How to get good at estimating rehab costs?

[Michael Johnson]

Hi,

I want to get good at estimating rehab construction costs using contractors so I can do a deal analysis to prior to making an offer on the property to determine what is my max allowable offer to have a successful flip or BRRRR.

How can I get really good at it? 
is there books of construction costs? 
Youtube videos?

Should I try to work part time aa ann estimator for a construction company in my spare time? 

How did you guys figure out how to run a deal analysis and know the rough prices for bathroom remodel, kitchen remodel, plumbing, electrical, roofing, drywall, paint, landscaping, etc. 

Thank you

[Nathan Gesner]

Quote from @Michael Johnson:

The price of materials changes constantly. The price of labor also fluctuates, though not as much as materials. In 2018 I could hire a master plumber for $60 an hour; today they are $100 - $120 an hour. In 2018 a plumber would install a water heater for $800; now it's pushing $2,000.

The only way to get good at it is to do it constantly. Instead of spending all your time staying current on market trends, build a relationship with a reputable contractor and use their knowledge to estimate the costs.

[Mike Dymski]

Make an educated guess on rehab costs, a buyer's agent with investor experience can help, put deals with thick profit margins under contract, get them quoted during the diligence period, allow room for overages, and then knowledge builds over time.

[David Robertson]

Hi Michael,

Learning about renovation costs is a process that takes time and experience. Here is my boilerplate list of the steps you should take to learn how to estimate rehab costs:

#1 Read the Book on Estimating Rehab Costs

Expert house flipper J Scott discusses the fundamentals of budgeting and pricing rehab costs and reveals the steps, tips, and tricks he uses to accurately estimate costs for 25 common trade categories and hundreds of repairs. The Book on Estimating Rehab costs is a must-read book for new rehabbers that struggle estimating rehab costs for their rehab projects.

Keep in mind, this book is a little dated so the prices may not be accurate today, but it still should provide the basic process of estimating the different trades and scopes.

#2 Walk Through Distressed Properties and Spy on the Competition

Walk through a couple of completed rehabs that a local real estate investor has completed in your local market and study the types of repairs they made and the level of finishes they installed in the property.

Spying on the competition and understanding what buyers are looking for will help you determine what type of repairs and level of finishes you need to install in your own properties.

#3 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.

#4 Contact Local Contractors For 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.

#5 Build Out Your Database in 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.

#6 Practice, Practice, Practice

Walk through distressed fixer-upper properties (or find properties virtually online) and practice creating detailed scopes of work, quantifying repairs and estimating rehab costs for the projects.

This will help you get acquainted with common rehab repairs, rehab costs & estimating terminology.

#7 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!

#8 Learn from Your Experience!

Once you complete your first house flip project, take some time to review your actual costs that you spent on the project and compare it to your initial estimates and budgets.

Reviewing your final numbers will help you gain a better understanding of how much you actually spent in each Category and identify areas where you underestimated cost and blew your budget.

When you buy your next house flip project you will have this valuable learning experience to help you build a more accurate estimate!

As your continue to do more and more houses, you'll gradually gain more experience and be able to develop accurate estimates quickly and confidently!

[Alan F.]

Quote from @Michael Johnson:

Hi,

I want to get good at estimating rehab construction costs using contractors so I can do a deal analysis to prior to making an offer on the property to determine what is my max allowable offer to have a successful flip or BRRRR.

How can I get really good at it? 
is there books of construction costs? 
Youtube videos?

Should I try to work part time aa ann estimator for a construction company in my spare time? 

How did you guys figure out how to run a deal analysis and know the rough prices for bathroom remodel, kitchen remodel, plumbing, electrical, roofing, drywall, paint, landscaping, etc. 

Thank you

 Construction & remodeling has been around long before flipping, box stores & on line shopping. Estimators too, there are cheap great books called estimators guides. They can be found a 2nd hand book stores, on line etc. These cover labor units & you can extrapolate your $ into the units. Materials fluctuate but wholesale distributions proved fee material pricing. Many people here have never done a real estimate, they guess or use some tribal knowledge. Contractor forums are far more useful to actually learn and such a tactile industry. Best of luck @

[Gi'angelo Bautista]

@Alan F. which construction forums do you usually go to?

