Estimating renovation costs
Dallas, TX · Member since 2008 · 73 posts · 0 votes
Estimating renovation costs
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Attorney · Raleigh, NC · Member since 2008 · 4k+ posts · 1k+ votes
17yAnd by the way, understand that for a contractor, time is money. Disclosing whether or not you own the property is a common courtesy as some contractors have a policy of not bidding work for people who don't own the property. It stems from hack wholesalers wasting our time and resources wanting bids on something they're never going to do.
And yes, I've been lied to by someone who didn't actually own the property. And yes, I told them to go screw themselves next time they needed help from me. And yes, they hired a contractor who was just as dishonest as they were and got screwed by him.
32 Replies
- Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes19y
One way is to get three estimates from recommended contractors.
Best when you given them a list of the work you want done so they are bidding on the same thing. The list can be produced by the home inspector as it will be the same items the inspector writes up normally.
John Corey
- Real Estate Lender · Member since 2008 · 642 posts · 13 votes19y
1. Have a trusted GC provide you with a cost of repairs.
2. Purchase a as-is/subject to appraisal.
3. Have a realtor provide recent comparables (both on market and recently sold) based upon FMV/ARV.Regards,
Scott Miller
- Real Estate Investor · Las Vegas, NV · Member since 2008 · 1k+ posts · 447 votes19y
I personally never use a GC. I hire subs as needed and do a lot of things myself. I look at the ratio of cost vs. time, sometimes it is quicker for me to do some things myself and other times I save a lot of time by hiring the work out. I like to manage my own projects so the GC is not needed.
8)
- Accountant · MN · Member since 2008 · 142 posts · 25 votes19y
Which projects do you typically handle? I am rehabbing my own house and have done almost everything my self from painting to tearing up concrete. I hired out the taping of the drywall (after I hung it), the carpet and the egress windows. I also found out that I do not like plumbing.
- Residential Real Estate Broker · Bay City, MI · Member since 2008 · 29 posts · 0 votes19y
I have 4 guys that work for me full time and do most of my repetitive tasks such as but not limited to: painting, cabinets, roofing, siding, yard work, windows, tile, carpet, light fixtures, and light plumbing. I sub contract out the more serious plumbing and electrical. For me I found that it is easier this way because we constantly have projects waiting to get started I try to plan that no more than 2 weeks before the next project is started usually less than 1 week but you know how things go.
With a general contractor the will bid the job do the job as they are working on other projects as well and then when things they quoted you are done thats it, it doesn't matter that the doors need trimmed because the carpet and pad are too thick, that the outlets need to be changed because now they look bad on a freshly painted wall, if it wasn't in the original qoute it is extra and they may not be able to get back to it for 2-6 weeks as they are already scheduled for their next job. That is why I decided to hire my own crew I just say to get it done the way you would want to see it when you would be moving in. Also once a week they take half a day and go around to the properties and hit the lawns, or driveways for snow in the winter and such. GC's in my opinion are a waste of time and money, I use subs when I need to for more "important issues" and my crew for tidious items.
- York, PA · Member since 2008 · 227 posts · 0 votes19y
I did everything myself. Not that I recommend that.
First, what REI said ... get at least three qoutes from reputable contractors.
Second, learn the basic trades yourself. How much does it cost to buy and replace an interior door? 100 sq ft of carpet and pad? Paint 300 sq ft of walls? So on and so forth. Go to Lowes, Home Depot, 84 Lumber etc and ask.
I use subs based on time vs money and do the rest myself like Rehab702. I can do everything from digging a basement to putting on a roof but I have a more than full time job so I very rarely paint or put down carpet, but I always do my own tile and hang my own cabinets. I always sub out any code type work ... plumbing and electric. Don't want to get caught in that type of mess.
- Member since 2008 · 9 posts · 0 votes18y
Do you all bring in contractors for estimates before or after you purchase the property? I have an idea of how much the repairs will cost for a property I am considering, but I am debating whether I should try to get some real estimates before I put in a bid.
Casey
- Member since 2008 · 50 posts · 0 votes18y
Originally posted by "dudeonbike":
Do you all bring in contractors for estimates before or after you purchase the property? I have an idea of how much the repairs will cost for a property I am considering, but I am debating whether I should try to get some real estimates before I put in a bid.Casey
Bump for more info. I have no experience in construction :oops: (will def. be reading and attending store DIY classes to learn more about tiling/ flooring/ etc.). How can I estimate/ assess what a rehab house is going to cost to rehab before I buy the property? Does an inspector estimate the cost of repairs? Any help is greatly appreciated.
