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 how you can determine if you are getting a fair deal.

I will first mention that you should (in most cases) choose a roofing contractor who is licensed, insured and has a good reputation with their past clients. It is important for you – the homeowner, because you will be buying a new roof for many years to come, and don’t want to replace it within a few short years.

Quality VS Price: All too often, a cheap roof means that it will NOT last you a long time, and when it leaks, a “cheap” 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.

In fact, because most contractors compete on price, cutting corners has become the norm in the industry, which for years has been torn to shreds by uninsured crews hiring illegal labor, with very little expenses. It has become immensely difficult to compete in such an environment for honest, licensed and insured roofers, who do not cut corners when installing protection for your most expensive investment – your home. In order to get enough work, even these good crews had to drop prices, and to compensate for lost profits, they too began cutting corners and reducing quality of work.

How contractors determine your roof replacement price

A typical roofing contractor looks at the following factors:

• Roof size
• Roof slope
• Roof complexity
• Number of existing roofing material layers
• New roofing material to be installed
• Roofing underlayment and accessories
• Material waste
• Ventilation to be installed
• Roof flashing to be done
• Trash disposal costs
• Labor costs
• Overhead costs (insurance / advertising / trucks /cost of doing business / etc)
• 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 a roof 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 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:

Whether the roofer calculates their job per square of roofing area or per square of roofing materials to be installed, the overall number should be about the same.

First, the total amount of materials is calculated. On top of 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 contractor cost of materials / square, needed for the job.

Having the cost of materials in mind, the contractor already knows how long such a roof should take to install, and how many roofers he/she will need on the job – this provides the cost of labor, including taxes and workers comp insurance.

Overhead:

Cost of doing business, or overhead cost is what can differ the most among roofing contractors. However, these are still similar for most licensed / insured 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. 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 Massachusetts 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 roofing company owner. Of course 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%.

Profit:

Of course, any roofer wants to charge as much as they can get away with for a roof installation. However, reality dictates its own terms.  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) 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. 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, but 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?

There is no magic number, and it varies greatly depending on your geographic location, as well as local economic conditions and competition. This is reflected in our roofing estimator, which calculates an “approximate” price of roof replacement. However, we can look at the formula used in our calculator to see how much an average roof would cost.

Cost of roofing materials and accessories:

1 square of Lifetime or formerly known as “30 years” architectural asphalt shingles is about $100. This is set to be increased by an average of 5-9% in the spring of 2013, as indicated by the “roofing materials price increase” notices, that suppliers are now sending out to contractors.

Underlayment and accessories cost another $40-50 / square.

Dump fees can range from $30-100 per ton (2000 lbs.) depending on where you live. 1 square of 1 layer of shingles weighs ~ 250 lbs., or 8 squares per ton. a 15 sq. roof is about 2 tons for one layer to be removed. A typical dumpster rental fee is $350 with 2-3 tons of debris allotment. If a roofer has his own dump truck, disposal cost is about 5-0-60% that of dumpster rental cost (includes salary of the driver and fuel).

Overall, material cost is about $150 / square + $350 for dumpster + $50-100 for building permit. Read our complete Asphalt Roofing Shingles Prices Guide here.

Labor cost:

If a typical roof installer gets $15/hr, and a foreman gets $20/hr, and you need say 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 1 roof.

Overheads costs of a typical roofing contractor:

Lets 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

Lets calculate a 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:

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 profit. Total cost of such a roof would be $5,232 or $350 per square.

Average roofing costs across US and Canada:

It just so happens that in most places and according to most roofing contractors that I’ve spoken to, the average cost per square that they charge ranges between $300 and $400 / square, so our calculation of $350 / square falls right in the middle of that average.

Our roofing calculator formula is in large based on these calculations, but also takes into account additional items, such as chimney / skylight flashing, different roof slopes, houses that are 1, 2 or 3 stories high, different roofing materials, and overall  job complexity. Therefore, you will get different “prices” depending on your home’s conditions.

Other factors affecting roof installation prices across US and Canada:

Among many factors that can affect your total cost, a major one is your geographic location and local cost of living, as well as local economic conditions.

For example, $15 / hr in Boston or NYC is probably a bare minimum on which a working person can “survive” because of high rent and food / clothing prices, while somewhere in the Midwest, or recession-torn areas, $15/hr, can provide a person with a very decent level of comfort. 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’s not uncommon to see prices for a new installed roof to be around $250-275 / square even in the Boston / NY / NJ / DC stretch.

Regional differences:

Although roofing prices and contractor’s cost differ depending on the region (for example in the midwest and the south, roof prices are impacted in large part by the insurance companies, as there is a lot of insurance work there, due to storms, and thus are much lower than in the northeast or the Pacific regions (see our Local Roof Prices Guide for details).

Additionally, here is a separate article about insurance work, and how it affects roofing market as a whole, the quality of work, and price levels – how insurance companies manipulate residential roofing prices