Estimating rehab work for newbie

8 Replies

Hey everyone, I'm just starting out and haven't pulled the trigger yet on a property and constantly refining my proforma model but wanted to seek advice on estimating rehab work.  Most of the deals I'm looking for are going to have some value add work that will need to be done.  Instead of floating some random number in my model for work that I have no experience in yet.  Wondering if folks have some actual costs for major rehab work such as new roofs, new/replace plumbing, upgrade electrical, etc.   

I know that no two properties are the same and everything is with a grain of salt but wanted to get a sense of what I could expect per square foot.  


I should mention that my strategy is to buy and hold for cash flow so not flipping so different scope of work than those flipping for appreciation.  I'm also looking at multifamily.

THanks,

Daniel 

Others that know how to hammer a nail on here may have a better idea, but I would start by building relationships with local contractors. Having a good partnership can go a long way not only for this property but for others in the future. They can give you a ballpark on cost for construction. Also, I would ping your local REI meetings for those that have done similar work. Based on your area, labor cost can be the biggest difference in expenses.

@Daniel Petta The ONLY WAY to accurately calculate rehab costs is by walking the property. You'll want to develop a scope of work for each room and write (or type) notes for issues you find. After that you start pricing materials and factor in labor (the most expensive aspect) to complete the renovations. Finding contractors is huge. I don't have advice for that because I'm not in your market. I took the approach to learn some skills, DIY, and hire contractors for big ticket items. Your approach could be different but that's why distressed properties are fun.

You'll find real quick the best deals do NOT REQUIRE massive rehab. Kitchens, baths, flooring, HVAC, water heaters, and roofs are a must fix but if you're new to flipping or remodeling don't buy a challenging property. You'll find more surprises (every property has them) that cost you money and more importantly time. The longer it sits empty the more it costs you. 

If you're buying for cash-flow renovate with durable materials that look OK and be happy with boring finishes. It's a rental property so renovate it and run it like a business. You'll increase the value either way if you bought it correctly. Make sure the breakable/ touchable plumbing fixtures are new. That's where you'll get water leaks in the future. Replace the doors and locks. The hinges and door frames get beat up after years of abuse. Actually repair and test things on tenant turnovers. You'll fix issues before they break on Sunday evening at 9pm. Cheers.  

Originally posted by @Cody Lewis :

Others that know how to hammer a nail on here may have a better idea, but I would start by building relationships with local contractors. Having a good partnership can go a long way not only for this property but for others in the future. They can give you a ballpark on cost for construction. Also, I would ping your local REI meetings for those that have done similar work. Based on your area, labor cost can be the biggest difference in expenses.

Thank you!

Originally posted by @Jaron Walling :

@Daniel Petta The ONLY WAY to accurately calculate rehab costs is by walking the property. You'll want to develop a scope of work for each room and write (or type) notes for issues you find. After that you start pricing materials and factor in labor (the most expensive aspect) to complete the renovations. Finding contractors is huge. I don't have advice for that because I'm not in your market. I took the approach to learn some skills, DIY, and hire contractors for big ticket items. Your approach could be different but that's why distressed properties are fun.

You'll find real quick the best deals do NOT REQUIRE massive rehab. Kitchens, baths, flooring, HVAC, water heaters, and roofs are a must fix but if you're new to flipping or remodeling don't buy a challenging property. You'll find more surprises (every property has them) that cost you money and more importantly time. The longer it sits empty the more it costs you. 

If you're buying for cash-flow renovate with durable materials that look OK and be happy with boring finishes. It's a rental property so renovate it and run it like a business. You'll increase the value either way if you bought it correctly. Make sure the breakable/ touchable plumbing fixtures are new. That's where you'll get water leaks in the future. Replace the doors and locks. The hinges and door frames get beat up after years of abuse. Actually repair and test things on tenant turnovers. You'll fix issues before they break on Sunday evening at 9pm. Cheers.  

Good advice.  I've seen alot of complete rehab deals and I was already thinking that this is too much work regardless of the discounted purchase price.  I agree that I'd like to find something with cosmetic rehab needs.  

I'm guessing that from this thread I'm really just going to have to go through with my first one to get my beak wet to then understand what the costs could be.

Originally posted by @Daniel Petta :
Originally posted by @Jaron Walling:

@Daniel Petta The ONLY WAY to accurately calculate rehab costs is by walking the property. You'll want to develop a scope of work for each room and write (or type) notes for issues you find. After that you start pricing materials and factor in labor (the most expensive aspect) to complete the renovations. Finding contractors is huge. I don't have advice for that because I'm not in your market. I took the approach to learn some skills, DIY, and hire contractors for big ticket items. Your approach could be different but that's why distressed properties are fun.

You'll find real quick the best deals do NOT REQUIRE massive rehab. Kitchens, baths, flooring, HVAC, water heaters, and roofs are a must fix but if you're new to flipping or remodeling don't buy a challenging property. You'll find more surprises (every property has them) that cost you money and more importantly time. The longer it sits empty the more it costs you. 

If you're buying for cash-flow renovate with durable materials that look OK and be happy with boring finishes. It's a rental property so renovate it and run it like a business. You'll increase the value either way if you bought it correctly. Make sure the breakable/ touchable plumbing fixtures are new. That's where you'll get water leaks in the future. Replace the doors and locks. The hinges and door frames get beat up after years of abuse. Actually repair and test things on tenant turnovers. You'll fix issues before they break on Sunday evening at 9pm. Cheers.  

Good advice.  I've seen alot of complete rehab deals and I was already thinking that this is too much work regardless of the discounted purchase price.  I agree that I'd like to find something with cosmetic rehab needs.  

I'm guessing that from this thread I'm really just going to have to go through with my first one to get my beak wet to then understand what the costs could be.

100%. Best advice is to find an ugly ducking and start swinging some hammers. Connect with other local investors and hire contractors for projects way out of your league (electrical, roofing, windows, HVAC, dangerous jobs, etc). You'll be on the right path if you do that. I think otherwise you're playing house with with retail buyers looking for cute HGTV properties. 

@Daniel Petta The costs for different rehab items varies by location. Example, in Houston a re-roof is roughly $200 per square of roof. Only if the roof is not 2 story or steep. Electric is approx $90-$95/hr. Contractors charge more if they know you are an investor.

Originally posted by @Shelby LeBlanc :

@Daniel Petta The costs for different rehab items varies by location. Example, in Houston a re-roof is roughly $200 per square of roof. Only if the roof is not 2 story or steep. Electric is approx $90-$95/hr. Contractors charge more if they know you are an investor.

Thank you for this.  Yeah, I'm going to start contacting general contractors in the area I want to invest in and see what I can get back from folks.  Good advice about knowing that I'm an investor but truth is that I won't be able to hide this from them.  I hope to find a GC that works with out of state folks and doesn't charge too high of rates.