Luxury Home Rehab Estimating

13 Replies

Hey there BP nation. First time questioner. I've been on BP for a little over a month and reading and learning a lot about fix N Flips, and also participating in the forums sharing knowledge from my experiences in real estate. 

I'm looking for some guidance from some of the more experienced California flip investors in luxury homes to see if they might use a matrix or formula to plug in a set of  rehab estimation numbers for a luxury rehab as they are initially looking into the potential of a project being an acquisition candidate before they actually walk the property.

I can typically create an estimated improvement budget for almost any commercial property in both office and industrial for proforma purposes before visiting the property, but residential is a new animal for me. 

Below I will provide an overview of a property that looks to meet most of the underwriting criteria I've established for a viable investment e.g. 75% ARV test, affluent neighborhood, great school district, strong resale market, etc., but thought this information would be useful for those who might answer. The ARV is pegged at $1,200,000 supported by nearby comps.

I'm currently underwriting a 4bd 5ba luxury home that is approximately 3,000 sf in a Southern California affluent inland neighborhood in Los Angeles County. The home was custom built in the mid 80's and is in terrific shape, but its now dated and will need a new kitchen, baths, and some walls removed to open up some of the space that buyers find more attract today. Obviously new flooring and other accoutrements will round out the improvements.

I know there is no way to know what the actual budget number 'will be' until the property is walked, but I'm curios if there are some numbers, based on the luxury rehabs more experienced rehabbers have rehabbed, they use to plug into a quick proforma review they may use while investigating a new luxury market property before walking the property. Example, price per overall square foot, kitchens X, baths y, flooring Z. 

I've estimated the rehab for more moderate priced homes but I suspect a luxury home is going to have a dynamically different rehab cost structure, and as I've stated I'm curious to know if there is a way to estimate a prototypical rehab number for a luxury home.

To your continued success!

I wish this post would get some attention. I'd love to hear about this as well. 

Originally posted by @Heath Clendenning :

I wish this post would get some attention. I'd love to hear about this as well. 

 I guess some folks would rather keep their numbers private. I too was hoping some of the affluent neighborhood investors in So Cal would be able to provide budgetary guidance.

Chris, I'm also in SoCal and if you want to connect it might be useful. 

My father is a contractor on the east coast. He has said with flips, don't think about sq. foot. Only use this in new construction. Additionally, some affluent towns might have extra fee's for waste removal, parking, etc that local contractors and this city hall will know about. 

75% in a nice neighborhood is a good ARV according to what I'm reading for more luxury homes. I think if you have that threshold, work with a good inspector and don't over estimate your sales price - then you should be in solid shape.

The fact that your project already has the size and just needs rehab is excellent. Less chance for rot, termites and irrigation issues. 

Would love to know how it is going/went on your project. 

Personally, I have foreign investors on my projects and I'm quite conservative with projections, but always looking for local intel to make my numbers more accurate. 

PS: Have any decent recco's on CPA's? 

Originally posted by @Heath Clendenning :

Chris, I'm also in SoCal and if you want to connect it might be useful. 

My father is a contractor on the east coast. He has said with flips, don't think about sq. foot. Only use this in new construction. Additionally, some affluent towns might have extra fee's for waste removal, parking, etc that local contractors and this city hall will know about. 

75% in a nice neighborhood is a good ARV according to what I'm reading for more luxury homes. I think if you have that threshold, work with a good inspector and don't over estimate your sales price - then you should be in solid shape.

The fact that your project already has the size and just needs rehab is excellent. Less chance for rot, termites and irrigation issues. 

Would love to know how it is going/went on your project. 

Personally, I have foreign investors on my projects and I'm quite conservative with projections, but always looking for local intel to make my numbers more accurate. 

PS: Have any decent recco's on CPA's? 

I agree 75% ARV is good. I tend to underwrite conservatively and for fixNflips that number is a comfortable max even though a lower ARV would be more comfortable.

The project I mentioned was taken off the market. I made an appointment to walk it one afternoon and received a call from the listing agent (I would have represented my entity as a buyers agent) that the listing was being removed from the market and the sellers declined the showing. The agent told me they were within days of the listing expiring, as he had previously shared, and the sellers were tired of the selling process. So it was a no go.

Are you searching or doing deals in the Santa Monica and surrounding markets?

Yes, looking for deals in 1mm to 2.5mm range. I think there are a solid amount. 

Agent myself as well :)

@Christopher Telles  

@Heath Clendenning

Here's some numbers for you. Los Angeles $70 sq ft for rehabbing existing space. Includes permits and knocking down or opening up walls.  $190 sq ft for adding square footage includes permits engineering and architecture fees.  Does not include holding costs. Purchase price from 750k to 950k with an exist of 1.2MM to 1.4MM Not "luxury" per se but good houses in good neighborhoods with good school districts.  

Good luck

Hi All. 

I actually flip high-end properties in the Hudson Valley in New York. Most of my customers are City folk looking to purchase their county homes. So, while the market is a bit different I suspect our customers and costs are probably pretty similar. 