[Carlos Ptriawan]

Quote from @Michael Johnson:

Hi,

I want to get good at estimating rehab construction costs using contractors so I can do a deal analysis to prior to making an offer on the property to determine what is my max allowable offer to have a successful flip or BRRRR.

How can I get really good at it? 
is there books of construction costs? 
Youtube videos?

Should I try to work part time aa ann estimator for a construction company in my spare time? 

How did you guys figure out how to run a deal analysis and know the rough prices for bathroom remodel, kitchen remodel, plumbing, electrical, roofing, drywall, paint, landscaping, etc. 

Thank you

 The key is actually having constant contractor/sub con that can do 80% of the work required. Not all projects require specialist. Things like drywall to paint to basic plumbing can be done with the same one or two people. But if you hire different drywaller and different plumber for any simple projects than things are started to getting messy. So when I select contractor I ask them what they can do and how long they're experienced doing those thing. Once you have accustomed to such person, just use the same person over and over. I'm probably lucky because some of my contractors are my own tenant.

[Alan F.]

Quote from @Gi'angelo Bautista:

@Alan F. which construction forums do you usually go to?

 Just put contractor forums into your search, some have DIY sections too. Besides the estimators guides I mentioned there also software like accubid, procore and RS means.

On a different thread an investor mentioned how his Realtor could identify problems and general estimates, and how valuable he was.

[RJ Molitor]

Michael,

I am a general contractor here in Denver. Like everyone has said, practice makes perfect. But learning the general costs for room by room costs of work needing done will help you alot. Let me know if I can help you out any more.

[Jonathan Klemm]

This is awesome @Michael J Johnson!  You will be super happy you educated yourself more than most on this subject.

The root of renovation is simple (but complex to most because none of us know what we don't know)....figure out all the material that is needed and how much (aka quality take-off).  Then figure out how long it will take to install (labor) that material aka production rate (SF/MH = Square feet per man hour).  Then figure out an hourly rate for the specific trades (aka $/MH).  Combine everything and then you get $$$$$.

I can give you some practical numbers that would be representative in Chicago if that would help?  Let me know I am happy to help!

I could have never imagined how practical my degree in construction engineering would be lol we had to take estimating, scheduling, and material classes.

[Carlos Ptriawan]

Quote from @Michael Johnson:

Hi,

I want to get good at estimating rehab construction costs using contractors so I can do a deal analysis to prior to making an offer on the property to determine what is my max allowable offer to have a successful flip or BRRRR.

How can I get really good at it? 
is there books of construction costs? 
Youtube videos?

Should I try to work part time aa ann estimator for a construction company in my spare time? 

How did you guys figure out how to run a deal analysis and know the rough prices for bathroom remodel, kitchen remodel, plumbing, electrical, roofing, drywall, paint, landscaping, etc. 

Thank you

 Also do not be surprised for one exact job and quality you may have to pay $5k or $70k. Same exact job.

The most component is actually just .... labour.

If you can get the job done as slow as as possible with fewest number of labour, actually the cheaper it would be. Although practice makes perfect but you really need to have trusted contractor as your best friend.

If the contractor is fixing their own home, they can fix it for 3k ; but same job to others they may charg you 20k lol

[Kevin Sobilo]

@Michael Johnson, you don't have to be good at estimating to make good estimates! If you are honest about your expertise (or LACK of expertise) with each part of the estimate you can do just fine.

For each part of my estimate I will assign my best guess as to the cost and then also assign a certainty %. I will use that percentage to calculate a LOW and HIGH value for each aspect of the estimate.

For example:

Task    Estimate   Certainty     Low Estimate     High Estimate

Roof    $7,000          90%            $6,300               $7,700

Siding  $10,000        80%            $8,000               $12,000

-----------------------------------------------------------------------------

Total   $17,000                          $14,300              $19,700

So, you end up with 3 estimates. Your original, a high and low. If the high estimate is something workable and you feel comfortable with your original estimate you have a good deal.

You should be able to manage the project to end up somewhere in between those numbers and hopefully at/near the original estimate since some of your categories will be high and some low. With luck they will average out.

However, if they don't average out or if unexpected things arise you want to rely on good project management. A basic project management principle is that there are 3 aspects to any project Scope, Time, and  Cost. So, you can often adjust one or more of those aspects to bring the 3rd one to where you want it to be. So, if price is going off base you can extend the time or adjust the scope to bring the price back in somewhat.