Estimating rehabs and refinancing

General Real Estate Investing
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Estimating rehabs and refinancing

Carlos Mezquita
Columbus, OH · Member since 2016 · 8 posts · 4 votes
Hello everyone, I'm pretty new to the real estate investment world and I'm analyzing my first properties, but I have the following questions regarding rehabs and refinance... How do you accurately estimate for closing costs? (A breakdown of what are the specifics closing costs would help) How do you estimate rehabs accurately? I see there are many things to consider and it depends a lot on the property conditions, but how do you get some ballpark numbers if you haven't seen the property yet? Is there any database online with materias and labor costs? About refinancing thinking on the BRRR strategy, how can you be sure that your property will get refinanced to pay off to your investor? If you don't get the refinance what other alternatives you have pay your investor? What would be the best alternative exit plan? I'm sorry if my questions are a little bit open or unclear but I still trying to figure out if I want to focus on buy & hold or BRRR. Thanks!!!
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Jeremy Paschedag
Rental Property Investor · Saint Louis, MO · Member since 2016 · 162 posts · 53 votes
9y

Hi Carlos, welcome to BP!

I echo what @Jordan Grimstad said about the book The Book on Estimating Rehab Costs.  You can get it here or on Amazon.com.  And about what Jordan said on closing costs.  With rehab costs, prices vary depending on area for both materials and labor.  You could measure your kitchen floor to get an idea of floor square footage, then go to a big box store to price materials to install.  Ditto for cabinets, bathrooms, waterheaters, etc.  Then you could call a handyman to get a rough idea on labor for a couple projects.  Then call a contractor and get the same.  Don't call more than one or two, they have jobs they need to work to get paid.  Then you should have a rough idea of the different costs for various project work.

The key to a successful BRRRR is buying below market value. Usually this means a distressed property, estate sale, foreclosure (may involve a LOT of rehab work) (my understanding is these are slow moving deals just to get to the closing table).

Buy and Hold and BRRRR are similar. Both are buy and holds, but with BRRRR the idea is to repeat the process in short time. This is done through buying below market value and refinancing. You make money when you buy, you just don't realize it until you sell.

The first property will be scary.  You'll make mistakes.  Forgetting some costs or expenses.  Learn from that and hone your process.  You'll get better.  Don't let the NOs get you down.  Keep your dream in mind.

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  • Jordan Grimstad
    Minneapolis, MN · Member since 2016 · 51 posts · 19 votes
    9y

    @Carlos Mezquita 

    Re: closing costs - aside from asking your realtor, mortgage broker, etc., there are a number of resources online that can give you ballpark figures.

    Re: estimating rehab budget - no easy answer to this one either aside from getting in touch with a couple contractors/handymen/plumbers/electricians in the area and asking for quotes on generic stuff you'd be likely to work on. Aside from that, I'd strongly recommend The Book on Estimating Rehab Costs - it's not a super exciting read, but it's easy to skim through and get a sense of things. It'll be nearly impossible to get a straightforward answer on this since there really isn't such a thing as boilerplate - what are the specifics of your area? What types of properties are you buying? How much does material/labor cost in your area? The best chance you'd have to get the answer without the hard work (at least, not the hard work I've already mentioned) would be to link up with a house flipper in your area and have them mentor you on how they estimate rehab costs.

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  • Jeremy Paschedag
    Rental Property Investor · Saint Louis, MO · Member since 2016 · 162 posts · 53 votes
    9y

    Hi Carlos, welcome to BP!

    I echo what @Jordan Grimstad said about the book The Book on Estimating Rehab Costs.  You can get it here or on Amazon.com.  And about what Jordan said on closing costs.  With rehab costs, prices vary depending on area for both materials and labor.  You could measure your kitchen floor to get an idea of floor square footage, then go to a big box store to price materials to install.  Ditto for cabinets, bathrooms, waterheaters, etc.  Then you could call a handyman to get a rough idea on labor for a couple projects.  Then call a contractor and get the same.  Don't call more than one or two, they have jobs they need to work to get paid.  Then you should have a rough idea of the different costs for various project work.

    The key to a successful BRRRR is buying below market value. Usually this means a distressed property, estate sale, foreclosure (may involve a LOT of rehab work) (my understanding is these are slow moving deals just to get to the closing table).

    Buy and Hold and BRRRR are similar. Both are buy and holds, but with BRRRR the idea is to repeat the process in short time. This is done through buying below market value and refinancing. You make money when you buy, you just don't realize it until you sell.

    The first property will be scary.  You'll make mistakes.  Forgetting some costs or expenses.  Learn from that and hone your process.  You'll get better.  Don't let the NOs get you down.  Keep your dream in mind.

    1Reply
  • Carlos Mezquita
    OP
    Columbus, OH · Member since 2016 · 8 posts · 4 votes
    9y
    Hey guys! Thank you both for taking the time on replying to my post, I will definitively get the book that you suggested and get deeper into the rehab stuff, I bet is not that easy but after doing it the first time Im sure I will learn a lot! I'm looking forward to take the next step and buy my first investment property at the end of next year after I can figure out some of the questions I have, but really your suggestions are very helpful to me! Thanks again!
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  • Kyle Christian
    Property Manager · Fort Smith, AR · Member since 2015 · 3 posts · 0 votes
    9y

    Estimating rehab cost is not an exact science, but of course you would rather estimate higher than lower. So you do need to be within the ballpark at least. They do have a national average material cost and labor cost they may help you out. There are some pay lists but this one is free All Cost Data . Hope it helps.

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