Here is a project I just completed: http://www.realtor.com/realestateandhomes-detail/4...

I agree with the above post that pricing it by the sq/ft is a bad idea. In high-end properties small decisions can radically effect your sq/ft costs. 

So here is how I would set this up: 

Kitchen: 

Appliances - $6,000 

Cabinets - $10,000

Countertop - $70-110/sqft

Sink - $1,500

Faucet - $500

Cab pulls - $500 (or $6-10/pull) 

Install - $2,000

Flooring: 

Floor product (unfinished): (expect to pay 4 - 10 dollars per board foot for anything quality) 

Floor finishing (sanding, coating etc) roughly $3/Sq ft (as long as you are using a standard coating (polyurethane) if you want to go higher end with an oil or stain expect this to jump to 4-5/sq ft 


Bathrooms:

Demo: $/hour x expected hours 

Underlayment: Schulter Shower System (approx: 500/shower enclosure) 

Tile/grout/thinset: 6-10 sq/ft

Install: $3-6 sq/ft 

Lighting and Electric: (pricing includes installation)   

Switches: approx $30/switch  (this assumes a mid range Leviton 3-way dimmer) 

Outlets: $10 (TR Leviton duplex, GFI where needed and duplex/USB combo in Kitchen Island and a few choice locations) 

Lighting:

Surface mount approx $150/fixture

Can: approx. $250/fixture (assuming old work install by electrician)

A little more on why I do it this way: 

Kitchen: You can figure out exactly how much your kitchen is going to cost before you start. And because appliances are so expensive, I find it best to buy my kitchen at the outset. That way you know, concretely how much this stuff is going to cost. If all of the nice homes in the area are packed with Viking then you can expect to pay 20K for appliances. 

Bathrooms: People expect custom. If my buyers see pre-formed plastic on the floor they assume the entire place is junk and pass. That means I am always building custom enclosures. I use the Schluter system because it is easy to install, fast and comes with a good warranty. 

Flooring: Most buyers can't tell the difference between pre-finished floors and the "real deal". That said, I still choose to install custom floors. I work with local mills to do custom runs of interesting varieties and lots. That way my floors are always a unique size, variety or have additional features (heavy spalting for example). A custom floor makes the entire project feel way different and gives the realtor something to talk about.  

If you're trying for a quick and dirty estimate this might not be too helpful. However, with higher end builds quick and dirty estimates are hard to pull off because materials and labor are just way more expensive. This breaks down what I generally find to be the most expensive parts of my build and will hopefully get you to a number that cuts down on surprises. 

Some things I left off: 

Windows: 700-2,500/unit 

Insulation: 3-6/board ft. I live in a cold place and people want foam 

Paint: $3/sq ft. 

Hope this helps everyone. 

- Jeffrey 

Hi Jeff

Thanks for walking us thru your flip; its really detailed and informative.  Are you currently only flip in Hudson?  Do you think Poughkeepsie has any potential?

Good luck!

Best 

Cynthia 

Poughkeepsie might have some potential but it does not suit my business model. I am focused on City people and Poughkeepsie does not have much of a second home market. Millbrook and the surrounding areas are pretty good. 

That does not mean that deals don't exist in Poughkeepsie, it's just not an area of focus for me. 

Dear BP - I'm posting here because this is one of the few threads I've found relating to high end flips . I'm an investor/ GC in South Florida / South Palm Beach County. I'm focusing on high end flips ( 2,500 SF +, ARV of $500,000 - $1,000,000) as my specialty as a builder is custom homes and renovations. My current road block is locating deals. Any tips / advice for locating deals from people in the high end flipping arena?

I've been considering direct mail but I'm thinking it would be that worthwhile for high end properties.

I do need to network with more realtors but most of them can't tell a good deal from a bad one. Which has me considering getting my RE License.

I drive for dollars and have written a few letters but without any responses.

Has anyone had success with other strategies in todays market? ie  in the past 4 - 6 months...

Hello @Jim Hiler

I get what you mean about some realtors not knowing a good deal from a bad deal, most of them care just about getting a deal done. I currently don't flip high end homes but I can tell a good one from a bad one a mile away. I can send you some properties in that area, which is my specialty as well as coral springs, parkland, Creek and fort lauderdale. I do not hand out any mailers for distressed property because theres a slim chance you will get a response, I would get in touch with wholesalers because they sometimes have great deals and have them add you to their list for only palm beach deals. If you'd like work with me I can send you property that has some good ARV and ROI, from investor to investor.

@jean taveras - If you have properties in the South Palm Beach County area definitely send them my way (particularly Delray, Boynton, Lantana, Lake Worth, WPB)...

I get weekly emails from the bigger wholesalers in my area and in my experience 99% of the deals they have available are in the sub par neighborhoods or condos or do not fit my criteria. That being said maybe I haven't found the right wholesaler...

Thanks. Looking forward to seeing what you send over.

Is there any difference when getting a contract on a high end house vs a median to low end cheap house? I want to know because my marketing plan has brought me to the high end part of town. I want to be able to understand the client better and know what I getting myself into socially to be better prepared so i can get a deal under contract. 

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