How to Estimate Rehab costs?

Question

Hi all,I realize this is a really detailed subject that's impossible to explain in 500 words, but does anyone have any tips on estimating rehab costs?I'll be scouting out properties for a BRRRR investor in Iowa, so I want to be able to run the numbers semi-accurately and send him only the deals he would actually be interested given the rehab costs.Thanks BP!AJ

David Robertson · Answer

Learning to estimate rehab costs is a process that takes time and experience. Here is the process I recommend for learning how to estimate rehab costs: #1 Read the Book on Estimating Rehab Costs 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 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. #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 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 Someone Who Can Help You Estimate Rehab Costs. Pay A GC For A Consultation And Property Walk Through You can hire a General Contractor to provide a consultation to walk the property for you and provide an detailed estimate breakdown of what they would charge for the repairs to the property. Expect to pay between $200 to $500 to have a contractor provide a consultation. Partner With Someone That Has Construction Experience To get your feet wet, you could partner with another house flipper, contractor or construction professional that could help with Estimating Costs.

Matt J. · Answer

@AJ Smith Whatever your final number is add 15-20% as a cushion. I can almost guarantee you’ll run into something you didn’t expect.

David Barnett · Answer

@AJ Smith You're going to need to get an education by getting in there and looking at properties. If you aren't sure the costs, I would recommend having a contractor walk through the property with you for a ballpark. You might need to pay the GC for a bid to be able to provide you the numbers, or might be able to assign some of a wholesale fee to the GC for their time providing bids for you. You'll likely only need to do this 5-10 times to get a general ballpark of how much things cost in your market. Sometimes you need to pay to play...

Rick Ortiz · Answer

@AJ SmithMany posts offer great ideas. I would reitterate there thoughts and just try to educate yoursel by researching your market by either attending a meet up or on BP. So many variables to consider so its kinda hard to sum up. One way is to try to get data on a sq. Foot basis. For example it may cost "on average" $50 sq ft to remodel. So rooms or more and some are less but its a quick avg.Or just use worst case scenario. A whole roof cost $xxx of the cost to rewire a whole house cost $xxx. Then based on your property just work down from those numbers since it cant be more than that. Of course most accurate is a walk through with a contractor.

Darius Ogloza · Answer

You basically have three variables: time for repairs, materials costs and carrying costs throughout the rehab period. For the first, try to get a sense of what various subs charge in your market per hour; for materials you have google and carrying costs include PITI, utilities, permits and fees and other standard costs of ownership. In terms of workers, you have basic laborers and specialists (plumbing, electrical, carpentry, masons, roofers, landscapers) and other finish pros. Get a sense of the range of cost for each specialty your project will need.

Matthew Irish-Jones · Answer

@AJ Smith get a good contractor to walk properties with you. Nothing more risky than guessing rehab costs, most new investors laugh at me when I give them my honest assessment of rehab costs. They are almost always higher than what they guess initially.

Kenneth Garrett · Answer

@AJ SmithYou can use the rehab estimator In the tools drop down for calculating estimates if you are uncomfortable determining rehab cost. I generally run my own numbers as I walkthrough a property. I’ve been in construction a long time and I am very Comfortable running my own numbers. You could also bring a contractor out, but you don’t want to waste there time. You need a plan as well as what you want to do with the property.

James Gleeson · Answer

@AJ Smith it really will come from experience, getting multiple bids from different contractors, and reading and educating yourself as much as you can. You could also do a sq footage estimate, but that won’t be as accurate as going down line by line. If you have any specific rehab cost questions, feel free to pm me

AJ Smith · Answer

@Kenneth Garrett Thanks for your response! It sounds like construction experience would be helpful in knowing the numbers to plug in. At this point I'll likely be taking a shot in the dark when running my own numbers in the calculator, because I have limited construction experience from Habitat for Humanity.Do you have any tips on figuring out what a close approximation for each expense would be? For example I have no idea how much siding is going to cost, so where would I go to find that out?