Rehab estimating

23 Replies

Hi there. 

Since I'm going to be getting into buy and hold real estate investing, I thought I would tap into the incredible knowledge base that is the Biggerpockets forum. 

I was wondering what rehab renovation costs checklist, spreadsheet, or software you are using (if you use them that is) to estimate rehab costs? This can be free or paid. I have a general knowledge of this, but am looking to learn more. 

Thanks!

A good "shoot from the hip" method is $10-$15 per square foot of the house, depending on how bad it is.  That's extremely crude and I wouldn't recommend closing on a house using it, but it's definitely a good way to get you in a realistic ballpark within a few seconds.

Originally posted by @Ryan Pemberton :

A good "shoot from the hip" method is $10-$15 per square foot of the house, depending on how bad it is.  That's extremely crude and I wouldn't recommend closing on a house using it, but it's definitely a good way to get you in a realistic ballpark within a few seconds.

Not sure where you're getting those numbers...

In order to get an accurate estimate, you need to know:

- Location

- Type of house

- Type of contractor

- Level of finish

- Permit requirements

- Local codes

- Time of year

- Are you using GC or subs

And most importantly, the scope of work.  

$10-15/sf might get you a full cosmetic renovation for certain types of houses/contractors/finishes in Atlanta, but it won't get you more than paint and carpet in many parts of New Jersey.  And it won't even get you paint and carpet in much of California.

I've never done a retail renovation for less than $12/sf, and I've often spent $50-70/sf in various areas on "typical" renovations.

Throwing out cost/sf numbers without knowing a whole lot more information is a recipe for disaster...it's NOT a good way to get a realist ballpark...

Thanks @J Scott. I actually just purchased your book and look forward to if arriving. I have heard great things about it and the checklists that come along with it. Im just trying to see what other sources people are using as I would like to be as educated as I can about this  

Originally posted by @Rudy G.:

The experts in residential rehab do's and don't's plus how to estimate repairs are Pete and Tony Youngs

www.peteyoungs.com

 When I first started buying and remodeling houses, I used an independent home building contractor to do all the work and provide me a list of all materials and labor costs.  My accountant put everything into a a spreadsheet and I was able to calculate renovation estimates. 

@J Scott

I'm not here to hijack Kyle's thread but I will defend my position and call it done:

I'm not sure how I could've made my statement much clearer.  

First of all, he's not in California or New Jersey, he's in Nebraska.  

Second, I said it's a quick "shoot from the hip" method to have a ballpark estimate in a few seconds.  I didn't claim it was the most precise and conservative.  The method you laid out is the best way to get an accurate estimate, I concur.  There are a lot of moving pieces to a rehab.  Especially when deciding whether to flip for the most money or hold for renters.  I have a feeling my definition of ballpark and yours differ.  A ballpark is pretty big.  

Third, If prices in Nebraska are on par with most of the rest of the midwest (and I bet they're relatively close), you're not going to get away with spending $50-70 on a rehab unless it's a luxury home in a high-end market, which most investors wouldn't hold for rental.  Hell, most C and D grade homes in move-in condition go for $50-70/sqft in most of the Midwest.  I've analyzed a deal or two in Midwest markets.  

Like I said, it's not a method I'd use to close on a deal but I encourage @Kyle Godbout to try it out and see if it gets him in the ballpark.  Especially if he's looking at a large number of potential investments and don't have a ton of time to vet them down to the penny.  

Once you narrow your list, drill down using J. Scott's link and really weed out the rest. There are a ton of other great books with sections on estimating rehab costs  I've personally read these:

  • The Real Estate Rehab Investing Bible by Paul Esajian
  • The ABCs of Real Estate Investing by Ken McElroy
  • The Millionaire Real Estate Investor by Gary Keller, Dave Jenks, and Jay Papasan
  • The Weekend Millionaire's Real Estate Investing Program by Mike Summey and Roger Dawson

Good luck with your endeavor!

-Ryan

If you are just starting out and you don't know anything, then you need to learn your market and cost bracket.  What kind of materials will you be using, what is the cost per /sf, what kind of labor cost is involved, etc.  The more quotes you can get and the more properties you run through, the more accurate your estimates can be down the road.

And please, always budget money for something going wrong.  Because it will, and you don't want to be in a deal where you have no room for error and you discover a problem at the 11th hour.

Originally posted by :
Third, If prices in Nebraska are on par with most of the rest of the midwest (and I bet they're relatively close), you're not going to get away with spending $50-70 on a rehab unless it's a luxury home in a high-end market, which most investors wouldn't hold for rental.  Hell, most C and D grade homes in move-in condition go for $50-70/sqft in most of the Midwest.  I've analyzed a deal or two in Midwest markets.  

I've done about 30 rehabs in Milwaukee (part of the midwest) and just went back and checked my numbers -- the least expensive rehab I ever did in that market was $22/sf.  Average was $41/sf.

