Rental Property Investor · Downey, CA · Member since 2017 · 347 posts · 25 votes
Hello,
I know each house would vary on how much to spend on its renovation costs, however, is there like a rule of thumb of a certain perecentage of the ARV price that someone should spend on renovations cost so it wont be to expensive which could lead to having less equity in the home?
@Horacio Gutierrez There is no rule of thumb because rehab costs vary widely.
For example I previewed a rehab property a couple of days ago that was a gut, right down to the studs. Horse hair plaster pulling away from walls and ceilings, knob & tube, tons of trim needing repair, kitchen and bath from the 1930s, plus it needed a new septic. That’s probably $125K in rehab.
Right now, I’m in another rehab (I’m doing an open house). It needs a new (small) kitchen, new bath, paint, refinished hardwood floor a little light carpentry). The rehab budget here is about $50K.
I’ve seen others that need paint and very light refreshing. Those budgets can be under $10K.
So in the end, it depends entirely on the scope of work.
@Horacio Gutierrez There is no rule of thumb because rehab costs vary widely.
For example I previewed a rehab property a couple of days ago that was a gut, right down to the studs. Horse hair plaster pulling away from walls and ceilings, knob & tube, tons of trim needing repair, kitchen and bath from the 1930s, plus it needed a new septic. That’s probably $125K in rehab.
Right now, I’m in another rehab (I’m doing an open house). It needs a new (small) kitchen, new bath, paint, refinished hardwood floor a little light carpentry). The rehab budget here is about $50K.
I’ve seen others that need paint and very light refreshing. Those budgets can be under $10K.
So in the end, it depends entirely on the scope of work.
I’ll expand on @Charlie MacPherson that not only does it vary for the house, but also the investor. Some investors find a niche in full guts. $100K, down to studs and re-laying out floor plans. Other investors focus on the change out carpet, new paint, and done for $10k. So not only is it the house, but your expectations as an investor.
The other big factor is how much work you are doing yourself vs. how much you are farming out. Flooring, drywall, new cabinets instead of refinishing yourself, etc. can cost a lot. The one I'm doing now needs a new furnace, AC, and new wiring. That's at least $10,000 right there that I wouldn't have to put in a place that already had them. This one already had the roof done so that saved me a lot since it's a 2 story barn type house.