When it comes to installing a new roof, homeowners typically look at the overall price, without giving much thought to what goes into that number. In this guide, we will discuss how roofers come up with their numbers, and give you a better idea why a new roof costs so much.
At West Side Roofing, we will first mention that you should chose a roofing contractor who meets the highest quality standards. Do your research. It is important because you will be buying a new roof for many years to come, and don’t want to replace that expensive roof within a few short years. All too often, a cheap roof means that it will NOT last you a long time, and when it leaks, a cheap roofing contractor will usually not honor their warranty, and the cost of repairs or replacement will be on you. The bottom line — a roofing company needs to make money to stay in business, to be able to repair your roof if or when the need arises.
How roofers determine your roof replacement price:
Most roofers already have all these figured out, and adjust prices for each individual roofing job. A typical roofing contractor has a base price per square (1 square is a roof area of 10 x10 or 100 sq. ft.). On top of the base price per square they add additional factors, such as complexity of the job.
Let's look at an example: (typical roof) a ranch house that is 26 feet wide by 48 feet long, and has a roof pitch of 5 in 12. The size of such a roof is 1350 sq. ft., and with waste of 10%, the roofer will need about 1485 sq. ft. (15 squares) of shingles or other roofing material.
Cost of materials and labor:
First, the total amount of materials is calculated. On top of roofing materials (usually roof shingles), the roofer 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 roofer a cost of materials / square, needed for the job. Having cost of materials in mind, the roofer already knows how long such a roof should take to install, and how many roofers he/she will need on the job.
Cost of doing business, or overhead cost is what can differ the most among roofing contractors. What affects the overhead costs is the type and amount of advertising that 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.
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, 40% would be an ADDITIONAL $19,200 per year per worker, that a contractor has to pay just for worker's comp insurance. In Ohio for example, a typical Worker's Comp rate for ROOFING, starts at around 38%, before any incidents.
Additional and UNAVOIDABLE overhead is income taxes. Uncle Sam takes 35% flat rate from any corporation, and then taxes personal income of the roofing company owner.
Of course, any roofer wants to charge as much as they could for a roof installation. However, reality dictates its own terms. Competition from roofing contractors who are uninsured and do not carry any worker's compensation insurance is tremendous. Contractors have to sell based on quality, against low prices. Homeowners are wired to look at the total price (lower price) first, without much concern for what's included in that price.
With all the competition and expenses, a contractor needs to make at least 25% NET profit on each job to stay in business. They also need volume to support needed income. If volume is low, net profit must be higher than 25%. Profit can and will vary among different roofing outfits, and will in great part depend on the volume.
So, how much does it cost to install a roof? There is no magic number! Price varies greatly depending on your geographic location as well as local economic conditions and competition.
Cost of roofing materials and accessories:
Overall, material cost is about $150 / square + $350 for dumpster + $50-100 for building permit.
If a typical roof installer gets $15/hr, and foreman gets $20/hr, and you need 6 guys to rip and install a 15 square roof 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 one 15 square roof.
Overheads costs of a typical roofing contractor:
Let's say a roofing contractor hires 1 secretary / office manager at $18/hr, rents an office / storage for about $1,000 / month, buys liability insurance for $7,500/year, and spends $500 / month on advertising, and about $200/ month on utilities, as well as $1,000/ year in office supplies and equipment. On top of that each truck insurance is about $1,500 / year, + $1,500 / year in maintenance and repairs. Fuel costs for an average work truck is say $4 per gallon of diesel fuel. Having a 15 MPG, and driving 30,000 miles per year, a truck will use 2,000 gallons of fuel / year, which is $8,000.
Let's calculate hypothetical roofing contractor's overhead cost:
Office manager salary: $36,000 + 18% for Workers comp, taxes, unemployment insurance = $42,800 / year.
Office / storage rental: $12,000 / year + $2,400 in utilities = $14,400.
Advertising: $6,000 / year.
Insurance: $7,500 / year.
2 Trucks: $9,500 / year * 2 = $19,000.
Office supplies: $1,000 / year.
Miscellaneous: $1,000 / year.
Total overhead cost: $91,700 or $251 each day of the year!
Figuring out total contractor's cost to install one 15 squares roof:
Labor:$86/square ($1285/15 squares).
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 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 profit. Total cost of such a roof would be $5,232 or $350 per square.
Average roofing costs across US and Canada:
The average cost per square ranges between $300 and $400 / square, so our calculation of $350 / square falls right in the middle of that average. This roofing calculator formula is in large based on these calculations, but also takes into account additional items such as houses that are 1, 2 or 3 stories high, and overall roofing job complexity.
Other factors affecting roof installation prices across US and Canada:
Among many factors that can affect your roofing cost, a major one is your geographic location and local cost of living, as well as local economic conditions. Additionally in urban areas cost of materials, insurance and other overhead costs are typically higher than in suburban away from civilization places. On top of local costs of living, there are many uninsured roofers, who hire illegal workers, and have a much lower overhead. Therefore, it is not uncommon to see prices for a new installed roof to be around $250-275 / square in the Cleveland area.
We at West Side Roofing understand that price is a large part of your decision making process. We simply want to share this information with you to help you understand everything that is involved with your roofing project. The old saying of, "You get what you pay for," really does apply to a lot of things in life.