Failed to estimate a rehab

Aurora, Illinois
Rehabbing & House Flipping
2yFollow

Failed to estimate a rehab

Mounish Thatikonda
Member since 2024 · 5 posts · 4 votes

I am reaching out for guidance and assistance as I embark on my journey into real estate investing, specifically focusing on rehabilitating and renting properties. Today, I had the opportunity to visit a foreclosure property located in the western suburbs of Chicago. While initially enthusiastic about the potential of the property, upon inspection, I found myself overwhelmed by the extent of work required for its rehabilitation.

As a beginner in this field, I must admit that I feel ill-equipped to accurately assess the necessary renovations and calculate the total cost of rehabilitation. I recognize the importance of having a thorough understanding of the scope of work and associated expenses to make informed investment decisions.

Therefore, I am seeking recommendations for experienced contractors or professionals in the area who specialize in property rehabilitation. I am looking for someone who can provide an expert assessment of the property's condition, outline the necessary repairs and upgrades, and offer reliable estimates for the rehabilitation costs.

Any guidance or referrals you can provide would be immensely appreciated. Thank you in advance for your support and assistance in this endeavor

Thanks in advance

3Reply
60 views

Most Popular Reply

Shawn Parsh
Real Estate Investor · TN · Member since 2010 · 294 posts · 160 votes
2y

Mounish,

I can understand your hesitation. If you get the numbers wrong by too much you lose any potential profit. I am not in your market so I will not be able to provide any contractor names, however, I do have a couple suggestions. I would reach out to contractors and have them give you written bids to do the work you want done. That could be one contractor depending on what is needed or several for different specialties like electric, plumbing, drywall, and so on. I would also speak with a knowledgeable real estate agent in your market and ask them what repairs they recommend and what the after repair value will likely be when finished. 

Ultimately no one has more to gain or lose with the deal than you so you are responsible for all decisions that are made. Just use others to help gain a better picture of what is needed and what it will cost. Make sure you are continually tracking properties for sale in your market, what is selling for how much, what features are in demand and so on. Also keep track of the rental demand, and prices. The better you learn your market the better you will do. If you are not already actively involved in a real estate investing club then I would join one. Other investors in your market are a great resource.

Having said all of that I will say this. If you are fairly new to rehabbing properties and have limited construction knowledge you may want to focus on cosmetically distressed properties at first. Places that need new flooring, paint, a deep cleaning, some yard work and so on. There is less to risk, they can be completed faster, and the rehab is easier. Good luck.

3Reply
See this reply in the discussion

8 Replies

Jump to latestLatest
  • Shawn Parsh
    Real Estate Investor · TN · Member since 2010 · 294 posts · 160 votes
    2y

    Mounish,

    I can understand your hesitation. If you get the numbers wrong by too much you lose any potential profit. I am not in your market so I will not be able to provide any contractor names, however, I do have a couple suggestions. I would reach out to contractors and have them give you written bids to do the work you want done. That could be one contractor depending on what is needed or several for different specialties like electric, plumbing, drywall, and so on. I would also speak with a knowledgeable real estate agent in your market and ask them what repairs they recommend and what the after repair value will likely be when finished. 

    Ultimately no one has more to gain or lose with the deal than you so you are responsible for all decisions that are made. Just use others to help gain a better picture of what is needed and what it will cost. Make sure you are continually tracking properties for sale in your market, what is selling for how much, what features are in demand and so on. Also keep track of the rental demand, and prices. The better you learn your market the better you will do. If you are not already actively involved in a real estate investing club then I would join one. Other investors in your market are a great resource.

    Having said all of that I will say this. If you are fairly new to rehabbing properties and have limited construction knowledge you may want to focus on cosmetically distressed properties at first. Places that need new flooring, paint, a deep cleaning, some yard work and so on. There is less to risk, they can be completed faster, and the rehab is easier. Good luck.

    3Reply
  • Richard Segal
    Member since 2023 · 7 posts · 2 votes
    2y

    Hi Mounish, Taking on a large rehab project can absolutely be daunting...but not impossible.   Do you have your team already in place?  This would include your agent, property manager,  and contractor.   If you haven't put the best possible,  experienced people around you, I might suggest getting involved with your local real estate investment groups...many of these people will have experience and contacts that could help walk you through the steps required to make this project safe and profitable or to show you why it might be something to walk away from.  Good luck!

    1Reply
  • John Warren
    Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
    2y

    @Mounish Thatikonda are you planning to do large rehab projects? Do you want to take on smaller, more manageable projects? I always recommend that investors early on focus on lighter projects, even if the returns "aren't as good". The reality is, it is important to hit a base hit right out of the gate. Otherwise, you can get in too deep and lose a lot of money. 

    1Reply
  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    2y

    I agree with John, learning to estimate renovation costs is hard to teach and is gained by experience.  I would start with some light cosmetic jobs and get those base hits.  Then as you feel more comfortable you can start taking on more complex projects

    Podcast Guest on Show #132
    Second City Real Estate4.821 Reviews
    WebsiteView Page
    1Reply
  • Eudith VacioPro Member
    Real Estate Agent · Chicago & NWI · Member since 2015 · 860 posts · 521 votes
    2y

    Hey @Mounish Thatikonda - were you able to find contractors? definitely would agree with John + Bree that light rehabs are recommended for first time investors that are just starting out so you can slowly dip your feet into the water and get a better idea of comps and what needs to be done. 

    1Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    2y
    Quote from @Mounish Thatikonda:

    Therefore, I am seeking recommendations for experienced contractors or professionals in the area who specialize in property rehabilitation. I am looking for someone who can provide an expert assessment of the property's condition, outline the necessary repairs and upgrades, and offer reliable estimates for the rehabilitation costs.

    That's the only way to do it. Find a good GC and pay them to give you a detailed SOW and related estimate. You can use the SOW to get other bids or do research on your own.


    1Reply
  • Chris Poklacki
    Specialist · IL · Member since 2023 · 17 posts · 0 votes
    2y

    Hey Mounish, I would like to connect. Please take a look at my BP profile. I can help you. 

    Even if you get the purchase price and ARV right, the cost to rehab can kill the deal. Most really good GC's are reluctant or will refuse to just go out on a bunch of potential houses with you. You may have to pay a fee but they will still only go out if you are very serious about making the offer "right now" if they give you "good news". Or, find a property that you feel very good about and make an offer with an inspection period to get your DP back if it doesnt work. Thats not always possible but I have seen it happen.

    0Reply
  • Andrew SyriosPro Member
    Moderator
    Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
    2y

    I can offer a few recommendations: 

    1) get an inspection while under contract to make sure you don't miss anything and do thorough due diligence in general (I wrote a long piece a while back that might help: https://www.biggerpockets.com/blog/due-diligence-ultimate-gu...

    2) Read J. Scott's book The Book on Estimating Rehab Costs, it's quite good: https://store.biggerpockets.com/products/the-book-on-estimat...

    3) Always build in a contingency to your rehab estimate, I usually go with 20% over what I expect it to cost

    4) Make sure to account for holding costs too of course

    I hope that helps

    Podcast Guest on Show #121
    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free