How to Estimate Rehab Quotes

Question

Hi Everyone,

In terms of rehabilitation for a house that you might want to flip or rent, what is the best strategy to analyze how much rehab might cost you. I understand that rents and flips will have different criteria's of renovations and that I could always get a contractor to go out and get a quote; however, is there a way to learn on my own and be able to analyze how much a rehab will cost just from walking a house and going to a showing. I know it will not be 100% accurate, but I want to be able to have a range in terms of prices for renovations, just from eyeing the property myself. Let me know, thanks!

John Ma · Answer

You would use different ways of estimating depending on how quick you want to do an estimate.  If someone is bringing a deal and you're determing if the numbers might make sense, I use a Dollar/SQFT estimate based on amount of rehab needed.   $30/sqft for cosmetic interior reno.  $50/sqft for a full interior and functional update, $100/sqft for a full gut down to studs, $150/sqft for newcon .

If these numbers make sense I would want to visit the property for a true estimate, where it would be line item work scope development.  I use a $5000 rule, where I est everything in incriments of $5000.   Demolition $5000. Dumpster, permits, and inspections $15,000. Framing interior $25,000. Windows $5000.  Roof $5000. MEP $40,000. Insulation $5,000. Flooring $25,000.  Kitchen $15,000. Bathrooms $15,000. Drywall andpaint $15,000, ect.

Jaron Walling · Answer

@Kyle Lam The best to learn is by hands on experience. Remodeling real estate is just as much art than science. I created spreadsheet from previous remodels but every deal needs tweaked. Labor costs of gone up. Estimating material costs is easier but the labor is tough. Your SOW, challenging projects, expensive stuff, can be tricky unless you have experience and an established team.

Take lots of pictures and share them with contractors. Ask them general questions but take as little of there time as possible. We have a plumber friend so I get advice from him. He installs our water heaters for $260 + the tank. It's a win-win. You need people like this so you can budget for projects.

Level up. Talk to more contactors. Hire them for smaller projects and build from there. We just looked at a distressed property last week. It's a good location but an overwhelming rehab just beyond my experience; sorta a full gut/ or the basic kitchen, bath, flooring and paint remodel. Our estimated budget and ARV didn't command the investment so we passed. Another investor may see it has a homerun. We don't care. Don't get "stuck" on a property. Focus on what YOU KNOW, leverage your team, and control your exit strategy. That's how you avoid risk if you're buying distressed RE. Best of luck.

Caleb Brown · Answer

Best way is to get actual bids. Most GC's are not going to do it for free so you will have to pay them. Each property is different and doing a formula or per SQ FT will be off.

Greg Kasmer · Answer

Kyle - If you're looking for specific ways to educate yourself on rehab costs, I would suggest you consider some of the following:

1) Read J. Scott's book on estimating rehab costs. Estimates are probably a bit outdated now, but consider it a starting point and maybe add 20-30% to the estimates. The Book on Estimating Rehab Costs | Fix-and-Flip Investing Book – BiggerPockets Bookstore 2) Go to REIA meetings and specifically look for "Rehab Subgroups" or "Rehabber Meetups" that you can attend. In Philadelphia I know that DIG (Diversified Investors Group) and DPI (Delco Property Investors) are both local REIAs that I believe have subgroups in on rehabbing. I also think SJREIA has one as well.

3) Find an investor (maybe at a REIA) and ask him/her to walk through their existing rehab/flip and inquire about prices while you're touring. I know that REIAs also often give tours on a schedule weekend session a few times a year.

4) Put together a rehab budget for a project in excel for an example (or actual) house and post in the forums asking for local investor feedback. You'll want to notate level of finishes, etc... but you'll get feedback.

I'm local to Philadelphia, so if you'd like to talk more, let me know. Good Luck!

Evan Polaski · Answer

@Kyle Lam, as Jaron noted: do a flip, see what it costs, use that as basis for next one, repeat.

At the end of the day, John has provided some really rough numbers, but these are renovations.  Until you run into issues and learn from them, you really won't have any idea.  I.e. using John's $30/psf is great, until during your renovation you realize that a previous owner only update the wiring to romex in the unfinished basement, but didn't run it to all outlets and light.  So, your interior light rehab now has a $10k rewire added to it. And, you have an additional $3k in drywall work that wasn't planned because the electrician needs to cut holes to pull the new wires.

The moral is: you need to take the risk and just try to have way more money than you need.  Get a full inspection by someone that knows renovations.  Have the sewer lines scoped.  And with more renovations, you will start to get better at ball parking things, but even then you will always uncover items, so make sure you are baking in enough profit, even after conservative renovation budgets to feel confident you won't lose money.

Peter Mckernan · Answer

To be honest, there really is so many ways to estimate rehab costs from just doing a quick flooring, window, and paint remodel to doing the whole property fully gutted/remodel. I would if I were you, get contractors to bid the job from licensed and non-licensed contractors. Use that as your basis and do that on every job till you could bid it yourself.. This takes awhile, but in the long run you can get your job costs to brass tax and not have anyone else tell you anything different!

How to Estimate Rehab Quotes

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