Rehab Cost Estimate

[Jacob Phillips]

Hi everyone! I currently have 2 rentals in Flint, MI and I'm ready to start flipping/ BRRR as another pillar to my portfolio. When analyzing deals, how do you calculate for repair cost without having to get bids? I know the cost isn't going to be exact but just looking for a range.

[Kevin Sobilo]

@Jacob Phillips, I don't agree with any of the above responders. You CAN estimate yourself without quotes from contractors IF you can identify the work you want/need to do. 

The basic premise for how I estimate is to create a spreadsheet listing all the work items at a fairly high level and then I give my best estimate. Sounds simple and it is! However, the next part is KEY. Next you need to gauge how sure you are of your estimate. So, you need to know yourself, but who knows yourself better than YOU!

You assign a confidence value to each work item and use that to calculate a LOW and HIGH value. 

For example: You need to replace a roof that is 12 square in size. You estimate $7,000 because because 3 years ago you replaced a similar sized roof and you know costs have gone up. So, you feel 80% sure of your estimate. 

With an 80% confidence value your LOW value will be 20% below and HIGH value 20% above your estimate aka $5,600 and $8400 respectively.

When you are done and you total your Estimate, Low, and High Values up you have 3 estimates! If you are happy with your "Estimate" and still OK with the "High" estimate then its probably a good deal because likely everything won't go to a worst case scenario and also if you apply project management principles you can adjust the time or scope of work to try to compensate for many unexpected things that could come up.

So, your Estimate is the goal and High estimate is the worst case scenario knowing that with good project management you will probably end up between those numbers and with good project management hopefully closer to the estimate number.

In addition, if your High number is too high, you can go back and look at items where your confidence value is low and research those items more or get an estimate if needed to bring the confidence value UP thereby working to get that High estimate nailed down more and potentially bring it to where it looks like a good deal. So, you can see where you need to put effort into your estimate as well.