Starting Out Rehabbing

9 Replies

As a beginner, should I be accurate on repair cost or should i lean on an expert & get a bid from a GC while analyzing a potential project? Also, how many GC should I work with to see who gives the best pricing?

I would highly suggest reading a book on estimating rehab costs. J Scott has a good book that was helpful for a starting place. This will help give you an idea of what to expect and to see if contractors are giving fair prices. The investors I work with started out getting three different bids and eventually found someone that they do everything with now. Most of the time you will have to estimate the rehab on your own and once you purchase you get can get bids. I know some teams that have a go to guy will check it out before purchasing, but that can be hard to find starting out. 

If you can get a GC or really good handyman to look at the property that is beat. All of the estimators are guessing...heck even the GC and handyman are guessing...

But this is a guessing kinda business we're in....you just have to guess right most of the time.

I would recommend that you read "The Book on Flipping Houses" and also "The Book on Estimating Rehab Costs", both by J. Scott. There is a lot of information regarding this topic. I don't know how hot your market is, but where I am by the time I can get a GC out to a property it is typically sold already.

Create some type of checklist that you bring with you to every property you look at, take good pictures and video if possible so you can review afterwards. Don't just estimate numbers for a rehab, but get actual estimates for labor and materials. I've found that a lot of contractors or handymen will give you a decent price range based on photos and your description of the project. Then, go from there. Trust your gut - if you have a bad feeling about the numbers, either don't buy it or lower your offer. As a beginner, if you are unsure if something needs repair, ask somebody with the experience or just add that cost into the rehab. Finally, as a beginner they always say to add 10% to the rehab estimate. Even if you think you estimated everything, you will still somehow end up using that 10%.

Originally posted by @Bruce Woodruff :

If you can get a GC or really good handyman to look at the property that is beat. All of the estimators are guessing...heck even the GC and handyman are guessing...

But this is a guessing kinda business we're in....you just have to guess right most of the time.

 To add on to this, I had a handyman come give me a quote on a full interior rehab last week. We finished walking through the property and he goes - "you know, there are always two prices - one when we are walking through it as is and one after we rip everything out and see the real issues." 

@Boomie Olusanya , as noted the ideal situation is to have a contractor walk the property, with a scope of work, to estimate.  In reality, by the time you do this, the house is likely sold.  

Do you own a home?  Have you done any work to your house, particularly recently?  That could give a good start point.  

One option, in general, is to network and try to partner with someone else.  Where you are bringing all or most of the capital, and utilizing their experience to look at and estimate deals.  You are basically paying for an education by giving up part of the profits.  This partner will likely be more nimble and able to tour properties quickly, versus a contractor who has little to no incentive to meet you at a moments notice to walk a house you very likely may not ever buy.

You should really develop at least a working knowledge of rehab costs so you can at analyze a lead to see if you want to get serious. If you keep getting estimates just to get to that point you will burn a lot of bridges with GCs. It takes them a lot of time to prepare even a budget estimate. So eventually they're just going to stop taking your calls if they don't get some work. The books by J Scott others have suggested are a really good start. I have both.