When it comes to installing a new roof, homeowners typically focus on the TOTAL price, without giving much thought to what goes into that number.
In this guide, we will discuss how roofers come up with their quotes, and how you can determine if you are getting a fair deal. I will first mention that you should (in most cases) choose a contractor who is licensed, insured and has a good reputation with their past clients. It is important for you – the homeowner, because you want to install a roof that will protect your home for many years to come.
The best, most expensive material is only as durable and long lasting as the contractor who installs it. The last thing you need is to replace your new roof within a few short years, just because you initially tried to save money and hired a sub par contractor.
Quality vs. Price:
All too often, a cheap roof means that it will NOT last a long time. When it leaks, a “cheap” contractor will usually not honor his warranty, and the cost of repairs or replacement will be on you. The bottom line – a company needs to make money to stay in business, to be able to repair your roof if or when the need arises. In fact, because most contractors compete on price, cutting corners has become the norm.
For years, the industry has been torn to shreds by uninsured crews hiring illegal labor, with very little expenses. For honest, licensed and insured roofers, who build a reputation on doing excellent work, it has become immensely difficult to compete in such an environment. In order to get enough work, many of these good crews have to drop prices, and to compensate for lost profits, some also begin cutting corners and reducing quality of work.
How contractors determine your roof replacement cost:
A typical contractor looks at the following factors: Roof size, Slope, Job complexity, Number of existing layers, New material to be installed, Underlayment and accessories, Material waste, Ventilation to be installed, Flashing work to be done, Trash disposal costs, Labor costs, Overhead costs (insurance / advertising / trucks /cost of doing business / etc) and Profit.
Most roofers already have all these figured out, and adjust prices for each individual job, based on these factors. A typical contractor has a base price per “square” (1 square is an area of 10*10′ or 100 sq. ft., and is used in the industry to simplify communication between suppliers, architects, sub-contractors and customers).
On top of the base price per square they add additional factors, such as complexity of the job, amount of flashing to be done, and other items such as ventilation, etc.
What goes into the cost of new roof installation:
Let’s look at an example: typical roof – a ranch house that is 26 feet wide by 48 feet long, and has a pitch of 5 in 12. The size of such a roof is 1350 sq. ft., and with waste of 10%, the contractor will need about 1485 sq. ft. (15 squares) of shingles or other material.
First, the total amount of materials is calculated. On top of materials (usually shingles), he calculates the underlayment (felt or synthetic underlayment and/or ice and water shield), ventilation, flashing, and accessories (nails, caulking, pipe flashing, etc.) needed.
The above items give the contractor cost of materials / square, needed for the job. Having the cost of materials in mind, he already knows how long such job should take, and how many installers + laborers he/she will need. This provides the cost of labor, including taxes and workers comp insurance.
The cost of doing business, or overhead cost is what can differ the most among contractors. However, it is still similar for most licensed / insured contractors. What affects the overhead costs is the type and amount of advertising a contractor does, office expenses, equipment / trucks / fuel, and cost of Worker’s Compensation insurance.
Worker’s Comp can range from 25% to over 40% of the payroll, depending on the state in which the company operates and past incidents. If the company had on the job injuries, the Worker’s Comp rate can jump over 10% easily.
Think of it this way – an installer gets paid say $20 / hr. Working full time, that would be $48,000 / year. On top of that a 40% (or $.40 per dollar of payroll) would be ADDITIONAL $19,200 per year per worker, that a contractor has to pay just for worker’s comp insurance.
In Rochester for example, a typical Worker’s Comp rate for ROOFING, starts at around 38%, before any incidents. If there are any incidents, it can easily go to almost 50%.
Additional and UNAVOIDABLE overhead is income taxes. Uncle Sam takes 35% flat rate form any corporation, and then taxes personal income of the company owner. There are ways to pay a lower rate, or avoid double taxation, using S-Corp, but still, most of the time, the personal tax rate of the business owner is around 35%.
Competition from other contractors who are uninsured, and do not carry any worker’s comp. insurance (or inadequate workers comp. such as SIDING, which is only about 13% vs. 38% for roofing trade) is tremendous.
Contractors have to “sell” based on quality, against LOW PRICES, meanwhile, most homeowners typically look at the total price (LOWEST PRICE), without much concern for what’s included in it.
They also need volume to support needed income. However, once again – a roofing company that does not make money will not be around to uphold the warranty – that is just how it is.
So, how much does it cost to install a roof?
1 square of Lifetime or formerly known as “30 years” architectural asphalt shingles is about $100.
Underlayment and accessories cost another $40-50 / square.
A typical dumpster rental fee is $350 with 2-3 tons of debris allotment. Overall, material cost is about $150 / square + $350 for dumpster + $50-100 for building permit.
Labor cost: If a typical installer gets $15/hr, a foreman gets $20/hr, and a laborer gets $10-12/hr, and you need say 6 guys to rip and install a 15 square job in one day, that gives you 5 guys * $15/hr * 8 hours = $600.
Add a foreman at $160 / day, gives us $780 in payroll. Add another 65% (workers comp, unemployment insurance, payroll taxes).
An average labor cost would then be $1285 to install 1 roof.
Figuring out total contractor’s cost to install one 15 squares roof:
Materials: $150 / square. Labor: $86 / square ($1285 / 15 squares). Overhead: $17 / square (assuming that a roofer does only 1 roof per day). Dumpster + permit fees: $400 or $27 / square.
Total contractor’s cost: $4,186 to install a typical 15 squares ranch house roof, or $279 / square, before ANY profit. If we consider that a roofer makes an average 25% NET profit on each job, before taxes, then our hypothetical roof above would yield $1,046 in GROSS profit. Total cost of this job would be $5,232 or $350 per square.