Cost of repairs; how do you do it?

17 Replies

I tried to find a thread but didn't see one. My question is for all of you experienced investors. How do you estimate cost of repairs when you go look at a potential fix & flip? Do you have a google doc spreadsheet that you can plug numbers into, or do you have a rough estimation sheet such as house is A B or C rehab, and A is going to cost $X per sq ft to fix correctly? I am assuming you don't have a contractor come do a walk through with you. Or do you just take an insane amount of pictures and go over them with the contractor? If you use a list, is it something that you have gone to the hardware store and priced everything yourself, or would a good contractor know? Lots of questions haha. 

Thank you all in advance!

I did it on best guess. And I don't guess very well :(

I'd like to see responses as well. Ultimately I just failed to account for a lot that should have been obvious but I mentally discounted on my walkthru. Doors, trim, and fixtures probably cost me 4-5 grand that I just overlooked. There was plenty of other items as well.

Next time I will have a more regimented evaluation structure. One huge benefit to doing it once is that I have a data point on cost and a more developed understanding if what a rehab really is.

Ouch, did you still turn a profit? Also, if you don't mind my asking, what did you use to fund the deal?

@Hattie Dizmond  thank you for that most helpful comment and I really appreciate the snark! It is good for a well rounded diet to get a healthy dose at least twice a week in my opinion:) I'll check out the book, but in the mean time, do you have anything else helpful to add?  

Sorry...just know that if I'm snarky, it's always in fun!

Actually, finding information was probably what I struggled with most, when I first started on BP.  The way search results are presented can make it a bit difficult.  It takes a little while to develop an approach to how to sift through the information.  So, in the spirit of fair play, I've done a little research to get you started.  ;-)

Here are some other BP links that may help...

http://www.biggerpockets.com/renewsblog/2014/04/21/estimate-rehab-costs/

http://www.biggerpockets.com/renewsblog/2009/11/5/...

http://www.biggerpockets.com/renewsblog/2013/03/17/tultimate-guide-house-flipping-costs/

Now, as for practical advice, I have a spreadsheet where I have broken a house down into components (see below).  I make notes, but don't try to complete my spreadsheet, while I'm touring the property.  I simply grade each area as Excellent, Good, Average, Poor and take pictures.  That frees me up to continue visiting with the owner and building that relationship.

Now, I have an area I "farm" for deals.  Within that area, I know what constitutes high-end, mid range and low-end finishes.  Based upon the price point of the comparable properties, I know what finish buyers in that specific neighborhood would expect.  I use that information to determine a rough estimate of price per for the various items within each component of the property.  Once I have completed my rough estimate, I apply a 25% contingency to the total.  That is the amount I use for my offer.  My contract contains an option period for inspections.  During that inspection period (not a weasel clause, this is standard in Texas with a small option fee), I have a contractor and/or other experts (if I suspect foundation or other special issues) fully evaluate the property. I send the contractor in with my initial Scope of Work statement, from my walk-through, estimate those costs and tell me if there is anything else that will have to be done & those costs.

If the estimates come back outside my contingency, I can try to renegotiate the price, based upon those expert findings, or I can terminate the contract, only losing the small option fee, which was non-refundable.

Since you took snarky in stride...here's a look at how I break down the house on the initial walk-through...(and if you're interested, PM me with your email, and I'll send you the Excel workbook that includes an investor presentation page and a comparable analysis report format.  You'll see just how big a geek I truly am!)

Rehab ProForma
Condition Poor $48,000
Kitchen Poor $15,000
Living Areas Average $1,000
Bedrooms Average $1,000
Baths Poor $15,000
Common Areas Average $1,000
Exterior Average $2,000
Other N/A $0

After I get back home, it turns into this...

