Increased Material Cost for Rehab?

Question

Hi All,

I'm new to the community and been looking into starting BRRRR investing. One thing I've heard multiple times from friends (one who is a contractor himself) is that material costs for rehab have increased dramatically the past year. For those of you with a lot of experience, are you seeing this with current projects? Has it increased your rehab costs by a certain percentage?

As excited as I am to get into the game, I can't help but feel like I missed it by a year and won't be able to find deals that will be worth it after rehab. So, I guess I could use some encouragement that it's still been possible or the honest truth, it's just not a good time for BRRRR right now.

Colleen F. · Answer

Yes, Lumber costs are up. Not sure about other materials but there is a significant increase. At the beginning of Covid  production was shut down and then when it resumed it was assumed that building would fall off but it didn't so supply remains down. In addition imports of wood from Canada/China have tariffs.  Transportation costs are up.

Dan Maciejewski · Answer

Yes, material prices have gone up.  That link goes to a Builder magazine article quoting lumber prices.  From what I hear, it's pretty much all material.  I have heard it's been stabilizing, but who knows?  China is the manufacturing capital of the world, so trade issues affect contractors.

That being said, builders are building and flippers are flipping.  Margins may or may not be tighter.  Deals may or may not be scarcer.  There is always opportunity in every situation.

Home prices are still going up and money is still historically cheap.  Deals are still out there to be had.  Focus on scarcity and that's what you'll find.  Focus on success and you'll be able to see it when it presents itself!  You can definitely add value to a ton of houses, and in essence, that's what the BRRRR method is all about -- adding value!

Good Luck!