Estimating Rehab Costs
Investor · Member since 2021 · 20 posts · 15 votes
Hello BP community.
I was wondering if anyone had any advice or different systems they use to estimate what the rehab price would be of a property. I am trying to wholesale distressed properties in MA, but am having some difficulty knowing how much rehab prices should be, even for just a simple cosmetic rehab. I have read books like "Estimating Rehab Costs" by J Scott and the book on "Flipping Houses" by J Scott but still find it hard to get a pretty accurate estimate for rehab. I know BP has the rehab calculator but for that I believe you need to know what the prices are of whatever you are fixing.
If anyone can help it would be really appreciated!
As a rehab contractor I will say that the easiest way is too take plenty of pictures of the home. Get shots of the roof, gutters, yard, windows, doors, kitchen (with cabinets open and closed), flooring, furnace and hot water tank, electric service panel, plumbing from the water main. Get good pics of the bathroom(s) and wide shots of the walls and ceilings in the room.
Send these pictures to your preferred contractors and ask them for a snap price that you do not intend to hold them to. Add 20% onto their pricing and this will give you a good ballpark number
I have a couple, but the most accurate is to facetime my contractor while walking the property. Sometimes I'll look at it and just use my gut feeling which is typically within 10-20% of the rehab costs. I am almost done completing a rehab and it has been very beneficial for me in terms of estimating costs. I got multiple bids for each job and have a good idea of what things will cost. Google proved to be pretty inaccurate when doing my research. The trick is figuring out what needs to be done to get top dollar or meet your goals in the most efficient way. This is where I went wrong on my rehab (I over rehabbed). But it is still worth it just for the first hand learning experience. If you buy at a decent discount you have plenty of room for error IMO.
@Paul Veronis estimating rehab costs is a burdensome assessment and will depend on several variables including material cost. For the quick and easy, you can calculate rehab estimates utilizing the cost per square footage method dependent on the condition of the property. With that being said, your numbers could range from $15-100 per square foot. Moving forward, when you view a property, I would create a specific scope of work (SOW) to provide to your contractor to gauge the overall estimate. Some rehab estimate apps may be worthwhile looking into, but I would not solely depend on them. Hope this helps!
@Paul Veronis, I find J. Scott's book to be pretty close to what I am spending on rehabs in today's market (or at least when I bought his book about a year ago).
You happen to hit on my pet-peeve, which is people thinking they can wholesale deals without having done rehabs themselves. But, I can appreciate your desire to be remotely accurate by even posing this question.
At the end of the day, your best bet is to meet with contractors to tour properties. As a wholesaler, your value proposition could be aligning with a quality contractor, who has already seen the project and refer that contractor to your investors when presenting the project. But the reality is, most investors will have their own contractors and work scope in mind, and run their own numbers based on what they believe they will spend. I.e. my wife and I do much higher end work than most flippers, we also get noticeably higher prices compared to other flippers.
Therefore, while using J. Scott's book is a good starting point and what I would use in the near term, I would focus on being accurate on the ARV, where you have more data. As you build your business, just continue to talk with your investors: watching what their rehab scopes are, what their sale prices are relative to your initial estimates, and asking them to let you know what they spend. Then you can continue to customize your listings to your investors. Just like any realtor, the more you can bring the right house to the right buyer, the better your business will run and grow.
Thank you @Taylor Dasch, @Michael Dumler, and @Evan Polaski! I appreciate your feedback
As a rehab contractor I will say that the easiest way is too take plenty of pictures of the home. Get shots of the roof, gutters, yard, windows, doors, kitchen (with cabinets open and closed), flooring, furnace and hot water tank, electric service panel, plumbing from the water main. Get good pics of the bathroom(s) and wide shots of the walls and ceilings in the room.
Send these pictures to your preferred contractors and ask them for a snap price that you do not intend to hold them to. Add 20% onto their pricing and this will give you a good ballpark number
No shame in rough averages if starting out. E g huge gut jobs could be $50 foot all in. Minor touches $10 foot all in. Asking around in your area and getting this memorized could help especially if just for wholesaling. The end buyer is going to do their own due diligence anyway so I wouldn’t try to perfect the bid too much. I respect that you are trying however that’s awesome.
Using a price per SF for estimating rehab costs is one of the worst ways to do it as it is the most inaccurate! I have posted many times in many threads on how to perform this task in great detail. Do a search or look through any of my many posts in the past on this topic.
Essentially, you need to NOT rely on others (like contractors or inspectors) to perform this task, you need to know how to do it and after practicing many many times and using the right tools, you can eventually do it in your head in 15-30 minutes while walking through the property.
