Estimating rehab costs

[Zane Biggs]

What's going on BP!?

New investor here. I've been studying different materials the last few months from books, podcasts, webinars, forums etc. with the goal of not only purchasing my first home but also making it my first investment property. Ultimately shooting for financial freedom by or before 40(currently 27). I plan to invest in the Northwest Arkansas market.

I have been practicing using the calculators to prepare myself for my first deal but I have hit a bit of a road block. I really have no idea on the rehab costs for individual items which is keeping me from really being able to get far, effectively at least, on the rehab estimator and fix and flip calculators.  I realize that as I build relationships with contractors and gain experience these estimates will be a little easier to come by but do you all have any tips for where I'm at now and how I can get good estimates on different areas of work to be able to effectively use those calculators and analyze deals?

Also, I am looking into two strategies on how to get into my first investment and would like advice on which sounds best.

House hacking multi family property. I have a wife, one boy, and another child on the way so will have to be some type of a deal where we have our own unit to ourselves. My only problem here is I have enough money for possible down payment and closing costs with a little left over but if I find a good deal on a property that is needing some rehab I havent been able to figure out how to structure those costs into the deal. Possible private money lender but how could I structure paying them off?

Single family house BRRRR with a twist. Looking into a place that we can do a deal with a private money lender to rehab then my family moves in and we refinance through a bank to pay off the lender then live there until we find another property at which point we would move out then rent this property.

Thank you in advance and look forward to your tips!

[Ryan Blackstone]

Talking to a contractor would help to estimate this. I use some rules of thumbs to get close and feel good about putting an offer in. For example, I know that I can have a guy paint the whole place inside for $3.50/ft. Then, I know I need to pay a guy $20 per linear foot for 6' privacy fence. The book on estimating rehab costs is a great resource for this. All this being said, if you have an idea of what you are wanting to do to the property, I would get a contractor out there during the inspection phase to get you are real number. Partnering with a great investor friendly agent will help with this. 

I suggest house hacking. I have done this for several years. The last one I did I had the bank give me money for the rehab, and I didn't have to come out for more money. House hacking gives you a safety margin. If you are off on your numbers, that's ok... you will still be paying less living there than renting or buying a house anywhere else. Remember, you don't have to buy a "home run." Once you get your first deal under your belt, you will be 10000% more knowledgeable about it all.