I am looking to do a BRRRR deal in Connecticut and looking to see how you guys approach estimating rehab costs on a property. I have come across a few BRRRR deals and have tried estimating the rehab costs myself, but I feel like it might not be the most accurate. Are there are resources, books, etc. that you have found helpful in developing an estimate or scope of work? I also explored the idea of paying a General Contractor to come with me to look at the property and developing a detailed scope of work, that then I can use to solicit bids?
Hey @Samarth Patel , Jay Scott has a great Bigger pockets book on estimating rehab costs, you should check it out. Personally, I'm a bigger fan of the "pay a contractor" method. At the end of the day, it's the contractor that is going to do the work for you, not the book. Therefore, in my opinion, what the contractor says is more important than what the book says.
Plus, once you meet with a contractor enough times, and receive enough quotes, you will get a good idea of what things costs. Let me know if you need any referrals for the Hartford county CT area.
Definitely recommend the Estimating rehab costs book by Jay Scott that @Filipe Pereira suggested. In more expensive states such as CT, I would recommend leaning more towards the upper ranges of cost that Jay talks about in the book. Ultimately getting quotes from contractors or GC's for work will get you more familiar with the ranges of cost, combining the experience with resources like the book is a good approach moving forward and don't forget adding contingency in your own budget.
Thanks, guys! All good advice. I just started reading the book yesterday and so far it's been super helpful in understanding the overall process. @Ian Hogan @Filipe Pereira what is your high-level approach when looking for a deal. Here is my process. First off, when a deal comes through, I would quickly look at the area and neighborhood, then do a drive-by. If I am further interested then schedule a showing, run my analysis, and then finally make an offer. The part where I am struggling is bringing GC to each of the showings. First off, I want to be mindful of their time and second off it can also start getting pretty expensive paying them for each visit.
I guess as Ian mentioned, I will get better with time and experience, but wanted to see how other investors were approaching it.
Taking a lot of pictures and then running it by a GC or do you suggest bringing a GC to each showing and paying them? The latter can start getting expensive I am guessing if we don't move forward with the deals. How do you guys run a deal? Here's what I was thinking high-level, to begin, I would look at the overall area and neighborhood, drive-by, then schedule a showing, run numbers, and then make an offer.
@Samarth Patel I always run numbers before going to or setting up showings to see if it is worth looking at, understanding that there are some unknowns. Generally I'm looking in areas that I'm familiar with but I agree checking the neighborhood and what is around it is a good step. During a showing I'm looking for several things that for me would be turn offs from the property (foundational, large amounts of knob and tube wiring, etc). If it is a major rehab or gut rehab I've taken videos to send my GC's, and at that point is usually when I decide if this is worth walking it or not with a GC as to be mindful of their time and ultimately efficient with your own time. I run my own rehab numbers and get a bid or rough bid before offering, depending how complex.
I'm sure there are different approaches and I think these can also vary depending on your relationship with GC's. Hope this helps.
I've always been a fan of running a thorough bid process. Have 12 folks come out! Not 2! And, trust me, these bids will land all over the place.
You should be running an analysis before you even visit the property for a showing. Know the neighborhoods you want to invest in, find properties that are for sale or potential leads, then run your numbers. If the numbers work go look at the place. If the numbers don't work, you just saved an hour of your time in terms of having to go look at the property.
You may also think about switching to a video walkthrough method for your contractors. Do a 5 minute video of the house, and ask them to look it over. That will save at least 30 minutes to an hour of travel time for them and you may find that they would be willing to discount what they would charge you for a loose quote in terms of rehab numbers.
When you approach rehab costs you should be able to separate them into categories. It makes it easier to analyze than a total scope of work. For example, you should know your material/labor costs for things like paint/tile/floors. Use the same material and basically tell a contractor what you will pay for labor after researching costs. This is an area where you can see substantial savings in a project and get some predictability. When it comes to the trades, electrical/plumbing/mechanical don't try to get it done on the cheap. Getting the major stuff done licensed, with permits, correctly and on time is more important than saving a few dollars. This is not an area of savings and it will ALWAYS come up on a home inspection. However, doing some of the small items like toilet, vanity, face plates, light fixtures, etc. may be able to be done by a handyman or laborer at a significant savings.
Cabinets can be another area where you can save money. I pay someone to design the kitchen, purchase the cabinets wholesale and then get installed by an hourly guy. I broke the process down and separated our the mark ups.
The projects you want to get as many bids as possible will be things like roof, siding, windows. This is where bids can vary in my opinion the most.
The rehab control and cost process is a tricky process but keeping track of historical prices, paying contractors on time, and having a Rolodex of multiple vendors for each task is the key to finding substantial savings.
@Samarth Patel Hey man! After reading this thread, I think listening to episode 399 of the BiggerPockets Podcast might be useful for you. The entire episode is good, but there's one part that talks specifically about having contractor's come to bid on jobs before the property is under contract.
Hope this helps and happy holidays!