Estimating repair costs? Complete newbie.

11 Replies

Hi all, I'm a brand-new member to BP and this is my first post. I'm just starting to learn about REI and am at the stage where I don't know what I don't know, but have started looking at properties online all the same. I've found a duplex in Galveston, TX (I live in Houston, so close by) at what seems like a good deal, but it looks like it's going to need a lot of work. The owner's agent (not a realtor, just a friend, I think) believes that the property needs a new roof and he estimated $50k for a re-build, but I have no idea how experienced this guy is with such things.

The property itself is a duplex that is listed for $80K. The only ARV I really have to go on is the Zillow estimate of $150K.

Being a total newbie, I don't even know if I should look into BRRRR for this property, or wholesale, or just walk away? I haven't visited the property yet to see it for myself. Here are a few pictures, just for reference.

Does anyone have the time to just quickly estimate if this could be a good deal or a total disaster?  If this post is too complicated or against the rules, I'll gladly remove it.  Thanks so much!

Hi Kristen,

Do you know any experienced investors from Glaveston that can help you? BiggerPockets has some great calculators you can use as a first pass to see if the deal makes sense. 

If you're concerned about repair costs, then get a contractor to get you a bid. 

If you're concerned about ARV, get an agent or an appraisal.

Don't use zillow or blindly guess on ARV and repair costs - that would end in disaster.

Best of luck!

I would look at J Scott’s book on Estimating Rehab Costs, while also noting rehab costs are extremely based on your local market. You could ask the seller to allow you to walk a contractor through the house and estimate the rehab. Many will do an estimate for free, but you may want to consider a thank you gift if you don’t purchase the home to encourage he contractor to work with you in the future and show you value their time

Thank you, Cameron and Alyssa, for your great replies.  I would not have thought of getting a contractor to assess the property or to involve an agent.  So much to learn!  Really appreciate your time.

I suggest hiring a pro. Pay for the service you want. 

Sure, you can learn to guess on general remodeling cost. But "construction" isn't just remodeling. W/out knowing the code you can miss the mark by thousands, w/out knowing "signs" of troubles you could find out you have a major issue when its too late and you own it.

I, of course, am biased. but would recommend a MUCH different course of action. 

1. Hire an expert to look over the property and give you a complete evaluation before purchasing.  (inspector works well)

2. Determine of the items listed by the expert, which are viable. i.e. not all "fails" on an inspection are required to be repaired to get full retail, or an occupancy.

3. Create a scope of work and timeline for the items you need done to complete your project to your goal.

4. Do an internet search of the "cost" of items you need done. 

5. Create a scope of work for each trade (i.e. plumbing, electrical, demo, paint, etc.) with timeline and budget.

6. Be specific with the material selection. Leaving things up to "them" could get you much less than you thought.

7. Contact 5 of each trade you require and email them your scope w/ pictures and plans if possible. 

8. Make certain you provide as much detail as possible, good communication removes problems. 

9. Communicate that if your scope is incomplete for the task you are requesting a quote for you would like to be informed.

10. Add the sum of everything you have gathered and create a total budget based on a real world scope.

 You can skip many of these steps by hiring a G.C. (general contractor) but unfortunately there are not many real G.C.'s in Houston. No license requirement equates to a lot of want to be's. Those who are good, will want to be paid accordingly. As any highly sought after expert would.

You can also hire a consultant to put all the information together for you, and even assist in insuring you have the proper paperwork and protections against litigation should there be an issue arise.

I am also an investor, I was a G.C. for 20yrs in Houston, accredited inspector, Consultant for billion dollar REIT's. I know the value of good information. I pay for it all the time. As an investor I don't G.C. my own deals. That would make me a G.C. again, and I am not that.

Yes. My way is way more work than guessing. But I have also done hundreds of homes and never lost money. Ever.

@Jeph R. 's explanation is great! to put it in a sentence, get experts opinions and plan! 

Call a realtor to send you "sold comps" to get an accurate ARV.

Repair cost can be tricky and that's why you need a local expert to help you out. Remember that your remodeling should be in par with the neighborhood. 

@Kristen Olson you’ll want to get multiple bids and use a RE agent to get the ARV nailed down. The estimates on Zillow usually aren’t accurate.

This would probably be a huge deal to do as a first deal but it could work if you really nail your numbers

Never trust zillow "zestimates". To get an accurate ARV, you must get actual sold comps and then adjust accordingly for differences in bed/bath counts, square foot, lot size, amenities, condition, location, etc. Experienced agents can do this but you need to learn how as well otherwise you rely on another with your money/risk.

As to rehab budgets, this too you must learn and if you don't know already, then you will need to rely on contractor bids and hope that your scope of work is accurate.

Based on the photos, this project is a complete gut that needs it all. Not sure if the area supports an ARV needed to make this work as I don't know your local area enough to say one way or the other. I do know that getting into a full gut rehab on a duplex is quite an undertaking for a newbie so if you go at it alone, be very careful.

Another option is to partner with an experienced flipper in that area. Bring them the deal, get a small piece of the pie and learn from doing and watching.

This community is amazing! Thank you all for the thoughtful and complete replies. I’m definitely going to walk away from this property as I think it’s too much to handle for this newbie, but will keep learning.

Welcome @Kristen Olson !

A couple of statements leapt out to me in your post. The first that the owner's agent/friend is giving you advice on repairs. His loyalty is to the owner, not to you. It doesn't matter how experienced he is -- giving you a low estimate for repairs means your purchase offer will higher because you will not have accounted for everything needed for a rehab.

As already mentioned by the others, Zillow Zestimate is usually inaccurate. I don't rely on anything or anyone to tell me what a property is worth; it's not their money on the line. I highly recommend you learn how to find comps and calculate ARV yourself eventually. It gives you a very good idea of the competition in the neighborhood, how they compare to your property, the level of repairs/types of finishes you need to bring a property up to rental standards, and how much rent similar properties are bringing in.

Speaking of bringing up to standards, if you are going for a BRRRR and not flipping a property then it doesn't need the level of finishes that a retail buyer would demand. That should reduce your rehab costs somewhat.

One last thing I want to mention is that duplex means everything comes in two's. That means twice the rehab. It means two furnaces, two ac units, etc. Everything eventually breaks, and you need to account for the ages of the fixtures and appliances and try to map out how much life they have left and how much you'll need to hold back in reserves to get those fixed when they do finally break.

I wrote a few Biggerpockets blog posts that may be helpful:

First, since your post was aiming for this, how to estimate repairs and some cost guidelines for those repairs:

https://www.biggerpockets.com/blogs/8814/72452-how-to-estimate-construction-costs-for-these-29-common-rehab-projects

This on how to find comps and calculate ARV:

https://www.biggerpockets.com/blogs/8814/68395-how-to-find-real-estate-comps-and-calculate-after-repair-value

And finally, this one on the 18 key metrics for analyzing an income producing property, such as at a minimum cash flow:

https://www.biggerpockets.com/blogs/8814/73755-18-essential-metrics-to-a-complete-real-estate-investment-analysis

Feel free to reach out if I can help or expand on anything.