These were mid-level houses in decent (but not high-end) neighborhoods.

Originally posted by @Ryan Pemberton :

A good "shoot from the hip" method is $10-$15 per square foot of the house, depending on how bad it is.  That's extremely crude and I wouldn't recommend closing on a house using it, but it's definitely a good way to get you in a realistic ballpark within a few seconds.

@J Scott   Even as cheap as Labor is in Atlanta, my "shoot from the hip" is more in the $25-$35 range and that's if I'm not moving any walls or dealing with a damp basement. (Of course that is assuming I use licensed contractors and pull permits).  It goes up from there and should only be used to make an offer before getting a better estimate through due diligence. 

He who "shoots from the hip" greatly risks shooting himself in the foot!  :)

@Kyle Godbout There are no shortcuts. You have to calculate everything and it can be very different from house to house.  In time it will come easier but for now you just have to do the work.

Originally posted by @Kyle Godbout :

Thanks @J Scott. I actually just purchased your book and look forward to if arriving. I have heard great things about it and the checklists that come along with it. Im just trying to see what other sources people are using as I would like to be as educated as I can about this  

 Hi Kyle: I do understand that your question is about software/spreadsheets etc., but speaking from experience, I can tell you the best approach is to learn as much about the actual renovation work as you can. Even if you're not going to do any of the physical work yourself and you have a general contractor and subs you feel you can trust, you will eliminate a lot of grief by knowing the price of materials and details of work required; that way, at least you can rest assured you're getting reasonable value for your dollar. In my early days, a trip to Lowe's could take me 3 hours but that education has paid for itself many times over and still continues to do so. Best of luck!

If I'm not mistaken, if you order @J Scott book, he includes several spreadsheets to work your own SOW, price list for multiple jobs (needs to be updated to your area), budget spreadsheet for your SOW and a profit analysis spreadsheet, I think it has some more goodies as well.

He's through, organized and gives you the tools to do a detailed budget fairly quick. After reading his book I don't think you would need to do a "down and dirty" or quick estimate. It doesn't take that long to get a more precise estimate, especially with some practice.

I did order his book with the spreadsheets. I'm exited to read them as I want to get started. Have you used his estimating spreadsheets @Lennie Holland ? I have heard nothing but good things of them. I am also going to start using BP's estimating calcs. 

Oh yeah I've used them, I love spreadsheets. Not everything your might do on a project is in the provided spreadsheets but most of it is. If you will update the prices per project for your area. You can then easily make a SOW and detailed budget at the same time.

It really doesn't take that long once you do it a few times. Practice the whole process determining ARV, 70% rule, SOW, rehab budget and profit analysis on properties you have no intention of buying.

My problem is figuring out the accurate ARV, I think I'm always to conservative. However more experienced people like @J Scott could do all the above in probably 10 or 15 min. and you might be surprised at how accurate their 1st estimate to final budgets turn out to be.

Check out his blog at

123flip.com/

It's not really up to date anymore but he breaks down his 1st 50 deals in extreme detail. It's very interesting and inspiring.

Awesome! Thanks for the link. I think you should always be a little conservative when figuring out the ARV. Then if it ends up being higher, great, if not, than you aren't disappointed. I will be doing a lot of property analysis on properties I won't be buying. That is great advice. Thanks!

Thanks for sharing your Milwaukee averages  @J Scott that makes me feel much better -whoow! I always suspected I was a little on the high side.

If I look at my last 10 Milwaukee rehab-to-hold projects I am typically around $35-$45. Granted, we don't do cheap and try to rental proof everything for the long haul. 

I got two that were different: one for only $18.5/sft - but I just find myself sticking more and more money into it over time. And the other one was when I shot myself in the foot with a $75.000 rehab ($51/sft, not counting the finished basement, that would actually bring it down to $37). All of them are ranch homes, built in the 60's and 1100-1600 sft main level.

Does J Scotts book go into suggested materials ie (countertops, floor types, cabinets (types) etc)  for flipping houses.  Fine line when trying to estimate costs when your not sure of what materials you would/should be using?  These seem to be the biggest shortfalls whenever i'm reading other material on estimating as they are all generic about this?

Originally posted by @Brian McManus :

Does J Scotts book go into suggested materials ie (countertops, floor types, cabinets (types) etc)  for flipping houses.  Fine line when trying to estimate costs when your not sure of what materials you would/should be using?  These seem to be the biggest shortfalls whenever i'm reading other material on estimating as they are all generic about this?

The flipping book talks a lot about how to determine what level/type of finishes to use in your properties, but it certainly doesn't tell you exactly what to use.  Every house is different, and there is no one-size-fits-all answer to "what materials should I use?"

It will mostly boil down to what your competitors (other houses for sale in the neighborhood) are using, but there are some other more minor factors as well.

This is probably why other books are short on details here as well...