Mike
- Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes18y
Originally posted by "ctrentalguy":
when do you do the work yourself? some people believe that its not worth their time, they hire for everything, others the opposite.....Here is my view.
If you need a license or really specialist skills you just have to hire it out. You are an investor and not a licensed technician.
I do like the idea of doing a number of jobs directly to gain some idea as to what is involved. More so I can hire better contractors in the future as I have a sense of what I am talking about and what I am buying. Climbing the learning curve.
Lets step back a minute. Where do you make your money? If it is from doing deals anything that reduces your ability to do deals means it is costing you money no matter how much an hour it pays.
No one when starting out is able to fill every hour hunting for deals. Doing maintenance can be an excuse for not hunting as the maintenance is right there in front of your face but hunting for the next deal is less clear.
There is no prefect answer for every situation. Think and learn to be a specialist rather than a generalist. Focus on the areas that provide you with the best return for the time you invest.
One last thought.
If you wanted to be wealthy you likely need to do a lot of deals and have a large portfolio. That means you can not be doing everything yourself. Design your business so it can scale or just accept you will always be a small investor.
John Corey
- Member since 2008 · 50 posts · 0 votes18y
REI, I understand exactly what you mean. I currently rent. I'm still looking to buy my first house to occupy. You guys are light years ahead of me.
Ideally, for my first flip it would be great for me to do some of the minimal skill tasks to make sure I stay within a set budget. The only thing is that my previous question hasn't been answered:
I'm still worried about figuring out how to assess a property & set a budget. Any help is greatly appreciated.Thanks in advance,
Mike
- Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes18y
Charles,
Do those numbers include labor or are they for materials only?
Jon - Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes18y
IMHO, estimates provided by contractors, licensed OR unlicensed, corporate or one-horse operations, are pretty much a crap shoot. Unless you are providing the equivalent of a mil-spec for the scope of work, there is a tremendous variable in materials, application, preparation, workmanship, project management, and 1001 other details. Comparing two or three proposals is largely meaningless, unless you are already very familiar with the bidders. Yes, they will give you a range of costs, but as an investor you need to be able to make quick decisions. You need to UNDERSTAND what work is involved, and when it shifts from being a simple, straightforward repair, and turns into a Project. You just need to know that a kitchen rehab is going to be $20K, or a bathroom rehab $5K, and painting will average $500 per room, or whatever the average numbers are for your area. Unusual repairs, especially structural, or plumbing and wiring modernization are the types of things that can quickly suck up money, and lots of it. You do need to have a general idea of what those types of jobs run, if it's something you will tackle. To accurately figure the details down to +- a percent or two is just not realistic. There are ALWAYS "unknowns" that show up once you are swinging the hammers. Figuring a deal that closely will get you into trouble.
Having said all that, if you honestly want to try to accurately estimate, I have been very satisfied with the data and format available from
http://www.contractor-books.com/Software.htm
For a very reasonable cost, I use the CD estimator occasionally to keep the contractors honest, and find it pretty accurate as to materials. In general the labor costs are a good starting point, but you still need to understand what YOUR vendors are doing. You can make adjustments to the calculations that will approximate your own vendors if you have some history to deconstruct their invoices and figure what they use for overhead and profit. Of course, you may not be happy with what you learn about that.... - Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes18y
When getting bids try the following. It helps to deal with the issues BeachBum highlighted above.
1. Have a professional inspector create a list of everything that needs attention. Understand no list is perfect and somethings can not be observed until work starts. The point of the list is to have something for the contractors to work from.
2. Get three bids using the inspection report to tell the contractors what you need done. This way they all bid on the same thing. Much less room for an contractor to submit a bid that is widely different from another contractor as they are bidding on the same thing.
3. Have the labor split out from the materials. The materials really should not vary as you are effectively buying the same things for all the bids. Other than waste and maybe a slightly different process the materials really are going to be the same.
4. The labor should be where a contractor factors in unknowns. Things like they are not sure if it will be a simple task or something that will take longer. There are things that are not known until they start the work. You will also see differences based on the skills, the size of the crew, etc.
A contractor working on a fixed bid should pad the bid to deal with contingencies. Mostly that is a labor cost so they should only be padding the labor.
