Rehab Cost

Rehabbing & House Flipping
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Rehab Cost

Shoshawna Merten
Residential Real Estate Broker · Graham, WA · Member since 2015 · 42 posts · 17 votes

HI,

I am looking for someone to give me a price per square foot for rehab cost is Pierce county, WA. I have found several auction properties and am unable to view the inside. Any help is greatly appreciated.

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Brian Pulaski
Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes
10y

The best answer I can give, is that a new flipper should not be buying auction houses that you can't get inside of.

I saw a post above that stated $5, $10 and $25 per SF... These prices are so far off what I have spent to flip, they would sink you very quick. I just did a big flip, 1740 SF. Using $25/SF says $43,500. I spent around $43-44/SF and originally budgeted over $47/SF. If you have done a lot of flips, you may be able to use SF prices once you get a solid backlog proving them. Until then, you really should only be bidding on houses you have seen and are confident in your costs.

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  • Michael Lee
    West Palm Beach, FL · Member since 2015 · 57 posts · 16 votes
    10y

    a quick rule of thumb that works for me is $5 light rehab $10 medium rehab and $25 for a heavy rehab it will give a you a good ball park number based on the square footage of the home 

    1Reply
  • David RobertsonBusiness Member
    Flipper/Rehabber · Kansas City, MO · Member since 2010 · 755 posts · 778 votes
    10y

    Hi Showshawna,

    Blindly using $/sf values without completely understanding what's included in a light, medium or heavy scenarios is a very dangerous way of estimating rehab costs.

    If you are going to use $/sf you need to understand that the Scope of Work, level of finish, & market will impact your prices.

    I would recommend performing a pricing exercise and perform 3 different detailed estimates of a typical sized rehab project that you will pursue, with different grades of rehab (light, medium, heavy).

    Pricing Exercise Steps

    • Find a Typical prospective rehab property that you will pursue at the auctions
    • Create a detailed Scope of Work for each Scenario (light, medium, heavy)
      • Create a detailed list of whats included in each scenario:
        • Light - Paint & Carpet?
        • Medium - New kitchen, bathrooms, finishes throughout?
        • Heavy - New floor plan layout, structural changes, MEP upgrades & finishes?
    • Create a detailed Estimate for each Scenario (light, medium, heavy)
      • Talk to local contractors about specific scopes to get local repair pricing
    • Once you've calculated the Total Repair Estimate for each Scenario, calculate the cost per SF (divide your Total Repair Costs / Property Square Footage)

    This pricing exercise will give you a much better understanding of whats included in the $/sf values and provide more accurate pricing for your specific projects & market.

    FlipperForce
    WebsiteView Page
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  • Bill Devola
    Wholesaler · Bogota, NJ · Member since 2016 · 128 posts · 64 votes
    10y

    This reminds me of AVM and other new age fancy formulas and algorithms that fancy, super sophisticated wall street types use.  If you have enough data, you can make it more accurate.  If you buy enough houses, it will probably average out and be OK over a time horizon. 

    But if you are buying a house blind, and trying to estimate the rehab by a $/SF formula, you're asking to burned.  

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  • David RobertsonBusiness Member
    Flipper/Rehabber · Kansas City, MO · Member since 2010 · 755 posts · 778 votes
    10y
    Originally posted by @Bill Devola:

    This reminds me of AVM and other new age fancy formulas and algorithms that fancy, super sophisticated wall street types use.  If you have enough data, you can make it more accurate.  If you buy enough houses, it will probably average out and be OK over a time horizon. 

    But if you are buying a house blind, and trying to estimate the rehab by a $/SF formula, you're asking to burned.  

    Not sure it's all that 'fancy' to create a detailed estimate & divide by the square footage to get a rough $/SF value that can be used for high-level estimation and analysis...sounds like reasonable due diligence to me :)...

    However, buying property sight-unseen based upon $/SF value is a bad idea, especially if you don't understand what the values mean...

    FlipperForce
    WebsiteView Page
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  • Shoshawna Merten
    OP
    Residential Real Estate Broker · Graham, WA · Member since 2015 · 42 posts · 17 votes
    10y

    What I don't understand is how people buy properties from auction and estimate repair cost. If you haven't done lot of flips to get that average then how do you know or what formula do you use to get the rehab cost?

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  • Peter Vekselman
    Real Estate Professional · Atlanta GA · Member since 2015 · 615 posts · 225 votes
    10y

    @Shoshawna Merten I would connect with some local contractors.  In the end you are going to need them to do the work.

    By walking a few properties with them you will also get a better feel for how to price these rehabs out.

    In the end, do NOT think you need to have totally perfect rehab numbers.  You just have to learn how to get into the ball-park.  Hope that helps.....

    0Reply
  • Brian Pulaski
    Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes
    10y

    The best answer I can give, is that a new flipper should not be buying auction houses that you can't get inside of.

    I saw a post above that stated $5, $10 and $25 per SF... These prices are so far off what I have spent to flip, they would sink you very quick. I just did a big flip, 1740 SF. Using $25/SF says $43,500. I spent around $43-44/SF and originally budgeted over $47/SF. If you have done a lot of flips, you may be able to use SF prices once you get a solid backlog proving them. Until then, you really should only be bidding on houses you have seen and are confident in your costs.

    2Reply
  • Shoshawna Merten
    OP
    Residential Real Estate Broker · Graham, WA · Member since 2015 · 42 posts · 17 votes
    10y

    Thank you everyone for your responses.

    0Reply
  • Chad U.
    Investor · Boca Raton, FL · Member since 2012 · 1k+ posts · 1k+ votes
    10y

    @Brian Pulaski agreed.  

    A $25/sf rehab in my market would basically be a cosmetic renovation, including new kitchens and baths. and I'm not in an expensive market. The kitchens/baths may or may not need replacing, but in order to get top dollar or ARV these are a must otherwise your property will sit for months without selling.

    0Reply
  • Manolo D.
    Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
    10y
    Originally posted by @Shoshawna Merten:

    What I don't understand is how people buy properties from auction and estimate repair cost. If you haven't done lot of flips to get that average then how do you know or what formula do you use to get the rehab cost?

    Your question has no answer, there are too many variables in play, most have their own targets and more of them are experienced or have a budget of a rehab or have their own square foot price per scope of work. With that said, they are bidding blundly for something that will yield them a profit no matter what it is. I know someone who is a buy and hold investor and will buy anything under 750k ARV as long as ARV-PP is more than 150k, conservatively, this does not make sense to most investors but works for him.

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