Rehab Cost's on the Fly

8 Replies

So, I keep reading how it is such a great strategy to come to a showing with a contract in hand and I agree it probably is. My question though is how do you come up with an offer price right there on the spot? Obviously you have ARV ahead of time and you know the max you can pay based on the 70% rule but how do you figure repair costs on the fly? I have read J Scott book and have created a great spreadsheet based on the categories he uses. The spreadsheet works great, but it's a bit impractical to set up on the kitchen table (if there is one) with my laptop and spend 20 minutes punching in every little thing. I know some of you guys have streamlined this process a bit to get a good preliminary number so you can make an offer on site, I just am not sure how? Do you just give everything a flat number per square foot? Do you just figure a flat figure that covers a traditional renovation (i.e. new floors, paint, appliances, cabinets, counters, baths etc.)? Perhaps a cost per type of room (i.e. $15k for a kitchen or $8k per bathroom, etc.)?

The ultimate goal is to come up with a spreadsheet that I can load on an ipad and edit as I go but for now I am sticking with a pad and paper. Any advice is greatly appreciated. 

Tom

Tom - Do as much research as possible beforehand and go to the house with a number in mind. Use property records or old MLS data to understand how big the house is, number of bedrooms, baths, etc. You can complete a large part of the estimate this way.
Using a 1000 sqft ranch as an example. I know that it will cost me roughly $3000 for paint and flooring. The roof will be around 11 square, so that's ~$3000. You can also assume numbers for the kitchen, baths, mechanicals, lighting, appliances, etc. Now, when you are walking through the house, add or subtract for things that are different from your assumptions as you go. Do this in $250, $500, or $1000 increments. so, if you showed up to the house thinking it would be around $20,000 and discover the cabinets are new, but the electric panel is shot, you would subtract $2500 for cabinets, add $1000 for a panel,. and adjust your offer by $1500. Make sense?

You have to get to a point where you have done enough renovations to get a ball park idea of the cost.  This only comes with experience and no spread sheet will help new investors figure this out.  Having something is better then nothing at all but only time will help this situation. Good luck

@Tom Scott 

Hey Tom, 

What you are going through is a very good question. And @Curt Davis is right that it really just comes over time by doing flip after flip after flip. But in the mean time this little postcard we built is pretty cool to help the investors at the beginning stages. 

Basically, it is a 4 by 6 postcard that can fit in your back pocket and you can simply check check off each little box that you will have to do. 

Now if you can see there are a couple different sections it starts with Exterior and Interior. Then across the top there is a line that says 1,000 2,000 and 3,000sqft. So you can simply fit your house in one of those categories then check off what you need to do to the house. 

The prices are for labor and materials that we use form our guys. Also at the bottom there is a place to add up the totals and even add 10% for extras. 

Lastly, these are NOT GUARANTEED numbers they are suppose to be just guidelines that you can use to help you get a quick educated estimate. 

If you want some just let me know and I can see if I can get you one. 

Andrew

@Andrew Cordle

Very nice cheat sheet.  

One thing I did when I was learning to estimate renovations was I sat down with our contractor and basically created something similar so when I wen to look at a rehab project and wrote down what i though was needed for repairs, I was able to then start plugging in the cost for each item to help me out.

Tom Scott - these estimates will become second nature to you after some time, as will ARV and quality offering prices. For now, do exactly what feels a bit uncomfortable and set up your laptop or IPad and do a more formal estimate...insurance adjusters do it all the time as do efficient contractors. Plus, the seller will have absolutely NO problem with you doing so in their company, in fact it may help them to see that though your price is lower than they expected, the numbers prove why. Best of luck!

Originally posted by @Andrew Cordle:

@Tom Scott 

Hey Tom, 

What you are going through is a very good question. And @Curt Davis is right that it really just comes over time by doing flip after flip after flip. But in the mean time this little postcard we built is pretty cool to help the investors at the beginning stages. 

Basically, it is a 4 by 6 postcard that can fit in your back pocket and you can simply check check off each little box that you will have to do. 

Now if you can see there are a couple different sections it starts with Exterior and Interior. Then across the top there is a line that says 1,000 2,000 and 3,000sqft. So you can simply fit your house in one of those categories then check off what you need to do to the house. 

The prices are for labor and materials that we use form our guys. Also at the bottom there is a place to add up the totals and even add 10% for extras. 

Lastly, these are NOT GUARANTEED numbers they are suppose to be just guidelines that you can use to help you get a quick educated estimate. 

If you want some just let me know and I can see if I can get you one. 

Andrew

AWESOME CHEAT SHEET!!!  I would have killed to have that starting out.   

Wow great question and great responses. I was about to post a similar question and saw this at the top of my feed...destiny?!

@Andrew Cordle

What a great tool that cheat sheet must be. I sent you a PM and would love to have a copy. I think the prices look pretty good based on what I am seeing here, which isn't surprising since you're only a few hundred miles away. I'll tweak the prices a bit but other than that, it looks like just the thing to get me in the ballpark. It also looks like it would translate over to an iPad spreadsheet rather easily which will make the process even more streamlined.

Thanks, 
Tom

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