What is a good way to learn about rehab cost?

Question

Hello,

I am new to real estate investing with no rental property yet. I would like to learn more specifically about estimating rehab costs. I am assuming that rehab costs have increased significantly since 2020, and would like to be able to learn to estimate roughly before getting into my first project (light to moderate rehab). I am located near DFW area and have read book on rental property investing by Brandon Turner and BRRRR by David Greene.

If you could recommend books or resources to learn more in depth about rehab aspects of real estate investing, I would greatly appreciate it!

David Robertson · Answer

I would start by reading JScott's Book on Estimating Rehab Costs to learn the basics.  The pricing is outdated, but it will give you a general understanding of how to estimate the major repair categories.

Otherwise, this question get's asked ALOT, so I have created boilerplate list of the process of how you can learn to estimate costs.  It's a process that takes time and experience:

#1 Read the Book on Estimating Rehab Costs

J Scott discusses the fundamentals of budgeting and pricing rehab costs and reveals the steps, tips, and tricks he uses to accurately estimate costs for 25 common trade categories and hundreds of repairs.

#2 Walk Through Distressed Properties and Spy on the Competition

Walk through a couple of rehabs that a local real estate investor has completed in your local market and study the types of repairs they made and the level of finishes they installed in the property.

Spying on the competition and understanding what buyers are looking for will help you determine what type of repairs and level of finishes you need to install in your own properties.

#3 Explore Lowes and Home Depot to Learn About Material Pricing

Walkthrough through Lowes and Home Depot (or their websites) and look at finishes materials and fixtures that you will consider using in your rehab projects. This will help you get a better idea of what tile, hardwood, carpet, plumbing fixtures and light fixtures costs for your rehabs.

#4 Contact Local Contractors For Pricing

As others have suggested pay a GC to walk through a few properties and provide budget pricing for typical repairs.

#5 Build Out Your Database in a Spreadsheet

Once you start to get a better understanding of Labor and Material costs you will want to store this data into a spreadsheet or software that you can use to help you streamline the estimating process.

#6 Practice, Practice, Practice

Walk through distressed fixer-upper properties (or find properties virtually online) and practice creating detailed scopes of work, quantifying repairs and estimating rehab costs for the projects.

This will help you get acquainted with common rehab repairs, rehab costs & estimating terminology.

#7 Get Your First Rehab Project!

You can practice all you want, but ultimately you will learn the most about estimating rehab costs by actually rehabbing a house. Getting your first rehab project will require you to create a SOW, talk to contractors, compare and review bid proposals, review budgets, & make countless trips to Home Depot.

You will inevitably make mistakes and underestimate things, but you will learn 90% of what you know by just doing your first rehab!

#8 Learn from Your Experience!

Once you complete your first house flip project, take some time to review your actual costs that you spent on the project and compare it to your initial estimates and budgets.

Reviewing your final numbers will help you gain a better understanding of how much you actually spent in each Category and identify areas where you underestimated cost and blew your budget.

When you buy your next house flip project you will have this valuable learning experience to help you build a more accurate estimate!

As your continue to do more and more houses, you'll gradually gain more experience and be able to develop accurate estimates quickly and confidently!

Caleb Brown · Answer

Sit down with GCs, see if you can pay them for reviewing scopes of work. That would be a hard ask so the other option is analyze deals then pay GCs to walk before offering. You need to see actual scopes not broad estimates. In my area it's a few hundred bucks to pay a GC

Caleb Brown · Answer

I have a couple go to GCs that'll walk during the inspection. I estimate rehab beforehand then verify during.

Derek Simkins · Answer

Following the gurus for underwriting theory is great so you have a better understanding of what to look for. Getting reps in with GCs is the best way to apply all of that and ask tons of questions

Mike Shin · Answer

@David Robertson Thank you for such thorough instructions. I actually just purchased his book few minutes before reading your comments. I was a little concerned that this book was written in 2019 and I am assuming the cost has gone up significantly since then. But I'm glad it can still be useful. Once I finish the book, I will follow your step by step guide and hopefully I can be ready for my first investment.

Mike Shin · Answer

@Peter Mckernan It makes sense I need to talk with local GCs to understand more realistic estimates. Before you built your relationship with your GC, what was the most effective way you used to find potential GCs?

Peter Mckernan · Answer

The best way to learn this is to get a few GCs, and start to check jobs out with them on the MLS/on-market. You will need to probably pay these people if they are just bidding jobs for you randomly for you to learn and not do deal.. If you are using one or a few, I would be upfront with them. The guys I use, I use them on a ton of jobs and refer them out too so they are getting paid by my jobs and others, so when we call they go out and give free bids all the time. If you are farther away from doing a deal, then I would tell them your goals and plans to get to start doing deals but this is a learning process.

The timeframe to get the numbers down is not quick so be patient and be sure to continue to do it you'll get better at it the more you have under your belt.

Ezekiel Trevino · Answer

YouTube

Mike Shin · Answer

I will check out YouTube as well

Mike Shin · Answer

Thank you for your reply. Discussing directly with GC seems like accurate way to know. Would you normally hire GC to walk after inspection?

What is a good way to learn about rehab cost?

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