Whether I am investing in flip deals or rent properties through BRRRR or any other strategy, forced equity seems to be a strong tool to build wealth and help drive success for us. One of the tons of the topics I have had trouble with is assess repair costs. I am curious how other people started making educated estimations for repair costs? I'm sure some people have a background in construction, and some have had close friends to help guide their estimating powers. About my own experience- I worked as a hired hand for a flip in 2009, and ended up getting really sick, so I could not continue for that job, then got distracted by other life things, so I did not get back into the craft, until now... I am hoping to pick my Dad's brain, as he was an electrical inspector here in Denver for a couple decades, so he knows a lot of the contractors around here, which should be a good source, but how do I develop my own skills in the area? I can definitely learn by touring houses with contractors, my dad, other investors, etc. But is there a way to try to hone my skills, possibly looking at rehab pictures, estimating costs, like some sort of online tests or something? Also, I'd love to see how other investors tour houses to try and glean some information off of the experience!
Get 3 bids for each project and, over the course of time, you will learn ballpark estimates. I didn't know anything about rehab costs until I purchased my first flip.
BP also has The Book On Estimating Rehab Costs. I've never read it but I have read some of their other books and they are chalk full of good advice. It's probably a good place to start.
I learn the fastest when I try my hand at projects and the money comes out of my wallet. And then I compare with quotes from others. 65% of the cost I have found is the prep work. Demo is 1 thing, but preparation of site ready for new materials is something else. It's is method where I can evaluate time and cost of materials appropriately. Ironically, by doing this and engaging in conversations with other people I have found a few quality craftsmen that have really helped. i.e. If they can do in 1 hour what I can do in 3, it is a better use of my time to hire them. I hired for a bathroom remodel recently. I figured if I screw it up and then needed help it would cost me about $3,500. I received a quote for $2,500. I took the quote and I was pleasantly surprised about the experience. Sometimes, I have found that my ability in time and materials matches that of quotes. Those are quotes I stay away from.
I suppose it all depends on how you see yourself doing the repairs.
Do you see yourself doing them by yourself or are you going to hire out.
Personally I LIKE to do the work myself. It's my hobby or my stress relief if you can believe it. I do work a bit slower than most contractors, and I usually do the main work myself. I hire help for demo, landscaping and painting. I do the drywall-taping, framing myself and for plumbing & electrical I will do most of the minor stuff myself but for large items or stuff that needs to get a permit I will hire out.
Having said all that, if/when I estimate repair/reno costs it's always good to have an understanding of the materials that you will use.
What does a can of paint cost you? How much area can you cover with that paint?
What do studs cost you in your area? What would it cost you to frame a wall 10' long?
How much does sheetrock/drywall cost per sheet? Standard 4x8 sheet how many will you need to do the room?
Those are just the basics that you should be able to do in your head. Each electrical outlet is another $3. I ballpark $200-500 for each window. $300 for each exterior door and $100 for each interior door. $4/sq foot for flooring.. you get the idea. Now I will usually add 20% after all calculations for waste. And if I need "help" I usually pay my hands $100 a day, for professional trades people you can expect $300 a day
I would highly recommend J. Scott's book on estimating rehab costs: https://www.biggerpockets.com/store/flipping-estimating-physical
Howdy @Vance Corich
Get J. Scott’s Book. Download the spreadsheet based on his book from the FilePlace as mentioned. Go by one of the big box stores. Using the spreadsheet write down prices for each material type and quality. When you walk through a property fill in a copy of the spreadsheet as you go. Run the numbers on your computer to get your estimate. If you are doing all the work just add an additional 20% for the unknown issues that pop up. Otherwise walk with a contractor and/or home inspector to learn how.
There are several apps in the "app stores" that can help. I start ballparking at $35 a sqft.
Thanks everyone! I do have J. Scott's book, and I am currently reading through it. I just downloaded some checklists and worksheets. My plan is mostly to hire out to contractors, because I work six days a week. I love my job, but it ties up most of my time. In order to get any gains from a flip, I would need to spend more than the three hours a day working (which is currently all I have) so I need to find some really reliable contractors in Denver. Ill definitely talk to inspectors and such as well.
@Vance Corich my experience with inspectors is that they have little idea what things cost. They would be better at defining the scope of work but in my experience they never or rarely see what things cost. Sure the permit has a dollar value but the cost of the permit is based on the dollar value of the work so there is an incentive to use low values for the work.
One exercise I have found educational is to pick a project and then make a list of all the supplies you will need to do it. Watch a few youtube videos to get an idea of what is needed. Take that list to Home Depot or Lowes and price out everything you will need. It can be eye opening. On larger projects you can add another 150% to 200% to the price for labor. I highly discourage that approach if you are actually going to risk money in the outcome because some items have high labor costs and some items low labor costs and if you project favors one or the other your number will be way off.
@Bill S. Thank you for your input! I will absolutely use that to my advantage. I assume there is an initial estimation of costs done to make an initial offer on a place (or to determine if it is worth the investment), then a more thorough estimation, followed by further negotiation?
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