Purchasing and Pricing
Like many multifamily builders, Foster gets the lumber and materials he needs for his apartment projects from a blend of yards, dealers, and brokers. Bulk purchases come through brokers such as the Great American Trading Co., or large dealers such as HD Supply; smaller yards fill in the gaps as needed. (Those smaller orders are worth serving. Foster spends $20,000 to $45,000 monthly on fill-in orders.)
Local lumberyards “try to make sure they are price-competitive, but they don’t have the purchasing ability” that larger firms do, Foster believes, and those costs matter in multifamily. “As a rule, multifamily is more price sensitive,” he says. “Take a product such as reflective sheeting for a roof. The homeowner recognizes the value of that, but the renter does not because it’s not an investment.”
That’s an important distinction for dealers to remember when pitching a multifamily customer. Will a product translate into greater rents for apartments at that property? Sometimes it will. Foster says green products such as energy-efficient appliances and insulation have started to be incorporated in multifamily projects.
“In garden style, you can’t justify the additional costs. But in the denser projects, you can do it,” he says, because it gives the property a green marketing edge with younger renters.
Before dealers bid a multifamily job, though, they’ll want to ensure they are talking with the right person on the project and know their needs. Purchasing approaches vary. Some companies, such as Gables, buy materials such as lumber, brick, and light fixtures direct, and then hire the labor required. “Those are such high-dollar items that it’s better for us to buy them,” Wilber says. Other multifamily builders prefer turnkey approaches whenever possible, even on drywall and siding.
Finally, dealers should quote prices, particularly on commodities, that they can live with for the long term. “I need price commitments through the life of the project, which can be six to eight months,” Wilber says. Unlike new homes, where a house finished at the development’s end can sell for more than a house completed at the beginning of the community, rental apartments cannot absorb material cost increases that way, because they all rent within the same price range, regardless of when they were finished.
