How to estimate and begin construction?

Question

Andrew Syrios · Answer

First of all, I would recommend getting @J Scott's book The Book on Estimating Rehab Costs, which you can get here: http://get.biggerpockets.com/flippingbook/

Kuba F. · Answer

@Daniel Winschel Welcome to BiggerPockets. Sounds like you're on the right track with your research, and I get how daunting the design aspect can be.

If you were flipping houses, the design process is an easy fix and I would highly recommend an interior designer to take a look at your blank slate. We hired one on our last flip and the minimal cost was worth every penny. We knew exactly what items we needed (including size and color, paint color schemes, countertops, etc.), and exactly what work was needed to create the vision, and we worked those costs into our construction estimate.

However, you are talking about a House Hack or a BRRRR, in which case you just need to get the property into a habitable state, with some flourishes thrown in to make the place more homey and attract renters. My recommendation is to find similar properties that are renting in the area and see what their conditions are, especially if you can get a look at the interior. That will give you a better idea of how to improve (not over-improve) a property you are thinking of purchasing.

Speaking of purchasing, you can't purchase comfortably without knowing all of your costs and being able to analyze a deal. With rehab project costs, for example, at a minimum you need to know how to do a walk-through on a property with a checklist, and then estimate construction costs so that you can intelligently vet contractor bids. I wrote a BiggerPockets blog post outlining common projects and their average costs here: https://www.biggerpockets.com/blogs/8814/72452-how-to-estimate-construction-costs-for-these-29-common-rehab-projects

As far as analyzing deals, this post explains how to find comps and calculate ARV: https://www.biggerpockets.com/blogs/8814/68395-how-to-find-real-estate-comps-and-calculate-after-repair-value

Finding comps for multi-family properties is slightly different than finding them for SFR, generally in that you often have to widen your area and go back farther in time to find them as they are not sold as often, nor are they as common as SFR.

Happy investing and feel free to reach out if I can help.

Grant Rothenburger · Answer

@Daniel Winschel Go to the events area on BP, find a meetup and go network with investors and ask them your questions. In-person meetups have been my best resource.

James Wise · Answer

Nothing of value is free my man. You gotta pay to play.

James Wise · Answer

You'll want to get some contractors to walk properties with you & give you bids. This should start to give you an idea of what things will cost. Note that you'll likely need to pay for these bids as you would be seen as an extreme long shot to turn into a paying gig by the contractor at this point & time. No worries though, the education you will get will be well worth the price.

Patrick Jackson · Answer

How would you think a software service that caters solely to the project management of a flip/rehab would work for you?  I’m almost ready to release. Follow me for updates.

John Leavelle · Answer

Howdy @Daniel Winschel

Excellent questions.  This is how I started doing it.

First, If you haven’t already, get J Scott’s “The Book on Estimating Rehab Costs “ available here on BP.  It will provide you a good foundation on the process.

Second utilize your teams experience.  Realtor’s and Property Manager’s are in these properties all the time.  They have a good idea what the current trends are and what is going out.

If you have a good contractor they also can provide guidance on the different quality of finishes.

After you go through a lot of potential properties you will start developing a sense of what you need or want in your property.

Gary Swank · Answer

@Daniel Winschel When you have an Investor experienced agent, they often can help you with ARV. There are also several articles that discuss how to estimate rehab costs. Also many agents who are in properties every single day of their lives, can also offer home design tips of what works in today's market, and what renovations will offer you the most return on your investment when it comes to resell. Best of luck to you....Gary

How to estimate and begin construction?

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