Post Inspection Estimate Estimate Total
Kitchen 7575
Cabinets 500
Countertops 2500
Sink 300
Faucet 75
Floors 2000
Walls 500
Ceiling 0
Appliances 750
Range 750
Oven
Cooktop
Microwave
Dishwasher
Disposal
Fridge
Fixures/Other 200
Living Areas 3150
LR1 1700
Walls 500
Floors 1000
Ceiling 0
Fixures/Other 200
Fireplace(s) 0
LR2 1450
Walls 500
Floors 750
Ceiling
Fixures/Other 200
Fireplace(s) 0
LR3 0
Walls
Floors
Ceiling
Fixures/Other
Fireplace(s)
Bedrooms 2800
MBr 1200
Walls 300
Floors 700
Ceiling
Fixures/Other 200
Br2 800
Walls 300
Floors 400
Ceiling
Fixures/Other 100
BR3 800
Walls 300
Floors 400
Ceiling
Fixures/Other 100
BR4 0
Walls
Floors
Ceiling
Fixures/Other
Baths 4225
Mbr Bath 2700
Cabinets 250
Countertops 300
Sink 100
Faucet 50
Tub
Shower 1000
Walls 300
Floors 500
Ceiling
Fixures/Other 200
Bath2 1525
Cabinets 100
Countertops 250
Sink 75
Faucet 50
Tub/Shower 50
Walls 300
Floors 500
Ceiling
Fixures/Other 200
Bath3 0
Cabinets
Countertops
Sink
Faucet
Tub/Shower
Walls
Floors
Ceiling
Fixures/Other
Common Areas 2650
Fixtures 400
Ceilings
Flooring 750
Walls 1500
Exterior 3750
Paint/Brick 2500
Landscape - Front 750
Landscape - Back 500
Pool/Other
Roof
Other
Other 700
Doors - Interior 200
Doors - Exterior
Windows
Water Heater 500
HVAC
Plumbing

Sorry...those tables looked fine, when I pasted them in, but BP ate them.  Just hit me up, and I'll email it to you.

Hello @Hattie Dizmond what kind of option fee do you offer? Is it a set price or a percentage of the purchase price? Is that something that is common or just common in your area?

Thank You,

Paul

@Paul S.  

The Option Fee is discretionary and negotiable.  I haven't seen a buyer demand a higher Option Fee than whatever I propose.  I usually offer $50 or $100.  It's going to be non-refundable. 

I guess you would call it a "Texas thing".  There isn't an assumed or defacto inspection period in Texas.  The promulgated TREC contract includes an optional Option Period as a selection. 

Thanks @Hattie Dizmond that seems very reasonable and is something I am going to jot down in my book of notes.

Paul

Originally posted by @Hattie Dizmond:

Sorry...those tables looked fine, when I pasted them in, but BP ate them.  Just hit me up, and I'll email it to you.

Post the document in the BP "fileplace" and then put a link to that posted doc here. 

Originally posted by @Hattie Dizmond:

Sorry...just know that if I'm snarky, it's always in fun!

Actually, finding information was probably what I struggled with most, when I first started on BP.  The way search results are presented can make it a bit difficult.  It takes a little while to develop an approach to how to sift through the information.  So, in the spirit of fair play, I've done a little research to get you started.  ;-)

I also appreciate your snark and agree with your statement about the search results. 

It can be very time consuming sifting through threads that are similar in topic, but don't quite have what you are looking for. 

Hattie, I sent you an email.

Quoting the post of @Hattie Dizmond   will make the table readable on your screen.

Originally posted by @Steve Babiak:
Originally posted by @Hattie Dizmond:

Sorry...those tables looked fine, when I pasted them in, but BP ate them.  Just hit me up, and I'll email it to you.

Post the document in the BP "fileplace" and then put a link to that posted doc here. 

Thanks, Steve.  Great idea.  I'll do that tonight, when I'm no longer behind my corporate firewall.

Originally posted by @Hattie Dizmond:
Originally posted by @Steve Babiak:
Originally posted by @Hattie Dizmond:

Sorry...those tables looked fine, when I pasted them in, but BP ate them.  Just hit me up, and I'll email it to you.

Post the document in the BP "fileplace" and then put a link to that posted doc here. 

Thanks, Steve.  Great idea.  I'll do that tonight, when I'm no longer behind my corporate firewall.

@Hattie Dizmond  thank you! Great post and some good info on there. I'll definitely take a look through that. Sorry it took me so long to respond, I have been on kind of a vacation. 

Originally posted by @Hattie Dizmond:

Sorry...just know that if I'm snarky, it's always in fun!

