Am I paying too much

10 Replies

Hey guys, 

So I’m on my second flip ever currently. I live in New York on Long Island and I’ve bought both of my houses in a cheaper area of Long Island in Suffolk county.  My first flip started January of last year and we made some money but I feel like we spent way too much on the rehab. the total rehab ended up being around $70k in total. 30k went to the contractor for labor and 40k went to materials. I thought that was too high and we were just inefficient in our approach so I tried to reevaluate everything for this second flip and it seems like this flip will cost close to $100k in rehab between the contractor, the materials, the new boiler and roof etc. So I’m wondering are most rehabs this expensive and that’s just the cost of doing business in New York? Or am I doing something wrong. 

Any advice would be appreciated. 

Thank you,

Felix Perez

@Felix L Perez It is impossible to answer your question accurately. Renovation budget depends on many factors, including size, quality of finishes, among many others. Figuring these things out before purchasing a property is extremely important to be profitable. Let me know if I can help you in any way.

@Chris Mignone  @Brian Van Pelt  

so the house is in the Shirley/Yaphank, NY area and we got it for 170k. It needs:

New roof

Siding

New kitchen

Wood floors

New driveway 

New bathroom

New windows

Add bathroom in the basement but no need to finish the basement 

High hats throughout house 

New boiler 

Reposition door from side to the front since there was no real front door 

Upgrade electrical panel 

this is projected to be a 100k rehab for a house in a cheaper area and I just want to know if that sounds relatively accurate or too high. 

To do all that work at that price sounds very reasonable. I’m an experienced rehabber in Suffolk. 100k is very normal for me. Building materials are very expensive have gone up almost 15% in the last year and the cost of labor on LI is higher then any where in the nation. 

Originally posted by @Felix L Perez :

@Chris Mignone  @Brian Van Pelt  

so the house is in the Shirley/Yaphank, NY area and we got it for 170k. It needs:

New roof

Siding

New kitchen

Wood floors

New driveway 

New bathroom

New windows

Add bathroom in the basement but no need to finish the basement 

High hats throughout house 

New boiler 

Reposition door from side to the front since there was no real front door 

Upgrade electrical panel 

this is projected to be a 100k rehab for a house in a cheaper area and I just want to know if that sounds relatively accurate or too high. 

 If the numbers work for the exit price, then I see no reason not to move forward.  The only suggestion I have is perhaps to get multiple bids.

Hi Felix, 

Those numbers sound good as a minimum.  Keep in mind if you need plans or permits in Brookhaven, that will increase your carry number and may require a different level of renovation based on code.   If you sell it with a broker add the 4% fee as an expense.

You have a lot of big ticket items on that list, so it will be pricey.  Do a bit of shopping around for flooring, cabinets and hardware to get good ones at a good price.  Even though the house was $170K, if the renos come in on budget at $100K and you can sell for $300+K, then you're good. 

I agree with @Scott Wolf . Getting multiple bids and leveling them against each other is a great way to determine if you are overpaying and to find new reliable subcontractors at competitive prices.

Always remember to ask for references to vet out new subcontractors.

Best of Luck!

Alex Furini, RA