Budgeting for MF cosmetic rehab

[Jeff Davis]

We are in the early stages of developing a budget to purchase a 2/3-unit MF in Chicago (Andersonville/Edgewater). Does anyone have any insights on how much we should budget for cosmetic rehab (i.e kitchen/bathroom upgrades, etc)? We would like to be able to establish a healthy target to save for the downpayment, closing cost, and rehab so we have the funds we need to do the work that needs to be done.

Any general rules of thumb or general guidelines would be extremely helpful. Thanks!

[Crystal Smith]

Originally posted by @Jeff Davis:

@Crystal Smith - These details are very helpful and your approach makes a lot of sense. Is there a reliable place to estimate the after repair value? within BP community? This is something we'd need to educate ourselves on as it would help (in my mind) as we analyze different properties from the beginning. 

We estimate the After Repair Value as follows:

• We find the similar properties that have sold within the last 6 months
• The properties must be in the same community and within a one mile radius
• The properties must be updated and/or renovated (If we're going for rental quality we'll look for properties that look like rental quality If we're going for condo quality we'll look for condo quality)
• The room count, bedroom & baths, must be similar (we'll make adjustments up and down if they are not similar)
• The square footage must be similar (We'll make adjustments if the difference in square footage is too large)
• We'll look for a minimum of 5 similar properties- We use 5 because when we have to challenge an appraisal they ask for 5 properties as part of the challenge)
• We use the MLS & a system called REMINE to find the similar properties. If you don't have access to the MLS you'll have to use Zillow or Realtor.com or some other online tool to look at recently solds