How much to contractors charge per rehab?

Question

Let's say my rehab budget is 40k. How much of that would I need to pay the contractor? What is the general rule of thumb when it comes to this?

Wayne Brooks · Answer

Your budget has no bearing what a contractor will quote you for work you request.  Your budget estimate may be half of what the requested work will costs, or it could be more.....that's an impossible question to answer.  If you're asking what his "mark up" is on the costs of his work, after insurance costs and such, probably 20% or so.

Brian Pulaski · Answer

@Tom Wood

I see you are in CT also. I read your question as follows. If you budget $40,000, how much of that would you need to assume the contractor wants to make. Using guesses here, if you assume he wants to make $10,000, then your budget for labor/materials is $30,000...

The truth is, there is no hard and fast formula to determine this. The only way you are going to know if you will hit the budget using a contractor, is to create a complete scope of what you want, and bring in 3-4 GCs. Let them price it up, and not worry what they plan to make. Just be sure to be accurate in the scope and hold them to a certain level of quality and finish.

Igor Messano · Answer

Outside of the actual costs, I think a very important note everyone here is trying to make is that your budget doesn't determine the amount a contractor is going charge. All of the costs including the contractors price make up your budget. The way you have worded your question it seems as if you determined a budget and are now trying to make all of the costs stay within it. That can be a very costly mistake.

The reason why contractors cost don't follow a "rule of thumb" like a percentage of total costs is because the cost of materials don't always match the amount of work that is needed to complete the work. An example is installing hardwood floors. A can contractor charge you $2-$3 per square foot of flooring regardless of the quality of the wood you choose. This means that if you install a floor that costs you $4/sq ft, the contractors charge would represent 1/3 of the total cost of the installation. If you chose a $8/sq ft floor, the contractors installation cost would be 1/5 of the total cost.

This is not only a big consideration when thinking about what quality materials you are using in a flip (More expensive areas and homes would require better finishes), but different types of work have a heavier cost of materials vs the labor than others (Painting vs electrical).

Jim Adrian · Answer

fyi... $10 per sq ft will get you new paint (walls and ceiling) and carpet for a room.

Jim Adrian · Answer

Commercially I see and budget... What ever you spend in material you will spend the same on labor is a good rule of thumb.  Typically contractors build in 10% profit or we budget for this. RSMeans is a good source for cost estimating.  They publish books yearly with updates but its pricey but once you get one, it can be used for 3-4 years before its grossly out of date.   I would assume this is the same for residential work.

Aaron McGinnis · Answer

There's no good answer to this question. Just like every investor has different margins they'll accept, and different cost structures... every contractor is going to have different cost structures and margins they will accept.

A jack leg, out-of-his-truck, unlicensed and uninsured "GC" is going to have a wildly different overhead cost than a respectable firm with an office, insurance, licensing, and accountability. Even between respectable firm A and respectable firm B, cost structures can vary hugely.

The best thing you can do is nail down a very hard, written scope of work (plus plans if you're doing any kind of layout changes, even moving a sink from 'here' to 'there') and then bid the job out to a couple of different contractors.

Chris Anderson · Answer

Ok so I think this is a very general question. I have found in my business. Estimating a number of rehabs for other investors, and from talking to other flipppers. A general rule is that as long as there is nothing structural you can usually do a significant ammount of rehab for  $50 per square foot. That's the new kitchen flooring hvac plumbing gut rehab pricing.

Jake Armstrong · Answer

All projects are different, but I would say contractors shoot for %25-%35 profit.  So in your example of a $40k rehab, the contractors costs might be around $30k.

How much to contractors charge per rehab?

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