You need a spreadsheet (several free downloadable ones on the BP file place at the bottom of any thread page), fill in your local numbers for material and labor costs for each line item and then break up the home into sections. Kitchen, bath, flooring, paint, landscape, HVAC, electrical, plumbing, roof, stucco/siding, etc. Once you know the average general price for each area, you simply walk through, label your scope of work and add up the numbers. It is not rocket science but it does take lots of practice so get out there to open houses for fixers and start practicing once you have your spreadsheet filled in.
Using a price per SF for estimating rehab costs is one of the worst ways to do it as it is the most inaccurate! I have posted many times in many threads on how to perform this task in great detail. Do a search or look through any of my many posts in the past on this topic.
Essentially, you need to NOT rely on others (like contractors or inspectors) to perform this task, you need to know how to do it and after practicing many many times and using the right tools, you can eventually do it in your head in 15-30 minutes while walking through the property.
You need a spreadsheet (several free downloadable ones on the BP file place at the bottom of any thread page), fill in your local numbers for material and labor costs for each line item and then break up the home into sections. Kitchen, bath, flooring, paint, landscape, HVAC, electrical, plumbing, roof, stucco/siding, etc. Once you know the average general price for each area, you simply walk through, label your scope of work and add up the numbers. It is not rocket science but it does take lots of practice so get out there to open houses for fixers and start practicing once you have your spreadsheet filled in.
In my experience as somebody who isn't particularly handy I would just try to find a solid General Contractor to rely on for this. Many of them once they know the goal with the property and the types of finishes you want to use can give you a ballpark estimate from photos or quickly walking a property, which can help you get offers out there efficiently.
As a wholesaler you have so much to learn with marketing, estimating ARV's, negotiating with sellers, finding buyers etc that anything you can easily and quickly delegate to someone else is a no-brainer in my mind. Good luck!
@Paul Veronis If you are just getting started I'd recommend walking through a couple properties with a GC and pay them for their time. Other than that I would take a video walkthrough and talk through everything you want done with the property. From that they should be able to get a decent idea of what you want without having to go out to the property.
Using a price per SF for estimating rehab costs is one of the worst ways to do it as it is the most inaccurate! I have posted many times in many threads on how to perform this task in great detail. Do a search or look through any of my many posts in the past on this topic.
Essentially, you need to NOT rely on others (like contractors or inspectors) to perform this task, you need to know how to do it and after practicing many many times and using the right tools, you can eventually do it in your head in 15-30 minutes while walking through the property.
You need a spreadsheet (several free downloadable ones on the BP file place at the bottom of any thread page), fill in your local numbers for material and labor costs for each line item and then break up the home into sections. Kitchen, bath, flooring, paint, landscape, HVAC, electrical, plumbing, roof, stucco/siding, etc. Once you know the average general price for each area, you simply walk through, label your scope of work and add up the numbers. It is not rocket science but it does take lots of practice so get out there to open houses for fixers and start practicing once you have your spreadsheet filled in.
The best way to do this is to get a spreadsheet and then start pricing materials at your local box store and other suppliers. Talking to other rehabbers and individual sub contractors as to what they charge for labor on specific tasks can also help you fill in your spreadsheet price lists. Once you have individual pricing for specific line items, you can calculate sections of the home for quick and easy addition in your head while walking a property (once you do this over and over and over again). Practice, practice, practice on as many listed fixer homes as you can. If you have a general contractor contact willing to help you with the accuracy of your numbers, that would be good too but unless they are a friend or family member, expect to pay them for their time.
Using a price per SF for estimating rehab costs is one of the worst ways to do it as it is the most inaccurate! I have posted many times in many threads on how to perform this task in great detail. Do a search or look through any of my many posts in the past on this topic.
Essentially, you need to NOT rely on others (like contractors or inspectors) to perform this task, you need to know how to do it and after practicing many many times and using the right tools, you can eventually do it in your head in 15-30 minutes while walking through the property.
You need a spreadsheet (several free downloadable ones on the BP file place at the bottom of any thread page), fill in your local numbers for material and labor costs for each line item and then break up the home into sections. Kitchen, bath, flooring, paint, landscape, HVAC, electrical, plumbing, roof, stucco/siding, etc. Once you know the average general price for each area, you simply walk through, label your scope of work and add up the numbers. It is not rocket science but it does take lots of practice so get out there to open houses for fixers and start practicing once you have your spreadsheet filled in.
The best way to do this is to get a spreadsheet and then start pricing materials at your local box store and other suppliers. Talking to other rehabbers and individual sub contractors as to what they charge for labor on specific tasks can also help you fill in your spreadsheet price lists. Once you have individual pricing for specific line items, you can calculate sections of the home for quick and easy addition in your head while walking a property (once you do this over and over and over again). Practice, practice, practice on as many listed fixer homes as you can. If you have a general contractor contact willing to help you with the accuracy of your numbers, that would be good too but unless they are a friend or family member, expect to pay them for their time.