expect, I went to the Contractor’s Desk to ask about any discounts I might be able to get for a bulk order like that. The guy at the Contractor’s Desk sat my brother and me down for about 30 minutes, and explained the various “special” programs available to those who buy a lot from the store. This included everything from revolving credit accounts to points programs to purchase tracking to other incentives for large and repeat buyers. But, there was one program that I wasn’t aware of that outdid all the rest — the “Pro Bid Desk.”

The Pro Bid Desk is basically a program for those who walk into Home Depot ready to purchase $2500 or more in a single transaction. The store will take your purchase list, send it to the “Bid Desk” up at the corporate office, and within about 12 hours, you’ll get a “bid” on your purchase price. Basically, what this means is that Home Depot will offer you your entire purchase at a discount — generally 15-40% off retail! Obviously, they do this because their competitors (Lowes, for example) do the same thing, and they want to make sure you don’t take your volume business “across the street.”

Anyway, when the guy at the Contractor Desk found out that I was buying $5000+ worth of merchandise a month, and suggested that I never pay retail again. Basically, he said that if I bundled my orders into $2500 purchases or more, he’d send them to the Bid Desk and get me a discount. So, while my door and window order for this week only came to about $1500, I decided to add about $1000 worth of other materials I knew I’d use in the coming weeks (a case of door knobs, a case of deadbolt locks, fans, light fixtures, etc). My total order came to $2792, and Jim (my “guy”) told me he’d call me the next morning with the bid. The next morning, Jim calls and tells me that he can sell me that $2792 worth of merchandise for exactly $2139, a nearly 24% discount just for putting the order through the Bid Desk!

The next best part was that after I handed Jim my card to pay for the order, I just walked out of the store. Jim had someone go to gather everything I bought (15 doors, 4 windows, and about 2 dozen boxes of other materials), and stored it away for my contractor to come pick up that afternoon. Not only did I save 24% on my purchase, but I saved about an hour of having to get all the stuff, take it to the register and figure out where to store it from my contractor.

Considering I’m spending about $5000-10,000K per rehab on materials, an average savings of 25% can easily add up to $40,000 or more per year in this business. For $100/month I can rent a storage unit and really buy materials in bulk — perhaps getting even more than 25% off in some cases. I like this scaling thing…and if you prefer another store over Home Depot (like Lowes), I bet they’ll do the same thing…

7 responses to “Rehab Tip: Materials Discounts”

  1. Rm89004 says:

    This is the best information that anyone has every shared about flipping houses and reducing cost. I especially like the idea of bundling purchases and storing the materials in self-storage unit until needed. Great stuff!

  2. Bilgefisher says:

    I have to agree with Rm. This is huge even for smaller operations such as mine.

  3. MVG says:

    Fantastic info, I am going to try. By the way , do you share your spreadsheet progams for your business? I am just starting out.

  4. Felicia says:

    I would be so curious to know how close a Lowe’s bid would come to that price…

  5. J Scott says:

    Generally, Lowes and Home Depot are pretty comparable price-wise. I live in Atlanta, and I’m about 2 miles from the Home Depot headquarters, so there are a lot more HD stores here than Lowes. That’s the reason I use HD.

    If I lived somewhere else, I’d probably use both for different things…

  6. JACOB EVANS says:

    I would suggest getting bids at both Home Depot and Lowes. I’ve also read on that in addition to this tactic you can use a 10% off coupon (bought on ebay) to have the items that weren’t already reduced by the bid desk, reduced by 10% on top of the original bid! An added savings of 10% on items not already discounted…

  7. J Scott says:

    Jacob – I think I was the one who wrote that BiggerPockets post… 🙂 The other trick I didn’t mention (on here or at BP) is that you can generally purchase gift cards online for about 8% off face value, saving another 8% on materials. We average 23% off retail on our materials these days, which saves a LOT of money over time.

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