Some questions regarding rehab estimates and offers?

7 Replies

Quick question BP!

Assume I'm looking at REOs

When I'm looking at a property my agent sent me online and I want to determine whether or not the property is worthy of visiting, how do I do a quick estimate of rehab costs to plug into the flipping calculator? For examples sake, lets say I like the area and have found my comps, but now I need to decide what my bottom line is for offering and whether or not the deal's numbers make sense! What are some strategies for doing this?

Another question I have is, would having an inspector and a few different contractors visit a property before offering make sense? I know deals go quite fast, but since I am a newbie I really do not know what I'm looking for when it comes to rehabs and it would heavily benefit me to get a rough SOW from an inspector and then bids from different contractors based off that inspector's SOW as well as their own findings. As David Greene said on BP Podcast 257, "Do I really know what I'm looking for when I look under the hood of my car? I'd rather just ask an expert." I'd clearly pay everyone for their troubles, but having a legitimate list of what needs to be done, along with an actual price for the rehab would clear any doubts I have on my first deal and ensure my offer is adequate.

I know the standard procedure is to get your offer accepted and then go about your due diligence, but even after calling around and finding labor/material costs I'm not confident my numbers would be accurate. So I really wouldn't know what I needed to offer to even get it accepted to then go about my due diligence.

I am a newbie, but I'm extremely committed to real estate because I see the freedom it can offer. I have invested my money wisely elsewhere and will have the funds necessary to start looking for my first deal later this year. I'm just looking to get my understanding of the entire process down so once I am able to start my first deal, I can.


In a perfect world bringing a bunch of Contractors in, getting solid numbers and making offers is great. In the real world this most likely won't happen. You may get guys who will give you a budget if you pay them, but how many times will you do this? I probably viewed 50-75 houses before I landed a deal... if I paid $100 (contractor likely won't even come out for that little money) that would have been $5000-7500 of costs before getting a deal done.

The strategy of using an inspector I have heard, however are you expecting him to provide a SOW, or simply tell you of any issues? Inspections don't go in depth on MEP items and they may also not be on the same page regarding what upgrades will make a good ROI.

It's tough when starting out, especially with no construction background, however I think the best bet is to get an idea of what pieces and parts make up the kings you expect to replace and figure what they cost. Once you know the "materials" you can then go at the point of view of how long things might take to fix. This can be a rough guess on labor. When starting out always leave room for contingencies and plan for things to cost more than you expect. You won't get a firm grasp until you are doing houses.

Still looking for some more clarification on this topic :)

@Hunter Harms  

1. Your rehab quick estimate should be based on a $ amount per sqft. We usually do a quick estimate at around $85-$105/sqft in LA (depending on neighborhood), but we like to do good work. May be less where you are

2. Once that number lets you know the numbers look good, get 2-3 contractors or sub contractors to come by and give you an estimate of the work.

All the best!


@Shawn Ward Thanks for the response!

So use the price per square foot method for a solid rehab estimate to base my offer off of? 

And then during my due diligence period get the exact numbers and make sure the deal still works? 

Then finally close on the deal after negotiating the price down based on the exact numbers?

@Hunter Harms ,

Your question is very hard to answer because it is pretty generic. It is sort of like asking someone how to workout and provide a detailed enough explanation on a message board. Generally speaking contractors who are not in on the deal don't just go in and give quotes before purchase (they may do 1, but if it does not pan out after 2 or 3 don't expect them to answer your calls ever again). So my recommendation is to go in with someone else on your first couple deals. No you will not be getting all of the profit, but you will learn how to do it. Plus there are things you are going to be good at and things others are. Nobody does it all and makes a profit. So find a team and jump on board or join someone elses team and bring money and time.

Also to show how localized real estate is we can do new construction/permits/driveway/Acre lot/all hookups for $105 a SQ/FT.  @Shawn Ward s numbers are CA and yours will be someone in between. 

Good Luck!

@Hunter Harms It’s catch 22. You can’t bring a contractor in for free quotes without souring the relationship (2 or 3 as mentioned), and you can’t make an offer without solid bids. Listen to @Brian Pulaski he has made valid points, it could be more clearer if you actually did read J Scotts book, right mow you are too green for the questions
you are asking - if you know what i mean. Yes you can pay someone for their time, but that is not the main income of a contractor, make it worth their while (yeah, $100 is too small), however, you don’t need to pay them 50-75 times as what Brian said, but in my opinion, 10-20 times would be sufficient. Take your inspector SOW fee and learn the GC pricing/methodology. By the 10th-20th time, you will get what’s what. But still that a $3k-$5k learning experience, Id say it’s worth it vs going in with a partner or losing money on a had deal if not a bank breaker.

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