Newbie Question on Estimating Rehab Costs

[Dan Passarelli]

Hi. On all the calculators I've seen, when you are doing your analysis it asks rehab cost. It seems to me all the other info can be gotten (or easily researched) as soon as the lead comes in. But I think the only way to get a rehab estimate is to send your contractor and / or inspector out. Right? So you can't really do the analysis until you do the inspection? I'm not sure how to think about this.

[David Robertson]

Hi Dan,

Real estate is fast-paced game and you need to be able to submit your offers quickly and confidently without waiting around for an inspector or a contractor to walkthrough the property and give you an estimate.

Contractors are extremely busy right now, and it often takes several days (or even up to a week) to get an estimate back.

You obviously can't wait a week in order to make an offer on a property, so you really need to be able to put together an estimate yourself without a contractor so you can submit an offer and get the property under contract before your competition.

Unfortunately, if you don't have any experience with construction costs it can be nearly impossible to confidently put together an estimate, so here is the process I recommend for learning the process of estimating rehab costs:

#1 Read 'The Book on Estimating Rehab Costs'

First, you need to build a foundational knowledge of construction, inspecting properties and putting together a detailed SOW.

JScott's 'The Book on Estimating Rehab Costs' is a great resource for new rehabbers to learn how to Estimate Repair Costs on 25 common rehab repairs.

https://www.biggerpockets.com/store/the-complete-g...

#2 Explore Lowes and Home Depot to Learn About Material Pricing

Take a tour through Lowes and Home Depot (or their websites) and look at finishes materials and fixtures that you will consider using in your rehab projects. This will help you get a better idea of what tile, hardwood, carpet, plumbing fixtures and light fixtures costs for your rehabs.

#3 Contact Local Contractors for Labor Pricing / Hire a GC to Consult

Call local Subcontractors and get budget pricing for common repairs on your typical rehab project.

For example, call a roofer and ask what their average cost per Square of Architectural Asphalt Shingle Roofing would be on a 1,500 sf house, with a 6/12 pitch.

Note: Some contractors will be reluctant to share pricing without seeing the property, but tell them you are just looking for a rough budget number you can use on future projects.

You can also pay a General Contractor a consulting fee of a couple of hundred dollars (per house) to walkthrough a few properties with you and provide a detailed estimate of prices that you can use as your 'menu for future projects.

#4 Compile Your Prices into a Spreadsheet or Estimating Software

Once you start to get a better understanding of Labor and Material costs you will want to store this data into a spreadsheet or software that you can use to help you streamline the estimating process.

The Book on Estimating Rehab Costs comes with a spreadsheet that you can use to help you populate your own database of labor pricing and material pricing. Or you can download my estimating templates I have in my Biggerpockets fileplace:

Simple Estimate Spreadsheet

Detailed Estimating Spreadsheet

There are other Estimating Softwares available as well which can help you manage the Estimating process as well...

#5 Practice, Practice, Practice

Walkthrough potential rehab properties (or find properties virtually online) and practice creating detailed scopes of work, quantifying repairs and estimating rehab costs for the projects.

#6 Get Your First Rehab Project

You can practice all you want, but ultimately you will learn the most about estimating rehab costs by actually rehabbing a house. Getting your first rehab project will require you to create a SOW, talk to contractors, compare and review bid proposals, review budgets, & make countless trips to Home Depot.

​You will inevitably make mistakes and underestimate things, but you will learn 90% of what you know by just doing your first rehab!

If you aren't comfortable estimating costs on your own or aren't willing to put in the work to learn how to estimate rehab costs then you need to team-up, partner, or hire a GC as a consultant that can help you estimate your first few projects.