How much have you paid for your rehabs?

Question

What is everyone paying for a full gut these days (2-4 units and SFH)?   I'm interested in benchmarking my costs against other investors'.  Materials and labor on a full gut has been running me around 50-60K.  Would love to hear from folks in the Chicago market and around the country.

Chris Clothier · Answer

Joel Owens - everyone is departmentalized over several companies including acquisitions, renovations, management and realty.  The average income of each employee is significantly higher, but you have to remember, that we are in a different kind of business.  There is a HUGE demand right now for what we do - or more importantly - how we do it.  Tying back to this thread, you have a lot of REO sellers today who are doing shoestring budget repairs to houses and trying to sell them for as much profit as possible.  Regardless If they are selling to end buyers or long-term buy & hold guys, doesn't matter - they are still pricing sky high.

So, the point I was making is that we spend a little over $18,000 on a property that a passive investor is going to want to purchase and hold for an extended period of time.  We HAVE to do more work - we CANNOT afford as a company to saddle an investor with deferred maintenance.  The property has to perform so we have top spend more than the average quick sell company.

So today, we are managing 1,100 properties  and just went over 400 investors who have portfolios with us.  Those 400 investors all want to build portfolios of 3-10 properties.  When you add in the fact that new investors come in every month - there is built up demand - almost like we have reached critical mass.  We have helped investors buy 67 in the last 5 1/2 weeks so I think we are going to be able to support the staff for a while - hopefully!  Not too worried that demand will end anytime soon as long as we keep concentrating on quality.

And quality starts with a really good renovation where you do not skimp and you do not defer maintenance down the road.

Chris Clothier · Answer

Eric Michaels - It's not me!  I have not worked on a rehab in 5 years, but we have 31 full time employees who operate like one heck of a team and they get all of the credit.  That let's me do my thing marketing and connecting on sites like Bigger Pockets.

J  Scott - I appreciate the props. and you are absolutely correct.  Surround yourself with good people and get them to buy into your vision and it is amazing what you can get done.

J Scott · Answer

For me...

Full cosmetic (paint inside/out, siding/sheetrock repairs, flooring, cabinets, finish electrical, finish plumbing, HVAC maintenance, outlets/switches/registers/etc) for a low-end rehab runs about $10/sf.

Anything over 15 years old (assume new HVAC, roof and water heater) for a low-end rehab runs about $15/sf.

Full gut (including new siding, new roof, all new sheetrock, new plumbing, new electrical, new HVAC, etc) for a low- to mid-end rehab runs about $30-35/sf.

But remember, that's based on my location, the contractors I use, the management structure I have in place, the materials I use, the types of houses I rehab, the incentive structure I have for my contractors, and a whole host of other things that are very specific to my rehabs.  I doubt any two rehabbers who don't work together will have the same numbers...

Chris Clothier · Answer

Good points by J  Scott.  We are spending on average $12.50 - $14.50 per sq. ft. on buy and hold rehabs in 2012.  We have completed 93 properties this year and are averaging $18,355 per renovation, but the amount of work we get done for that dollar amount is significant and far more than someone doing a few jobs a month could get.  There are always going to be little things that can greatly effect amount spent on renovations.

Mark Yuschak · Answer

This is an extremely subjective question.  As J  Scott mentioned, everyone's numbers will be different.  I would never expect two investor's numbers to be nearly the same since every market is independent of what works or maybe acceptable in another region.

Lately, my acquisitions have been between $14 and $38 a square foot.  This is for my rehab flips.  For the rentals, they've been ranging between $9 and a $13 a square foot.

J Scott · Answer

That's the value of a well-run business...

Monica Breckenridge · Answer

•	Rancher 3/1/1 1000 square feet—repair estimate $25,000
•	Bi-Level 4/2/1 1666 square feet—repair estimate $30,000
•	Ranch with a basement 2000 sf—repair estimate $35,000
•	Add $5,000 if the property needs a new roof +/- depending on size
•	Add $1,700 if the property needs a new furnace

These numbers include materials and labor!

Chuck Brickman · Answer

I'm in San Antonio and the last 5 cosmetic or "lipstick" rehabs have been averaging about $11.50 per sq ft.

Joel Owens · Answer

Wow Chris at 30,000 apiece for salary not including Fica,Futa,Social Security you have over 1,000,000 in annual salary costs alone.

Is the 31 people just your rehab crews or everyone at your company??

Are you worried about volume requirements to sustain such a level of payout??

I have some friends who were doing huge volume of REO's as listing brokers but with robo signing listing volume went down and carrying costs were eating them up.

Some had to down scale or pull the plug and switch to short sales as asset assignments switched to a trickle plus listing price dropped eating into margins further.

Eric M. · Answer

So on average you have completed a house virtually every day of 2012 so far?  Don't know when you have time to post.

How much have you paid for your rehabs?

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