When a contractor hands you an estimate, it can feel like you’re staring at a foreign language. Between the line items, labor charges, material costs, and mysterious “contingencies,” it’s easy to get lost in the jargon. But for landlords, investors, or anyone managing property, understanding these documents is critical. An estimate is more than just a number—it’s a roadmap for the project, a reflection of the contractor’s approach, and, importantly, an opportunity to protect your bottom line.
Marc Romanelli of Lexington, SC, breaks down the major components of a contractor’s estimate and shows you where you can ask questions, negotiate, or push back to ensure you’re getting a fair deal.
The Anatomy of an Estimate
Before diving into negotiation strategies, it helps to understand the key parts of an estimate. A professional contractor’s estimate usually includes:
- Line Items
These are the individual tasks or pieces of work that make up the project. For example, in a kitchen remodel, you might see line items like “demo existing cabinets,” “install new drywall,” or “tile backsplash.” Each item should include a cost breakdown, which makes it easier to compare bids between contractors. If an estimate lumps everything into vague categories like “renovation services,” that’s a red flag—lack of detail often means fewer opportunities for accountability. - Labor Costs
This section covers the cost of the workers’ time. Some contractors charge by the hour, while others assign a flat rate based on the scope of the job. Pay attention to how labor is calculated. If it seems inflated compared to the timeline you’ve discussed, it’s worth questioning. For landlords managing multiple units, labor costs can add up quickly across projects, making this an area to scrutinize carefully. - Materials
Material costs can vary widely depending on the contractor’s sourcing. Some contractors pass materials through at cost, while others mark them up significantly. Look for details here: Are the brands and types of materials specified? Is there room to substitute more affordable options without sacrificing quality? For instance, the difference between mid-grade and premium flooring can swing thousands of dollars in either direction. - Contingencies
This is essentially a cushion for the unknown—unforeseen issues like hidden water damage or supply price hikes. While contingencies are standard, the percentage matters. A reasonable contingency might be 5–10% of the total estimate. Anything higher should prompt you to ask for justification. - Overhead and Profit
Contractors are running a business, and their markup is how they stay afloat. Typically, overhead and profit margins run between 10–20%. If you see numbers far exceeding this, it’s worth a conversation. On the flip side, margins that look suspiciously low may signal cutting corners elsewhere.
Where Costs Can Be Negotiated
Not every part of an estimate is negotiable—but some definitely are. Here’s where landlords often have leverage:
- Materials: If the contractor allows substitutions, you may be able to source your own materials at a lower cost. For example, buying appliances during a holiday sale instead of through the contractor can save thousands.
- Labor: While you may not be able to change the hourly rates, you can challenge projected hours. Ask contractors to explain how they calculated time for each line item. If one contractor estimates 80 hours for a bathroom remodel and another estimates 40, something doesn’t add up.
- Scope of Work: Sometimes an estimate includes extras that aren’t truly necessary. Review the line items to ensure every task aligns with your priorities. If a line item feels optional—like decorative trim or high-end finishes—you can cut it to reduce the total.
- Contingencies: You may not eliminate contingencies, but you can negotiate how they’re managed. Some landlords prefer a smaller contingency percentage with the understanding that major overruns will require approval before additional funds are spent.
Red Flags to Watch For
A polished estimate doesn’t always equal an honest one. Keep an eye out for these warning signs:
- Vague Language: Phrases like “miscellaneous costs” or “general construction” lack accountability.
- Missing Details: An estimate without brand names, quantities, or clear descriptions leaves room for surprises later.
- High Deposits: While a deposit is normal, anything more than 30–50% upfront should raise questions.
- No Timeline: An estimate without a projected schedule makes it hard to hold the contractor accountable for delays.
Tips for Comparing Estimates
Landlords often collect bids from multiple contractors, but comparing them can be tricky. To do it effectively:
- Line Item Match-Up: Make sure you’re comparing apples to apples. If one estimate includes removing old flooring and another doesn’t, the cheaper bid isn’t necessarily the better deal.
- Labor vs. Material Balance: Some contractors may downplay labor costs but inflate material costs—or vice versa. Look at the ratios carefully.
- Ask Questions: Don’t be afraid to request clarification. A professional contractor should be comfortable explaining their numbers.
Becoming a Pro at Reading Estimates
The key to reading an estimate like a pro is remembering that it’s not just a number at the bottom of the page. It’s a detailed plan, a negotiation tool, and a safeguard for your investment. By breaking down line items, scrutinizing labor and materials, questioning contingencies, and watching for red flags, landlords can move from feeling overwhelmed to being in control.
When you understand the language of estimates, you can spot where costs may be inflated, negotiate from a place of knowledge, and ultimately ensure your project runs more smoothly and more affordably.