Completely gutted house and estimating rehab costs

29 Replies

I met with a guy yesterday who is selling a house in St Louis. He has completely gutted the house, roof is only 1 year old, inside is just studs. There is a "newer" electrical panal, but that is basically it. Will need all systems . . . will basically need everything. House is only approx 900 sq ft (2b/1b) with rough in for another bathroom in basement. How do I begin even determining cost for that or is that the kind of rehab a beginner like me should just avoid in the first place?

Thanks Account Closed. I need to read those right away!

Unless you can find a reputable contractor that can provide a quote to rehab the property, I would avoid this type of project if you don't know how to estimate repair costs...

Here's what I would do:

1. As recommended by Paul, buy JScotts book on Estimating Rehab Costs to get educated on estimating costs...

2. Take some notes and populate those costs into a spreadsheet.

3. Talk to local contractors in your market and tailor the costs in the spreadsheet to meet your local market and specific project needs.  

4. Practice Estimating and Analyzing Deals...Analyze as many deals as possible, until you start to get comfortable with the #s and the math...

5. Find a property that you are comfortable with estimating and managing...To help minimize risk, partner with a mentor or contractor that you trust that has experience flipping houses...

6. Buy the property, rehab the property, and learn from your mistakes...

7. Modify your spreadsheet costs and estimating techniques to account for lessons learned...

8. Buy another property...learn from those mistakes...rinse and repeat :)

David Robertson | 816‑388‑0197 | http://www.houseflippingspreadsheet.com

I do this all the time as I purchase Non-Performing Notes and take back the property 90% of the time in poor condition. With a home that size and if you are keeping the bed and batch count the same You will expect to pay roughly $20,000 in rehab from a licensed contractor that is willing to spend time on small jobs in less desirable neighborhoods.  This is basically rent ready good condition; if you plan on a retail flip you can spend double that amount. If you are new at this I would be very careful as you can make major mistakes. 

Good luck

Thanks @David Robertson . Thanks for the advice. I see the need for visiting/viewing many properties and getting used to estimating costs so that it becomes easier and easier. 

Originally posted by @Gregg Wood :

I do this all the time as I purchase Non-Performing Notes and take back the property 90% of the time in poor condition. With a home that size and if you are keeping the bed and batch count the same You will expect to pay roughly $20,000 in rehab from a licensed contractor that is willing to spend time on small jobs in less desirable neighborhoods.  This is basically rent ready good condition; if you plan on a retail flip you can spend double that amount. If you are new at this I would be very careful as you can make major mistakes. 

Good luck

$20K Seems light even at non retail pricing.    

Your talking new HVAC (ductwork?), Electrical, Plumbing, Drywall, Trim, then exterior. 

I'd have to see pictures of the interior and exterior to chime in a little more on pricing but I would count for more than $20K

It is a small house and it really depends on who does the work and how fast; I am rehabbing houses now that include even a new porch and overhang and we are at $21,000 for a 3 br 1 ba property. The only thing different is we have the walls already. But we have a bigger house and the porch. Outside paint I did not consider as I thought you might not have included that. 

Yeah that's going to cost more than $20k. I'd say get a few contractors come out and get estimates one room at a time, and get an idea for how much all the materials will cost by measuring things out and going to home depot to see what type of costs you'll be looking at just for the basics. The books mentioned above, the J Scott books are the best there are for this sort of thing. Might not be a bad idea to hire a project manager to help you organize the order of the rehab and all the work the contractors will be doing.

@Gregg Wood

Are you gutting electrical, HVAC, plumbing or is $20k just a cosmetic bare bones redo

Roof?  Sod? Concrete, Windows?

Yeah, when I say this house is gutted, it will need duct work, electrical run, etc. The only thing it has is a 200amp electrical box.

@Jonathan McClintock If the house is already gutted out, my last price on a similar project is about $90-100/sf and about $60-70/sf on non-living space. Those are really, REALLY basic finishes, $1-2/sf tiles, floor, etc. Laminated wood counters, cheap but presentable cabinet. Upgrade as you see fit. The panel is only around $2k worth, I wouldn't count it. Now we are talking about "full gut out" rehab, as originally posted, that means only wood frames and trusses are left.

@Manolo D. yes down to the studs and exposed trusses. I wonder how the difference in price between LA and STL though. If 90-100sqft (living space) and 60-70 (non-living) then that puts the rehab of 900sqft house at around 70-80k. I guess that might not be too far off. Looks like a job for a small contractor operation who does most of the work themselves.

Jonathan, where is the house in St. Louis? That can determine quite substantially the cost of the rehab because I am a contractor in town and my prices are certainly impacted by where the work is being performed. The $90-$100 that Manolo threw out are not that far off from what pricing would be locally and $20,000 would be on the very low side in St. Louis.

Originally posted by @Jonathan McClintock :

@Manolo D. yes down to the studs and exposed trusses. I wonder how the difference in price between LA and STL though. If 90-100sqft (living space) and 60-70 (non-living) then that puts the rehab of 900sqft house at around 70-80k. I guess that might not be too far off. Looks like a job for a small contractor operation who does most of the work themselves.

