how to figure cost of rehab?

Question

Hi all, wish I could be more dedicated to the forums but as a first time home buyer/real estate investor I find it hard to keep up with everyone. I was wondering how you guys find the rehab cost of a house and if you do it before you get it under contract or after? because I'm trying to figure out how much the ARV would be and then how much equity I would build into the house and figure out how to BRRRR from there. I'm currently looking in the Tacoma, WA area or Pierce County Washington

Thanks and Glad BP is what it is today!

Aaron Nelson · Answer

Hi @Robert Spears, if you are looking for a pretty good ballpark estimate, a knowledgeable investor-friendly real estate agent who has managed renovations and owns rentals can typically give you a pretty good idea of renovation costs and ARV. If you are looking for hard numbers (i.e. a bid) you will need to develop relationships with contractors and convince a couple to come out and bid your job. Right now, contractors are extremely busy. This is where developing partnership and leveraging your network comes into play.

Kuba F. · Answer

@Robert Spears

I wrote a blog about this a while back with the gist of it being that you need to get to a point where you can do it yourself, otherwise you're likely going to use a mix of favors or paying contractors for their time.  Reading Jscotts boot is one good start.

Here's the blog post: https://www.biggerpockets.com/blogs/8814/68805-how...

You can read this blog post that goes into some detail on how to estimate 29 common rehab tasks:  https://www.biggerpockets.com/blogs/8814/72452-how...

And when I walk through a property for the first time, I always have this checklist with me while I video record the whole thing on my smartphone so that I can refer back to it.

https://www.biggerpockets.com/files/user/kubaf/fil...

Hope that helps, and happy investing!

Patrick Britton · Answer

@Robert Spears  A good number of contractors and investors i know in the Seattle area use a combination of $/SF with the age of the house in mind.  So for instance, anything built after 1980 is $45/SF, but anything built before 1970 is $75/SF.  Most of the guys also have a min starting repair budget that adjusts based on their findings, but they assume off the top that the house will need a new roof, new windows, paint (inside and out), several thousands in landscaping,  and appliances.  For a lot of houses, that's a bare minimum of $25,000.  so perhaps start with a $/SF based on the age and add $25,000?

Ryan Evans · Answer

If you're working the Seattle market you'd better find the energy to keep up!

Some guys use price per s/f, others view properties, other just have their price, or they have some combination of a million other deciding factors. As vague as it seems, it's up to you to some extent to know what a good deal is. I'm in the Northwest and in the Midwest, and the definition of a good deal is very different between the two.

Robert Spears · Answer

Hey thanks for the encouragement and great input! this has been really helpful.

Nancy Zhao · Answer

You take the quote one of those $75/sqft contractors give you and divide by two.

Patrick Britton · Answer

@Dean Hamilton  Firstly, those numbers are for Seattle.  I have to assume they would be a little less in Utah and more in SF or NYC.  Second, you don't need to add those two numbers.  So a house built before 1980 would be only $75/SF.  Also note that most houses in Seattle are not 2700 SF, and there's a certain economies of scale to consider too.  As the size of the house increases, the price per square foot decreases.

clear as mud?  :)

Dean Hamilton · Answer

@Patrick Britton, are you saying the cost of repair is $45 per square foot and $75 per square foot based on age?  I am looking at making an offer on my first property right now and it was built prior to 1980, so by your calculation on a 2700 sq ft home the repair costs would be $202k... which is only $100k less than the ARV.  That seems really expensive.  Maybe those are just example numbers? I'm still brand new at this and learning, so please forgive my ignorance.

how to figure cost of rehab?

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