Properly assessing rehab costs

4 Replies

Hey everyone,

My name is Keith, and two partners and I are at the beginning stages of opening an REI company. I have an extensive background in home repairs and construction in general but lack experience when it comes to estimating larger scale jobs. My question for anyone who has experience estimating is, how accurate and reliable is estimating by sqftage, and what other forms of estimation would you reccomend? I'm new to the REI business, and BP forums and would really appreciate any feedback. Thanks!

I personally would never estimate any rehab project just by SF. There are way too many variables inside a house that need to have eyes on the ground. Out of curiosity, why would you want to just estimate that way without seeing the property? 

Before I go look at a new prospective property, I already have a "rough" estimate of rehabs assuming it needs the majority of what the properties I buy needs - floors, kitchen/baths, HVAC, electrical upgrades, etc. So before I even go look, if the price I think we could settle at before I even see it + the "in my head" rehab number doesn't make sense, I might skip it altogether or just give it a cursory glance. Other than that, I'm doing numbers in my head as I'm walking the property. 

Thank you for the feedback. I appreciate it. Now when you rough estimate before seeing the property are you just taking the sqft multiplied by the average cost of installation for say flooring in your area as an example and adding that to the rest of the rehab costs? Once I get in I'll be more confident but like you said sometimes you want to avoid that trip to see the property if it's unnecessary.

Originally posted by @Keith Gilde :

Thank you for the feedback. I appreciate it. Now when you rough estimate before seeing the property are you just taking the sqft multiplied by the average cost of installation for say flooring in your area as an example and adding that to the rest of the rehab costs? Once I get in I'll be more confident but like you said sometimes you want to avoid that trip to see the property if it's unnecessary.

 More or less. I've usually seen at least a few pictures of a property before I actually go walk it, although occasionally all I know is what's on the outside at the start. Since I tend to deal with basket cases I can usually safely assume that we are looking at all new flooring, for example, so on 1000sf I might mentally note $4-5k for flooring, and then adjust that after I walk the property - maybe all the HW can be refinished, or maybe there's a room or two that needs a subfloor/joist repair before we even get to the finished floor. You can generally use this for most of the major parts of a house, but without walking it you'd find that on paper hardly anything would work out because you'd be so high on your rehab that there'd be no room for profit - and that happens on the walk through on occasion. Right now there's a small house in an area I really like, but they are too stuck on an asking price for the deal to make any sense based on my walk-through, so I will either wait them out or some other sucker will buy the house and take a loss. I took a look at the house originally based off my mental numbers that it could work depending on the condition. 

Really appreciate the feedback, and good luck with that stubborn seller. Hope they budge!

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