Actually, finding information was probably what I struggled with most, when I first started on BP.  The way search results are presented can make it a bit difficult.  It takes a little while to develop an approach to how to sift through the information.  So, in the spirit of fair play, I've done a little research to get you started.  ;-)

Here are some other BP links that may help...

http://www.biggerpockets.com/renewsblog/2014/04/21/estimate-rehab-costs/

http://www.biggerpockets.com/renewsblog/2009/11/5/...

http://www.biggerpockets.com/renewsblog/2013/03/17/tultimate-guide-house-flipping-costs/

Now, as for practical advice, I have a spreadsheet where I have broken a house down into components (see below).  I make notes, but don't try to complete my spreadsheet, while I'm touring the property.  I simply grade each area as Excellent, Good, Average, Poor and take pictures.  That frees me up to continue visiting with the owner and building that relationship.

Now, I have an area I "farm" for deals.  Within that area, I know what constitutes high-end, mid range and low-end finishes.  Based upon the price point of the comparable properties, I know what finish buyers in that specific neighborhood would expect.  I use that information to determine a rough estimate of price per for the various items within each component of the property.  Once I have completed my rough estimate, I apply a 25% contingency to the total.  That is the amount I use for my offer.  My contract contains an option period for inspections.  During that inspection period (not a weasel clause, this is standard in Texas with a small option fee), I have a contractor and/or other experts (if I suspect foundation or other special issues) fully evaluate the property. I send the contractor in with my initial Scope of Work statement, from my walk-through, estimate those costs and tell me if there is anything else that will have to be done & those costs.

If the estimates come back outside my contingency, I can try to renegotiate the price, based upon those expert findings, or I can terminate the contract, only losing the small option fee, which was non-refundable.

Since you took snarky in stride...here's a look at how I break down the house on the initial walk-through...(and if you're interested, PM me with your email, and I'll send you the Excel workbook that includes an investor presentation page and a comparable analysis report format.  You'll see just how big a geek I truly am!)

Rehab ProForma
Condition Poor $48,000
Kitchen Poor $15,000
Living Areas Average $1,000
Bedrooms Average $1,000
Baths Poor $15,000
Common Areas Average $1,000
Exterior Average $2,000
Other N/A $0

After I get back home, it turns into this...

Post Inspection Estimate Estimate Total
Kitchen 7575
Cabinets 500
Countertops 2500
Sink 300
Faucet 75
Floors 2000
Walls 500
Ceiling 0
Appliances 750
Range 750
Oven
Cooktop
Microwave
Dishwasher
Disposal
Fridge
Fixures/Other 200
Living Areas 3150
LR1 1700
Walls 500
Floors 1000
Ceiling 0
Fixures/Other 200
Fireplace(s) 0
LR2 1450
Walls 500
Floors 750
Ceiling
Fixures/Other 200
Fireplace(s) 0
LR3 0
Walls
Floors
Ceiling
Fixures/Other
Fireplace(s)
Bedrooms 2800
MBr 1200
Walls 300
Floors 700
Ceiling
Fixures/Other 200
Br2 800
Walls 300
Floors 400
Ceiling
Fixures/Other 100
BR3 800
Walls 300
Floors 400
Ceiling
Fixures/Other 100
BR4 0
Walls
Floors
Ceiling
Fixures/Other
Baths 4225
Mbr Bath 2700
Cabinets 250
Countertops 300
Sink 100
Faucet 50
Tub
Shower 1000
Walls 300
Floors 500
Ceiling
Fixures/Other 200
Bath2 1525
Cabinets 100
Countertops 250
Sink 75
Faucet 50
Tub/Shower 50
Walls 300
Floors 500
Ceiling
Fixures/Other 200
Bath3 0
Cabinets
Countertops
Sink
Faucet
Tub/Shower
Walls
Floors
Ceiling
Fixures/Other
Common Areas 2650
Fixtures 400
Ceilings
Flooring 750
Walls 1500
Exterior 3750
Paint/Brick 2500
Landscape - Front 750
Landscape - Back 500
Pool/Other
Roof
Other
Other 700
Doors - Interior 200
Doors - Exterior
Windows
Water Heater 500
HVAC
Plumbing

Thank you, Hattie!  I really appreciate your time to post this information.  I'm glad to see that I am not the only one who has a hard to finding exactly what I'm looking for on the site.  There is so much good stuff, I often get "distracted" from my initial search with other items that pop up during the search.  

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