estimating rehab costs

4 Replies

Looking into my first deal and stalling a little after walking through property 

side by side twin

asking 70,000 for both sides; 2400 total square feet, 1200 each side

one side is almost completely gutted with new electrical work only.

needs Hvac, sheet rock, full bath, kitchen, floors, half windows needed to be replaced and reframed

other side is "livable" and "passed inspection" think feces, stains and smells

needs new floor, full bath, kitchen, floors, half windows need to be replaced and reframed.

has electrical, radiator heat

my question is I know this is a huge renovation but how do I get a ballpark? Ive read the BP rehab book but this is a lot.

do I just pay a contractor to walk through with me and tell the owner Im interested but need my contractor to walk through?

then ask for line item quote from the contractor?

thanks for looking

-mike

If you have a solid, qualified contractor who will do that for you... then yes, tell the owner you need your contractor to walk it. Personally I would walk it with him, create the scope of what needs to be done and have him bid that verse expecting him to bid what you want. If the house has been on the market a while I would go after it assuming there isn't much action, verse a house recently listed.

Hi Michael, there are a few different ways. 

If you have a good agent, they should be able to walk you through the rehab costs as you walk through the property. That will give you a rough estimate and let you know if the property is worth your time. For me, as an investor and agent, I am always looking at what level of rehab will yield the most profit.

A second frame of reference will come from your home inspector. They should be able to give you a second opinion, which will be more focused on structural integrity and code standards. 

Paying a contractor is a great strategy for learning. It sets an expectation of spending a few hours walking around a property with them answering a million questions. I recommend doing this with a few contractors, so you get a variety of opinions and see their different approaches to the same property. 

Lastly, you could be like me... buy dirt cheap slumlord property, and learn to fix it all up yourself by watching youtube videos. I did that for my first six rehabs, and it's given me a much better ability to work with contractors. It's also the only way to do an almost-full rehab for less than $1,000 of paint, drywall, tile, lights, and caulk! It's work, not investing, but learning that skill set really has helped going forward.

Brian-thanks for the advice. The property is not listed so I don’t feel terribly rushed. I think I’m gonna contact some local contractors.

David-The property is a random vacant property, that the owner has thrown in the towel. I’d prob being paying cash (don’t think a bank would give a mortgage on it, guess doesn’t hurt to try) so i want the numbers close as possible, so my guess is a contractor would be the best?
Should I also get an inspection if I’m walking through with contractor?
I haven’t discussed with my realtor yet bc I found this property cold calling but I probably should.

@Michael Prasto . If you can pay cash up front, I always recommend going that route. You won't have to pay interest as a holding cost, and when you do get it rehabbed, you can then refinance and keep it as a rental, or sell it for a flip. Don't write your options off though, you could do a 203k loan which would include both the property and the maintenance budget!

If you have to ask about getting an inspection or not, you need to get one! A contractor will ask you "what do you want me to do with this property". If you don't know what work needs to be done, it can make for a very awkward moment! (I may have done that when I first got started) A home inspector is there to look for problems with the structure, fixtures, and utilities and provide suggestions on the best way to repair or mitigate them. In addition, if you get a home inspection, typically that is another point in the transaction where you can use the results to negotiate for repairs or a lower price.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here