Building on a budget: Using rebates to widen profit margins as the housing market shifts

Nationwide, industries are feeling the strain of inflation and continued supply chain shortages.

In construction, we’re seeing a small break from high material costs as things like lumber, steel and exterior paint start to decrease in price. Still, construction costs are likely to remain high as other expenses eat into cost savings gained with material costs. (Namely, energy cost, labor shortages and tariff rates.)   

This economic uncertainty isn’t just affecting builders. Home buyers are also experiencing financial barriers as they plan on future construction projects. And, as home buyers shy away from big projects, builders may see ripple effects in construction schedules and projected revenue numbers.

Knowing this possibility, now may be the right time to evaluate your construction budgeting and budget-friendly build strategies. Investigate ways to keep your costs low and buyer interest high, without adding stress or manual work to your to-do list.

A perfect example? Rebates.

They can seem complicated or hard to manage, rebates are actually a low-lift way to strengthen cash flow, support financial strategies and build on a budget ­– even as the market continues to shift.

Rebates: an overlooked way to save money in home construction

There are many kinds of home rebate programs available, but many builders overlook them­­­ as a way to lessen expenses.

In some cases, builders may assume they’re already getting the best price on material goods, especially if they have an established relationship with a manufacturer. Others may be aware of rebate programs, but feel like they’re too labor-intensive to manage. Maybe they worry the programs aren’t worth the cash value offered when you fulfill your rebate claim. If those are things you’ve experienced – just know there’s a better way.

Rebates are a useful method to save money on a variety of purchases. Appliance, energy efficiency and general home rebates are all prime examples. They can help you evaluate your offerings often to ensure you’re getting the best prices available. With the help of a rebate management service or group buying program, you can reduce the manual work required to claim your cash earnings.

When leveraged effectively, rebate programs can deliver hundreds to thousands of dollars in rebate returns, depending on the scope of your build. Across your entire portfolio of projects, that kind of rebate return can add up quickly and improve your profit margins.

How rebate programs benefit everyone

While rebates have a clear benefit for builders looking to strengthen their financial strategies, there are benefits across the home building industry. See how everyone in your network, from manufacturers to home buyers, can get the most out of rebate programs.

Manufacturers

Manufacturers typically use rebates both as a tactic to move inventory, generate revenue and build customer loyalty.

Often, rebates are dependent on sales volume, meaning that the discounts don’t kick into effect until after a builder has purchased a certain number of materials or goods. This ensures inventory stock is moving continuously for a manufacturer and generating revenue, even factoring in the discounts they’re paying after rebate qualifications are met.

As far as customer loyalty goes, builders (and their buyers) become accustomed to using certain product lines and brand names. This builds loyalty among those bases when new projects begin.

Builders

Builders use rebates to save money every step of the building process, from planning through to the last install.  

Although rebates don’t help shoulder the burden of upfront costs, you can put some money back into your pocket after you’ve delivered on your end of the rebate incentive program.

Depending on which rebate programs you use, how many materials you’re purchasing and your construction timelines, you may even be able to anticipate the amount of money that’s paid back to you. Proactively anticipating that return of income can help builders better prepare your budgets and strategize cash flow.

Buyers

If a builder chooses, they can pass some rebate benefits on to home buyers and potential home buyers.

With rebates available on everything from appliances, to electric components, to heating and cooling systems, rebates can offer premium products to buyers, sometimes more cost-effectively than if sourced at retail value. Some of these programs can help pay off for buyers in the long run, too (for example, savings from energy efficiency rebate programs can lower future energy bills).

As the housing market tightens, builders can leverage rebate programs to help entice buyers who may otherwise try to wait and see if material costs decrease.

Tips for building a house on a budget in 2023

We’ve established that rebate programs can help your construction company’s financial strength. But, how do you actually put it into practice? Here are four key tops to set up a rebate strategy that can lend itself to a strong financial outcome for your business.

Reexamine your manufacturer relationships

Just as you should consistently evaluate your relationship with subcontractors, you should also assess your relationships with manufacturers. As much as we’d like to think otherwise, long-time relationships don’t automatically equate to the best prices or quality for your current business needs.

As you begin your assessment, factor in things like reliability and reputation alongside dollar-to-dollar comparisons on material bids, quality and variety of products. Then, include available rebate programs into your decision making.

Some manufacturers could offer a wide array of materials, but only offer a rebate program with a single product line. Others may offer many rebate programs, but have more difficult rules and conditions built in to rebate agreements. Weigh each relationship carefully and determine what relationship can deliver the most ROI to your bottom line.

Examine market demand from buyers

Before you sign any agreement, make sure you’ve done your research. The last thing you want is to be contractually obligated to a supply company’s specific type of material, product line or service, only to find out that potential buyers are demanding something else entirely.

Examine orders from your recent builds and use them to identify any patterns in buying habits. Then, cross-reference your findings with potential buyers, realtors and manufacturers until you’ve landed on a supply chain that will satisfy your budget and your buyers.

Choose affordable materials that qualify for rebates

After you evaluate your market’s wants and needs, line them up against what products you can source that qualify for rebate programs. This is especially important now, as we’re still feeling the strain of disrupted supply chains. Be sure to keep availability and delivery timelines in mind.

Within available rebate programs, weigh the cost of materials against available rebates. Then, factor in for available funds at the time of purchase. Make sure you have enough cash on hand at any given time to fulfill any deposits needed to secure your materials, even if you’re anticipating rebate funds to circle back to you later on.  

Use rebate management tools

Incentive programs can be difficult to manually track and manage, especially when the time comes to file a claim – a fact which has turned some builders off of rebate programs in the past. This is where a rebate management tool can come in handy. It simplifies the process, tracks status of fulfillment and helps you follow through on what’s needed to claim your cash.

Use these tips as an actionable way to widen your profit margins. When used in tandem with financial tools and software specific to builders, you can keep your projects on budget, attract new buyers, and strengthen your cash flow, even as market costs continue to fluctuate.