Rehab Costs, where do I start?

[Daniel Pitner]

I know this topic is widely discussed, but I've finally found myself in a position where I need to know how to estimate rehab costs.

We are under contract for a home that will become our personal property.  It also has a detached garage that has plumbing and electricity that would turn into a casita to rent out. The problem is, I'm stuck on rehab costs. I have no idea where to start. The house is 1500 square feet and will need new flooring,popcorn ceiling removed, new kitchen (and the kitchen needs to be moved), and a few walls blown out. The casita would need to be completely built out (frame a bathroom, add a kitchenette, etc) 

Where do I even start?!

[Barry Ruby]

Hi Daniel,

A good place to start is to go through a room by room inventory of what needs to be repaired, replaced or added to get each space to the place you think it should be. Do the same thing with the external premises.

Next, create a scope of services for each sub-trade that is needed to do the work you have identified. Find at least 2 (3 or 4 is better) subcontractors in the market area of your project. Walk each one of them through the premises with the scoping sheet you prepared for them to show and discuss the work you are asking each of them to do. Ask each sub for each trade to provide you with a written bid for each line item of work you need them to do.

Gather the bids you receive and arrange them by sub trade and compare their pricing, schedule and qualifications. Evaluate each bid and select the sub that you feel is the best fit for you and the job you are asking them to do. Note: The low bid is NOT always the one to go with, price alone should not be the defining criteria as the basis or your decision to hire any one of them.

Reputation, bonding, experience, schedule, timely responsiveness and the way you can or can't communicate with a sub are all elements that should be included and weighed in making your selection to hire each sub.

Last and certainly not least, MAKE SURE YOU REDUCE YOUR AGREEMENT WITH EACH SUB TO A WRITTEN, CLEARLY UNDERSTOOD AGREEMENT.

Since you appear to be new to this game, ask each sub to provide you with their version of a contract to accompany the bid they give you. If you read it and can't understand it or don't agree with it then amend theirs or draft your own agreement. You may need 3rd party help with doing your own contract, but you do need your agreement in writing and have it in a form that leaves as little room for ambiguity as possible.

Have a clear understanding of the key elements to the contract: scope of services, materials, insurance, price and schedules. When and if possible, include language that addresses remedies, penalties, right to terminate and a prevailing party clause in the contract.

Finding skilled labor that is available and willing to work with you as noted above can prove challenging. The market I live in has a very active construction profile, which can be problematic in getting qualified subs to respond and or to offer competitive (and sometimes sane) pricing and along with other key terms and conditions to deliver their services.

Good luck with your journey into the world of construction.