Involving GC on Rehab Estimate

6 Replies

Hey BP,

I am very interested in flipping homes but the daunting task of estimating rehab costs with no experience is the biggest hurdle. I read in The Book on Flipping Houses a recommendation to hire a GC (or perhaps experienced rehabber) to walk potential properties to give you insight on the things they look for and help assign a ballpark rehab estimate. If the rehab estimate numbers work, proceed with getting the house under contract. Once under contract, use the inspection and formal contractor/sub bids to create a more accurate rehab cost. Here is my question...

Does anyone have experience with hiring a contractor with rehab estimates prior to getting the contract? What was your experience and how accurate was the initial estimate, if you followed through with the flip? 

Thanks in advance!

@Sean Carroll I thought the idea was that they help put together the SOW (I could certainly try, but without experience I'm certain I would overlook some things) in order to get to the rehab estimate.

When you hired the contractor for the estimate, how accurate was the estimate once you got legitmate bids?

 @Claire D.

it was spot on, because I gave him a home inspection sheet with the scope of work to fill out. Most cheap to mid price GC's will not write up a scope of work for you with out charging it. This is something you have to do unless you want to pay 20,000 for a bathroom remodel. I suggest one of two routes, bring in an experienced investor and be the money partner on the condition he or she teaches you and do a 50/50 split. Or better yet I would do a private money lending for a lower interest rate with the condition they teach you. The reason I say go the private lending route is it is less risk to you.

@Claire D.  

Unfortunately you're responsible for the SOW.

To address your problem you should definitely read the companion book on estimating rehab costs.  It's an excellent primer on getting your estimating legs.  Another good resource for you pick up is an inspection book to help you perform the walkthrough through the eyes of an inspector.

You can also use this punchlist during your walkthrough to help you identify some of the major systems that you may or may not need to rehab.

Pre-offer, contractors will generally not come out to give you bids, but you can hire them to do so as @Sean Carroll suggested.

That bid will be your starting point to help you understand whether you can make the deal work.  Once you have the property under contract, then you should get several other contractors to come out and bid on the work, to be able to compare bids.

@Kuba F. I recently picked up The Book on Estimating Rehab Costs and actually went to a bookstore last weekend to look for an inspection book, to no avail (guess I'll order online!).

Thank you for that checklist! I was actually just on your site the other day.

My fear is getting properties under contract and not following through with closing because my initial rehab estimates were not accurate. Don't want to make a habit of this and get a bad reputation with agents or anything like that. But I guess I just have to jump into the process and learn as I go. Thanks for the advice!

@Claire D.  

I hope the site has been useful to you.

Speaking as a Realtor, I wouldn't worry too much about your reputation with agents, especially if you intend on purchasing something. With the crazy competition right now agents have to work much harder and there's a certain expectation that more offers will fall through anyway. 

Although most agents don't invest, there are some out there like myself  that also flip and should be able to guide you with your estimates.  Find one of those, likely at your local investment meetup.

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