how will I really make sure that I am in the right ball park for "guessing" the right cost forrenovation.

Question

If I can't get a GC to come and look at a property and give me a bid on it before I put in an offer, (because another thread suggest they all charge for this)  then how will I really make sure that I am in the right ball park for "guessing" the right cost to renovation.

My experience has always been with renovate and hold, so spending a little more than I thought I would on a renovation wasn't such a big deal at the time.  Now that I am trying to flip 8 houses a year as a start to a CAREER, every dollar counts and needs to be accounted for.

I have J Scotts book on estimating...but does anyone else have some suggestions?   I could always do the whole $10 - $15 - $20 per sq ft estimate until I have done a few flips with and have  a relationship with a contractor to the point in which he'd come check out my property before I make an offer.

What would you do?  Kinda new, kinda experienced...but need some insight.

Chuck Catchings · Answer

O.K. Amy I'm going to comment on this post just like your other one. Your making the FATAL mistake that most F&Fs do when they don't get a qualified bid from a qualified contractor. I've seen it happen over and over and you will lose $$ when you do this. Why does it bother you SO much that you may have to pay a qualified contractor a fee that most likely will be rolled into the bid. You start guessing and you start losing $$. As the old saying goes: Your stepping over dollars to pick up pennies. But good luck anyway.

Bryan L. · Answer

There have been a few times when I've wanted to bring in a contractor to estimate a specific type of repair - mainly when there are foundation issues.  But then again, why not just skip those deals all together and move on to the next one that has less risk.

Michael Woodward · Answer

Amy,

Bryan makes a good point about going to Lowes. I did the same thing when I first started out because, although I could see how much things like shingles cost, I had no idea what it cost to have them installed. Fortunately, Lowes posts their installation prices on many of the items they sell so all you have to do is add it to your calculations. In my experience, Lowes labor prices are usually a little higher than what I would pay an independent contractor so if you use the Lowes prices to calculate your costs, you should be fairly safe in your estimates.

Unfortunately, there's no substitute for experience so you won't know exactly what things are going to cost until you do a few projects. But, like Bryan said, don't sweat it if you leave some money on the table. Do a few projects and keep up with all your expenses and future projects will be easy to calculate.

Good luck!

Bryan L. · Answer

When I was first starting out, I went to Lowe's a lot and checked on the cost of materials and such.  And I put together an Excel spread-sheet.  But, after I had done a few rehabs I noticed that my costs on all of them were very similar.  In my area, in the price range that I deal in, a typical foreclosure will cost me on average about $10,000.  That will cover new flooring throughout, new paint throughout, some electrical and plumbing repairs, new kitchen counter tops, fix or replace a few doors, and a lot of miscellaneous stuff (replace toilet(s), new door knobs, some sheetrock repair, etc, etc..  I really don't care what all of the misc stuff is, and it might be different on the next house.  That 10K will also cover my typical closing costs and carrying costs (interest, utilities, and yard mowing).  In my area, it's very rare for a rehab to take less than 10K, cause if it does, an o-o will come along and buy it and pay more than I would anyway.  So, I start with 10K as a baseline rehab number.  Then I start adding other items on top of that (if necessary) such as HVAC, windows, roof, bathroom remodel, etc.  Still, most rehabs in my area and price range will need somewhere between 10 and 20K in rehab costs.  Sometimes it might go to 25K.  If it's going to take more than 25K, then I might now want it anyway.  Disclaimer - this is only for my target area and target price range.  Rehabs on a $250,000 house may not follow this system for estimating.  Really, you often don't have to be dead-on accurate with your repairs - especially if you're starting offers are 10K or less than your max.

Kyle Hipp · Answer

If you can't get an estimate on your own by walking through then you need to hire someone to come in and give you a ballpark estimate and some type of scope of work. I would never guess at this. With the experience that you do have it sounds like you have done a number of projects. Are you now able to identify those types of issues and get a ballpark cost from past experience? What areas are you lacking in? Maybe you can just have someone, like a friend or colleague,  come with that has experience where you are lacking.

Mike G. · Answer

Order "The Book on Estimating Rehab Costs" from the BiggerPockets store.

Bryan L. · Answer

"every dollar counts and has to be accounted for"  -  Naw, not really.  I almost always go over-budget a bit.  But hey, if you miss a 15K estimate by 10% on a rehab that will profit you 20K, do you really care that you only made 18.5K profit on a 50K (or 51.5K) all-in deal?  While you are working an estimate down to the nearest dollar, I'm writing an offer on this baby as fast as I can.  Plus, I'm making a little commission on both ends too, so I'm not going to sweat a little hear or there.

how will I really make sure that I am in the right ball park for "guessing" the right cost forrenovation.

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