The per sq is so variable as it really depends on economies of scale and the higher for sq footage the lower the cost per sq.  So for a 900 sq ft house the $90-100 range should be accurate.  I think for what you need to replace the $70-80K budget seems more in-line.     

New construction is generally around $100/sq ft for cheap labor. Rehabs might run you between $50-100/sq ft depending on the quality of labor in this area, in my experience. Hope this helps.

Medium mogul logo web smallPeter MacKercher, Mogul Realty | [email protected] | 314.210.4414 | http://stlmogul.com

Fixing a house that is already gutted can be done in the 20k or under range but you would need to go cheap on labor and materials and then you might have to skip out on central air

I'd like to see the math on how you can build out a completely gutted house for "$20k or under range"...

Materials alone could exceed $20k...

David Robertson | 816‑388‑0197 | http://www.houseflippingspreadsheet.com

Originally posted by @Jassem A. :

Fixing a house that is already gutted can be done in the 20k or under range but you would need to go cheap on labor and materials and then you might have to skip out on central air

 Lol, is that a 200 sf house?

@Manolo D.

No but it is with subbing out the work to a highly skilled individual who will work by the hour and then going very cheap on materials and not spending a lot of time on finish work.

I'm assuming it means the property will need all new electrical, plumbing, drywall/paint, flooring, toilets/sinks/tub, cabinets and appliances (in that order) and not much else.  

You could certainly pay more than 20k for materials if you go high end: stainless appliances, copper pipes, overpriced cabinets with granite counters, etc.

I will typically pick up a fridge and stove for under $100, use cpvc or pex, get 6 feet of stock cabinets and laminate counters and then get laminate floors when they go in sale for 0.29/sqft.  Most of the time I'll just try to work with what is there and it will be way under 20k per property because most of the time the electrical and walls are in fairly good shape and sometimes the plumbing.

I'm at about $40/sf on a pretty substantial rehab that involved changing the layout, replacing almost all of the electrical, adding a bathroom through slab foundation, foundation issues, roof replacement, adding a driveway, and full cosmetic overhaul. My contractor is a partner in our business, so that price does not include any GC costs.

This is our first project and it is massive, so I understand your hesitation. I would not discourage you from taking this on. A couple of things we've done that have kept the pressure low. One - we used really cheap financing. No hard money payments beating down on us each month. For you, that could be your own cash, a HELOC, or someone you know willing to take a lower return. Two - we recognized going in that this was going to take longer than it should. Yes, we set a schedule, but with the understanding that we had a lot to learn. We are in our 5th month and just now starting to see the light at the end of the tunnel.

The advantage with a project this large is that you learn a ton about rehab, costs, finding good sub-cons, etc. It sets you up for success moving forward.

One big piece of this - the market has moved greatly in our favor during our holding time, and we will likely make a great return on this project. If the opposite were true, I might have a much different outlook and different advice for you. Having a positive financial outcome has a huge impact on your outlook and motivation to move forward. Could your business survive if you take on something this large and lose money? Something to consider.

I really appreciate everyone's response and input on this! I have made an offer and will let everyone know what happens.

Originally posted by @Jassem A. :

@Manolo D.

No but it is with subbing out the work to a highly skilled individual who will work by the hour and then going very cheap on materials and not spending a lot of time on finish work.

I'm assuming it means the property will need all new electrical, plumbing, drywall/paint, flooring, toilets/sinks/tub, cabinets and appliances (in that order) and not much else.  

You could certainly pay more than 20k for materials if you go high end: stainless appliances, copper pipes, overpriced cabinets with granite counters, etc.

I will typically pick up a fridge and stove for under $100, use cpvc or pex, get 6 feet of stock cabinets and laminate counters and then get laminate floors when they go in sale for 0.29/sqft.  Most of the time I'll just try to work with what is there and it will be way under 20k per property because most of the time the electrical and walls are in fairly good shape and sometimes the plumbing.

So in this case you'd be at $22/SQ Finished 

Can you put your highly Skilled Individual on a plane and send him up by me to Chicago?  

@John Weidner

People like this are all around.  A roofing company for example might pay a pro less than 20 an hour but then charge at 100 or more an hour to the end consumer.  Same is true for auto repair shops.  I find that price gouging is more common in the home repair industry because the average consumer doesn't really know how much certain repairs should cost.  It's simply a matter of finding someone who can work efficiently and independently at a fair rate.  If you hire a big company rather than a single guy, you will more than likely pay a ton of overhead and then they might also upcharge for the materials.  Also, some tasks are better suited for a crew of guys and some are just as easily accomplished with a single guy.  By having a single guy, you ensure there is no overlap where more than half the guys are sitting around doing nothing (it's less risky and less costly typically).  At most, I'll either have 2 guys working independently from each other or 2 pairs of guys where one of the guys is a helper and not making as much.

Many items at Lowes and Home Depot also have a lot of overhead that can be avoided in many instances if you are a savvy shopper and use coupons which can be purchased online (10% up to $5000 or $10 off $50 from mycheapcoupons, also raise.com for another 7-10% off) or shop elsewhere (Harbor Freight for tools).