5. Compare the material costs using HD, Lowes, the site recommended by BeachBum.
6. Assume that when you buy the materials and have them delivered you will have less waste then if the contractor buys them. If you are doing multiple properties you can carry materials from one site to another (shingles for example). If the contractor buys the materials they pick them up, they use what they need and they leave with the surplus in many cases. Habit seems to be the only reason.
Do not focus on the lowest priced bid unless you understand why it is lower. Some are more efficient and some are just not as good.
John Corey
- Dallas, TX · Member since 2008 · 73 posts · 0 votes18y
do you guys do all these estimations before you purchase the property or after?
- Member since 2008 · 14 posts · 1 vote18y
invstr wrote:
do you guys do all these estimations before you purchase the property or after?Charles wrote:
Before, you wouldn't want to prematurally tie up the property without first knowing repair costsCharles is exactly right. When you make an offer, the inspection is part of your contingency to buy. Based off the inspection (and your GC estimates) you can negotiate the purchase price further. Having the written inspection and an estimate (broken down) give you hard facts to help negotiate vs a gut feeling the price should be lower based on what repairs might be needed.
- Specialist · Riverside, CA · Member since 2008 · 382 posts · 72 votes18y
When I first started in this buisness I already had a little bit of contractor background. However, I didn't know the current prices. I just called every contractor I counld get to show up in my city and had them all come on the same day. You would belive the difference in pricing. After I narrowed it down to 5 guys I asked to visit there current jobs. The rest of the decision was made on gut.
By the way, if you have never worked with the contractor that is doing your rehab. DO NOT GIVE HIM MONEY UP FRONT. Go with him to his building outlet of choice and pay for the materieal your self. Pay him as work is completed.
- Real Estate Investor · Boston, MA · Member since 2008 · 102 posts · 10 votes17y
So the steps I have gleaned from the above discussion:
1. Make an offer on a property subject to inspection.
2. Create a list of everything that needs work based on the inspection. I'm assuming the inspector will just be able to tell me what needs done and cannot give estimates?
3. Give this list to multiple contractors to obtain bids. Am I still within the purchase window here?
4. Based on the estimates, I can negotiate the price down or back out of the deal. If I back out, I can keep the deposit?
5. Purchase property and create a contract for the rehab work. - Lender · Cupertino, CA · Member since 2008 · 11 posts · 0 votes17y
When you originally schedule an appointment to walk through a property for the first time, is it wise to have a contractor meet you there, and give some estimates on the work that needs to be done? Will a GC do that?
- Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes17y
It's never a bad idea. If you have a GC willing to do that for you, great, by all means take advantage of an onsite estimate, saves time.
- 17yCurt DavisBusiness MemberFlipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
Willis, always get your contractor bids before you buy b/c if the bids are too high or they find hidded problems then you are not bound to a contract. Also, if you are an investor your time is much more valuable then hanging out at your investment property doing the work yourself or overseeing the work. Leave all that up to a professional GC. That is what they get paid for, to handle everything that needs to be taken care of.
Curt Davis - KAIZEN Realty538 Reviews - Real Estate Investor · Boston, MA · Member since 2008 · 102 posts · 10 votes17y
Is it possible to get more than one GC bid before purchasing? It would seem odd to me to have multiple GCs show up on the same day (either while looking at the property before an offer or during/after the inspection), but I'd be concerned to get one bid if I am not familiar with the GC's track record.
- Investor · Kern county Riverside County, CA · Member since 2008 · 494 posts · 261 votes17y
You can get multiple GC bids before purchasing, and I would recommend it. It is polite to stagger the bids so they don’t show up at the same time, but it is also hard to get guys to show up right when they are supposed to anyway. Most GC’s assume you are getting multiple bids. There is a book called ‘Flip’ by Rick Villani and Clay Davis. They have some really interesting simple numeric calculations for getting an idea of the scope of a rehab and what it should cost. It shouldn’t be a substitute for getting actual bids, but will give you an idea of approximately where the bids should fall before meeting a GC.
- Attorney · Raleigh, NC · Member since 2008 · 4k+ posts · 1k+ votes17y
And by the way, understand that for a contractor, time is money. Disclosing whether or not you own the property is a common courtesy as some contractors have a policy of not bidding work for people who don't own the property. It stems from hack wholesalers wasting our time and resources wanting bids on something they're never going to do.
And yes, I've been lied to by someone who didn't actually own the property. And yes, I told them to go screw themselves next time they needed help from me. And yes, they hired a contractor who was just as dishonest as they were and got screwed by him.
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