How to estimate 200+ unit apartment complex rehab cost?

6 Replies

Any help on this is much appreciated. I've had an off market, bank owned rehab deal brought to me by a broker we've bought from before and trust. My specific question is how to go about inspecting a complex this large and putting together a detailed, accurate figure for what it will cost to rehab the complex.

I have no problem modeling the financials for a stabilized property, evaluating the market, etc. We operate in that market already, have effective management experienced in doing rehabs, etc. We have three decades of our own operating data in several different markets to build projected NOI for this property,

But we have not done a distressed physical rehab before.

I have been given a price for the complex, and a price for the rehab, and a financing package from the bank which has taken the complex from its owner that includes funding for the rehab costs, and good LTV.

The complex is operational but is over 40% vacant, and is the classic story of an owner who gradually drained their property, eventually lacking the money to do unit turns.

What I would like to do is bring in an independent team to walk the property unit by unit and build out a detailed rehab budget - a team without the conflict of interest of being hired by the bank who owns the property, or being brought in by my existing management firm.

Should I hire tradesmen with specific skills (electrical, drywall, plumbing, roofing, etc.) and pay them each a fee to walk the property? Should I hire a contracting firm to do the inspection?

We need to get this number reasonably accurate in order to model the ROI. It is a value add with margins that look pretty sweet - but if the rehab goes double or triple what's been projected then the deal quickly goes from sweet to "meh."

For the work itself, we are looking at around 100 units which need to be rehabbed - I would prefer to do the work all at once - so should I be dealing with only mid-size to large contractors?

Thanks in advance!

Hiring a tradesman will give you a trade price, and you will need multiple trade bids, you will also have to cover whatever the tradesmen bids doesn't cover, trash, exterior, permitting, etc. A GC will cover that, but it will tend to be more expensive if they are not self performing. We knock down hotels at a rate of 20-25 rooms per week per team, we have done 3-4 teams, but are best running 2, this is on a self-performing scenario and not juggling subs. That could translate to something like 20-25 per 2-3 weeks depending on what you need done. Just make sure if you choose any bigger, they might be union shops. Let me know if you need any help, and we would like to bid on it if it is a possibility. Not sure if it's even CA.

Interior and Exterior work determination is a good start but is too broad. That could be a long SOW, in order for that to be accurate, it should be a two part, one is sampling, walk every type and list down the sow at a worst case scenario, multiply, sum, to verify rehab numbers provided by others. After you buy it, then it's time to go through one by one and tick "off" the items you don't need done on a particular apt, sow for each unit. If it varies within 50 sf, it shouldn't be of much different in labor cost and material can be absorbed by wastages and allowances. The savings of the ticked off items should offset any changes of work and surprises, or savings at best. These alone takes about 2-4 weeks of dedicated work if done continuously, SOW determination, material sourcing and pricing, schedule making, soliciting of bids, and bid selection.

I would engage a local general contractor.  They might charge you for their services.  What I've done in the past is hire a GC for estimating or pre-construction services.  I still bid out the work to 3 GC but in the event that the GC that provided the preconstruction services is the lowest bidder, I get credited back the fee I paid for preconstruction.

Good luck to you, Chris.