Real Estate Investor · Honolulu, HI · Member since 2010 · 20 posts · 1 vote
My Apartment Investing course tells me to estimate rehab costs for the offers by asking the broker if there is a per door rehab cost especially for capital expenses. Rule of thumb apparently being $250/door. Then in due diligence phase get an inspector and contractor to draft proper costs. If they're different go renegotiate the price or get out of the contract.
Is this a good suggestion for everyone out there? Makes me a bit uneasy to approach it this way
Investor · Dallas, TX · Member since 2016 · 168 posts · 195 votes
10y
Hi Mchael Arrieta! We invest mostly in Dallas and are expanding to Atlanta. We underwrite our deals with $3,000-$4,000/door for rehab and adjust this number higher or lower after due diligence. We also buy Value Add properties with a plan to sell after we double the investors money within a 3-5 year period.
Specialist · Westlake Village, CA · Member since 2010 · 1k+ posts · 781 votes
10y
$250 per door? That is way too general & highly suspect in my opinion. So 10 units would be a $2,250 rehab? I wouldn't use a number that low for a 3/2 house much less a 10 unit building.
How about 3k-6k per door as an estimate then adjust from there after more due diligence.
Investor / Mentor / Contractor · Arcadia, CA Buying Out of State · Member since 2015 · 654 posts · 622 votes
10y
I think that $250 per door is the Capital Expenditure amount you will put aside per unit per year. Your lender will require this for major expenses like roofing, asphalt, hvac, appliances, etc.
Rehab costs would be if the property needs work when you purchase. Are you contemplating buying this way? I don't. I only buy performing assets that are turn-key because I don't (can't) buy in my local area. Probably same for you.
Real Estate Investor · Honolulu, HI · Member since 2010 · 20 posts · 1 vote
10y
Ellis, that sounds more reasonable and expected. Makes you wonder what you pay for in these courses after all...
Timothy that's actually what they say for the rehab amount believe it or not. Can you elaborate on buying performing assets that are turn-key? My approach was to add value and reposition. For the first my aim has been to wholesale it to get the experience that way and then learn the property way to add value and reposition when I am to buy and hold - which is the long term goal. If you say it can be done with less work and you're doing it with 200 units I'm all in!
Investor · Dallas, TX · Member since 2016 · 168 posts · 195 votes
10y
Hi Mchael Arrieta! We invest mostly in Dallas and are expanding to Atlanta. We underwrite our deals with $3,000-$4,000/door for rehab and adjust this number higher or lower after due diligence. We also buy Value Add properties with a plan to sell after we double the investors money within a 3-5 year period.
Rental Property Investor · Beachwood, OH · Member since 2016 · 21 posts · 6 votes
10y
Hey Tamiel Kenney, that sounds like a great strategy for planning upfront to buy, hold and rehab- market permitting. Would you be willing to go into further detail as to how you fund your projects? Thanks!
Rental Property Investor · Malvern, PA · Member since 2016 · 1k+ posts · 934 votes
10y
I usually take a more detailed approach to develop the high level estimate. If the unit has these:
Assume replacement every 10 years:
Water heater - $900
Refrigerator - $900
Range - $900
Dishwasher - $600
Clothes washer/dryer - $1000 combined
Every 15 years:
Furnace - $2900
Central air - $2900
3 BR SFR Flat Roof - $2100 + $300 per 3 years to coat it
I annually plan for an additional $1,500 of miscellaneous maintenance expenses and $800 for capital improvements.
You could probably use something like this to estimate your per-unit costs as some units might not have all the same features. You probably have to adjust my figures to your market and equipment.