Good morning everyone :)
We are evaluating our first buy and hold.. a little 700 sq ft 2/1 bungalow. It will need quite a bit in repairs, but we have zero experiencing in estimating costs of repairs.
When evaluating a property, how do you best ballpark the figures for rehab? Anyone have any lessons they've learned that we'd be smart to learn early? We just don't even know where to begin.. short of scouring the forums here for related posts :)
Thanks in advance!
@Jscott has a book on cost estimating, which i hear it's pretty good. But i have not read it.
to be honest though... it's just experience. sorry to give you a canned response, but when you call 10 guys (and you should), you will get a feel for what "project a" costs. if you have a good spread, you will not lose money.
the first time i did it was easy because i did all the work and just paid for materials. labor was "free".
Scott's book is very helpful, if for no other reason than that it helps you put repairs into an organized progression. It also points out things you may have overlooked, which will have to be fixed & paid for.
My first advice would be to check out other properties in the area - don't put in a jetted soaker tub & tile surround when all the other places have acrylic tubs & glue-up surrounds. You just won't get your money out of it. It can still be nice-looking, but if the rent won't support it, you've wasted money on that improvement.
Whatever estimates you come up with, add 20% to it. Trust me. If you don't need it, bonus for you. But factor it in so you don't get caught with your (financial) pants down.
20% overage for me would be conservative. Without the economies of scale and process creation by doing 100's of rehabs or cookie cutter builds, it's very hard to stick to "on paper" budgets for both time and money. Life happens, so I traditionally add 25% to cost and 50% to time. If everything according to plan it's a nice bonus, but I'd rather plan for the worst and hope for the best.
Sam & Heather Jones
I have completed 5 rehab projects on properties under 1200 sq feet, two of them under 900 sq ft. and never once have I had one where the contractor did not call me with some unforeseen problem. It always requires more money to fix. First make sure you get at least 3 or 4 bids that include a detail scope of work. I strongly suggest only contractors that are licensed and insured and have a track record with references.
You will find many contractors that are operating on a shoestring. they will underbid projects, and give you a haphazard list of what they will do. Even if you are lucky enough that they do passable work you will be hit by a barrage on items that "were not included" or were not discussed in the original estimate. You will be asked for money up front for material over and above a small up front deposit. This will not end well.
If you must pay for material buy it yourself and have it delivered. Pay only for work after it has been inspected. There are often unforeseen expenses so expect 20% over a competitive but realistic bid.
Originally posted by Sam & Heather Jones:
We just don't even know where to begin.. short of scouring the forums here for related posts :)
What's so wrong with perusing the forums with a search and then reading? Do some homework first and then ask specific questions.
Just my $0.02 worth.
I'm newer as well. I've done 3 rehabs and learned one thing, you won't ever get it exactly right. I'm trying to shoot high on my costs so I can some out better.
here is what I'm starting to do. I am trying to make room templates for basic stuff- this does not yet account for things you find that are wrong once you dig into the rehab
For example, bedrooms in my area will usually consist of 1 door into the room w/hinges and knob and 1 closet door w/hinges and knob, 1 ceiling fan, at least 1 window that needs blinds, need paint and need flooring. I went to home depot and figured out what those things cost. Obviously figuring out labor costs isn't as easy- or is it? Home depot will publish prices for many installs such as ceiling fan, blinds for your whole house, some of the flooring etc. Ask the home depot guys how much % to add for waste for flooring. Based on that I am coming up with a basic price per bedroom ( i used 12x12ft size). I've used my own home a few times and worked up prices for stuff.
Home depot will also come out and measure counter tops, flooring etc. My thought is, I can find some one to do it around the same price or probably cheaper. Sometimes you have to pay to have them come out and measure, but its a cheap education.
Looking at Angie's List may be helpful as well. In our area, there are deals on roofing and painting. It will say something like painting an interior of a house that is less than xxxx sq ft is $xxx. Same thing with roofing. I haven't tried these but it may be something to call on to see what kind of fine print there is.
Also check your local REI clubs. Ones in Dallas sometimes have classes to show you how to estimate costs.
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing