I’m new to investing and am trying to figure out how to calculate construction and development costs.
Say if you find a deal online or while you’re driving and want to pursue the analysis in a bit more depth, how do you benchmark your construction hard and soft costs? Do you base it off of a cost PSF basis based on the area or is there a rule of thumb that you use?
Curious to see how people approach this part of their deals and what you can advise. Thank you!
@Justin Henry generally this comes from experience of doing it and learning what things cost. If you don't have experience then Borrow experience of others. Network with other investors and go look at their deals and talk about the numbers. You can also pay a contractor to go take a look.
Yes some people do use a SQ ft cost but that can vary tremendously. J Scott has an excellent book on estimating rehab costs. You can find it under the bookstore tab above.
@Justin Henry per sq ft costs mean absolutely nothing; a bathroom is going to cost 10x more than a living room per sq ft to build. You really need to do a breakdown of the various trades / scope needed on the project and then use local average costs for the same kind of work to get your pricing