Good ways to figure out rehab costs
Lender · Costa Mesa, CA · Member since 2021 · 21 posts · 3 votes
Hi Everyone! I know the book of estimating rehab cost is a good one, but is there any other ways to figure out how a rehab will cost?
Hi Everyone! I know the book of estimating rehab cost is a good one, but is there any other ways to figure out how a rehab will cost?
Why don't you just get a bid from a GC. He will give you an exact price.... You have no obligation to use him.
Bruce, Imagine you are a contractor, are you OK with giving free bids to would be flippers all the time without any guarantee you get the job? I do free bids all the time but I am certainly not going to give a rehabber a free bid so he can make his offer in hopes I may get the job (which is likely a 5% or less chance).
I have posted many times on BP on how to estimate rehab costs (I wish I would have saved the best threads for it to repost). Basically, you need to get your hands on a spreadsheet that has all the basic items in a rehab. You then need to fill in what each line item will generally cost depending on your finish levels and then you need to go to open house after open house and practice filling it out noting each item that would need to be remodeled/upgraded. One of the best tricks I used was to chop up the home into sections. Doing this allowed me to walk into a prospective purchase and walk out 15 -20 minutes later with a number in my head that would more often than not be within 10% of what it actually cost. This of course takes time and lots of practice.
As an example, in your spreadsheet, take each line item associated with a bathroom and add it up. Lets say it comes to $10k. When you walk into a rehab potential which has 2 bathrooms, you know instantly in your head you have a $20k tally started. Do the same for the kitchen, same for windows (know the cost per window and multiply by how many windows in each opportunity) - same for interior doors, etc. Know the cost per linear foot for base/case, know the average landscape costs, roof, AC, etc. When you break up the home into sections and you know the costs in your head (or on paper) ahead of time, it is easy to add it up as you walk through. Things get a bit more complicated for hidden items or moving walls, etc. but this should give you a great start.
There is a checklist I uploaded here on BP many many years ago which is very popular and still available here to get you started: https://www.biggerpockets.com/...
Depends who is doing the work.
Call around to a couple of the smaller shops and ask for specifics. Plumber - How much to install one kitchen faucet. Electrician- one light fixture/change out 10 outlets. Same for drywall, concrete, siding. Get a base price and divide out to know the unit price.
I tell them outright that it's a home we are looking to put an offer in on. If they won't give me a couple minutes of their time to throw me a couple numbers (doesn't need to be exact) then I don't have time to consider hiring them.
Get a couple small projects going and build on that.
To enter the inside of my thought process: Check the real estate listing, count how many rooms there are, condition of appliances, cabinets and bathroom.
For a 3/2 1200 sq ft. that needs appliances, flooring and paint: 2 gallons per room @ $40/gallon. $1.39/ft lvp. $600 Stove and fridge, $440 dishwasher and $230 for a microwave. Add 10-15%
Paint $520, Flooring $2000, appliances $1800.
I then would work backwards, kiss some butt at Sherwin for volume pricing, hawk craigslist for the flooring and scratch-and-dents the appliances if possible. That's if doing the work ourselves.
Can't throw much more advice on hiring out other than calling contractors. Just NEVER tell them how much you have to spend!!
@Matthew Sipes
Practice makes perfect. It will depend on the market you are in as far as costs go. Also will depend if you are using a GC or not.
@Matthew Sipes, it is tricky. If you know enough to describe the job to a contractor to get a remotely accurate bid, you know what the bid will be. As Nate mentions, you can call around and ask, but I would have a general description of project AND pictures of current condition.
Also, know that unless you have materials selected, you will likely only be able to get a bid for labor. Materials can easily be more than half of your overall rehab costs. For instance, I have had bids for $10/psf for tile. That bid includes any required underlayment mortar. It does not include leveling of floors, tile or grout. I can pick the "super-saver" tile at less than $1psf or I can do terrazzo at $40+psf. My budget will be vastly different for that floor, depending.
Were closing on one Thursday, I'll throw my numbers and reasons out there for reference. With the uncertainties in the market and shotages/material price hikes we are playing it way safe on this one.
Let's just say we're buying for 150k, intent on selling for 200k. In my area homes go up on average 6% every year. Ignoring that some have sold for 20% higher last year.
