Investor · Tampa, FL · Member since 2021 · 33 posts · 17 votes
Hello everyone,
I heard that when estimating costs for rehabbing a Multi-Family Purchase, some investors will estimate rehab costs as being somewhere from $10 to $25 per square foot. A 1200 sf unit would range from about $12,000 to $30,000 under this method. If you need major items replaced you may need to estimate them separately.
Obviously, bringing a GC would be best, but what do you think about this method? And/Or as an experienced MF investor, what do you recommend when estimating a value add deal without the presence of a GC?
Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
4y
It totally depends on what needs to be done. Current condition, goal level of finish, what is going to be replaced/updated, etc.
No matter what you use, make sure the costs are based in reality. I recently spoke with a passive investor who looked at another sponsor's deal - their rehab budget included $1/sq ft to redo the floors. Total fantasy land. Can't even get half decent materials for that, let alone the labor to remove the old floor, repair subfloors, and put down the new flooring.
Investor · Tampa, FL · Member since 2021 · 33 posts · 17 votes
4y
I totally understand. I know that if I lock up a property under LOI, I can send my GC with my General Inspection team and the GC will get me that info. Now, prior to locking it up is where I’m trying to refine. I’m not talking about major stuff. Just cosmetic upgrades excluding major appliances as well which are easy to find out.
The question then becomes, how one can roughly estimate 1 unit. If I can estimate 1 unit, then all I have to do is to multiply times the # of units.
So basic items like flooring, kitchen cabinets, painting, bathroom cabinets and bathroom sinks. The items that give a new look to the place. Not cheap but not luxury either. Just standard.
Do you analyze value add deals like this? How would you do it before obviously sending and LOI and getting the deal under contract. Just wondering how successful investors are doing realistic estimates
It totally depends on what needs to be done. Current condition, goal level of finish, what is going to be replaced/updated, etc.
No matter what you use, make sure the costs are based in reality. I recently spoke with a passive investor who looked at another sponsor's deal - their rehab budget included $1/sq ft to redo the floors. Total fantasy land. Can't even get half decent materials for that, let alone the labor to remove the old floor, repair subfloors, and put down the new flooring.