If we do nothing, as it sits it will be worth somewhere near $168,000 in two years. My comfort level had been established by setting our rough estimate at no more then 18K into this flip. At least we make our money back if things go wrong, or we stay in the house.
The inspection came back pretty minor, the house is just a cosmetic turd. So knowing it's all cosmetic eliminates all contractors. I'll do the kitchens and bathrooms myself.
We went in with a laser tape and measured walls, cabinets and floors. Made a list of each project, materials needed, went into the Home depot app and started writing down prices. Came out to about $16k for a materials list. We will be much lower then that.
If anything just do your homework. Hit as many open houses as possible in your buying range, and selling range. Research the properties, know when they last sold. Eventually you will get a feel for which ones have been flipped and will know what to look for as potential and which ones are the duds.
I keep rambling but I guess the best way to put it is to set the budget you're comfortable with, and find a way to make it work.
First would be to check out J Scott's book on estimating rehab costs which you can find here: https://store.biggerpockets.co...
To be honest, I think the best practice would be sitting down, opening an excel sheet , writing down what is needed. room by room, bathroom by bathroom. If it is a gut job, you can figure out calculations etc... home depot also helps you what materials needed in details. Then, open home depot site and find out how much materials will cost.
it will be a good practice.
Last part will be collecting separate bids, and before you do that decide what needs to be done in specifics, like how many recess lights you will need...
If you spend some time, it will be very helpful.
Hi Everyone! I know the book of estimating rehab cost is a good one, but is there any other ways to figure out how a rehab will cost?
Why don't you just get a bid from a GC. He will give you an exact price.... You have no obligation to use him.
@Matthew Sipes I'd tour the property with a contractor. They can give you an accurate estimate on how much you should budget for the renovations,
A simple trick is to rate a property's condition from worst to best as (Horrible) (Bad) (Not too bad). Assign a dollar value to each rating, say ($25 - Horrible) ($20 - Bad) ($15 - Not too bad). Then multiply the property's square footage by the rating. Obviously, you need to do your homework when it comes to repair costs, adjust for your market, and be able to spot issues during the home inspection. However, once you look at enough properties and home inspections, you'll be able to quickly do the mental math on-site.
Hi Everyone! I know the book of estimating rehab cost is a good one, but is there any other ways to figure out how a rehab will cost?
Why don't you just get a bid from a GC. He will give you an exact price.... You have no obligation to use him.
Bruce, Imagine you are a contractor, are you OK with giving free bids to would be flippers all the time without any guarantee you get the job? I do free bids all the time but I am certainly not going to give a rehabber a free bid so he can make his offer in hopes I may get the job (which is likely a 5% or less chance).
I have posted many times on BP on how to estimate rehab costs (I wish I would have saved the best threads for it to repost). Basically, you need to get your hands on a spreadsheet that has all the basic items in a rehab. You then need to fill in what each line item will generally cost depending on your finish levels and then you need to go to open house after open house and practice filling it out noting each item that would need to be remodeled/upgraded. One of the best tricks I used was to chop up the home into sections. Doing this allowed me to walk into a prospective purchase and walk out 15 -20 minutes later with a number in my head that would more often than not be within 10% of what it actually cost. This of course takes time and lots of practice.
As an example, in your spreadsheet, take each line item associated with a bathroom and add it up. Lets say it comes to $10k. When you walk into a rehab potential which has 2 bathrooms, you know instantly in your head you have a $20k tally started. Do the same for the kitchen, same for windows (know the cost per window and multiply by how many windows in each opportunity) - same for interior doors, etc. Know the cost per linear foot for base/case, know the average landscape costs, roof, AC, etc. When you break up the home into sections and you know the costs in your head (or on paper) ahead of time, it is easy to add it up as you walk through. Things get a bit more complicated for hidden items or moving walls, etc. but this should give you a great start.
There is a checklist I uploaded here on BP many many years ago which is very popular and still available here to get you started: https://www.biggerpockets.com/...
Bruce, Imagine you are a contractor, are you OK with giving free bids to would be flippers all the time without any guarantee you get the job?
I have been for 40 years. I would give a quick job walk and throw out some numbers for people. If a particular person has the right feel and starts giving me regular work (i.e., I know I am not just being used) then I would go to the next level and give them a slightly more itemized bid. Of course not the 100 hour proposal/contract that I prepare for remodels or builds, but plenty good enough for them to wrap their heads around a budget.