Cost of repairs; how do you do it?
Realtor · Springfield, MO · Member since 2014 · 26 posts · 3 votes
I tried to find a thread but didn't see one. My question is for all of you experienced investors. How do you estimate cost of repairs when you go look at a potential fix & flip? Do you have a google doc spreadsheet that you can plug numbers into, or do you have a rough estimation sheet such as house is A B or C rehab, and A is going to cost $X per sq ft to fix correctly? I am assuming you don't have a contractor come do a walk through with you. Or do you just take an insane amount of pictures and go over them with the contractor? If you use a list, is it something that you have gone to the hardware store and priced everything yourself, or would a good contractor know? Lots of questions haha.
Thank you all in advance!
I'm not sure how you could have missed ALL the information available on this topic. It's literally everywhere on BP. The best place to start is with The Book on Estimating Rehab Costs...
Ouch, did you still turn a profit? Also, if you don't mind my asking, what did you use to fund the deal?
I'm not sure how you could have missed ALL the information available on this topic. It's literally everywhere on BP. The best place to start is with The Book on Estimating Rehab Costs...
@Hattie Dizmond thank you for that most helpful comment and I really appreciate the snark! It is good for a well rounded diet to get a healthy dose at least twice a week in my opinion:) I'll check out the book, but in the mean time, do you have anything else helpful to add?
Sorry...just know that if I'm snarky, it's always in fun!
Actually, finding information was probably what I struggled with most, when I first started on BP. The way search results are presented can make it a bit difficult. It takes a little while to develop an approach to how to sift through the information. So, in the spirit of fair play, I've done a little research to get you started. ;-)
Here are some other BP links that may help...
http://www.biggerpockets.com/renewsblog/2014/04/21/estimate-rehab-costs/
http://www.biggerpockets.com/renewsblog/2009/11/5/...
http://www.biggerpockets.com/renewsblog/2013/03/17/tultimate-guide-house-flipping-costs/
Now, as for practical advice, I have a spreadsheet where I have broken a house down into components (see below). I make notes, but don't try to complete my spreadsheet, while I'm touring the property. I simply grade each area as Excellent, Good, Average, Poor and take pictures. That frees me up to continue visiting with the owner and building that relationship.
Now, I have an area I "farm" for deals. Within that area, I know what constitutes high-end, mid range and low-end finishes. Based upon the price point of the comparable properties, I know what finish buyers in that specific neighborhood would expect. I use that information to determine a rough estimate of price per for the various items within each component of the property. Once I have completed my rough estimate, I apply a 25% contingency to the total. That is the amount I use for my offer. My contract contains an option period for inspections. During that inspection period (not a weasel clause, this is standard in Texas with a small option fee), I have a contractor and/or other experts (if I suspect foundation or other special issues) fully evaluate the property. I send the contractor in with my initial Scope of Work statement, from my walk-through, estimate those costs and tell me if there is anything else that will have to be done & those costs.
If the estimates come back outside my contingency, I can try to renegotiate the price, based upon those expert findings, or I can terminate the contract, only losing the small option fee, which was non-refundable.
Since you took snarky in stride...here's a look at how I break down the house on the initial walk-through...(and if you're interested, PM me with your email, and I'll send you the Excel workbook that includes an investor presentation page and a comparable analysis report format. You'll see just how big a geek I truly am!)
| Rehab ProForma | ||
| Condition | Poor | $48,000 |
| Kitchen | Poor | $15,000 |
| Living Areas | Average | $1,000 |
| Bedrooms | Average | $1,000 |
| Baths | Poor | $15,000 |
| Common Areas | Average | $1,000 |
| Exterior | Average | $2,000 |
| Other | N/A | $0 |
After I get back home, it turns into this...
| Post Inspection Estimate | Estimate Total |
| Kitchen | 7575 |
| Cabinets | 500 |
| Countertops | 2500 |
| Sink | 300 |
| Faucet | 75 |
| Floors | 2000 |
| Walls | 500 |
| Ceiling | 0 |
| Appliances | 750 |
| Range | 750 |
| Oven | |
| Cooktop | |
| Microwave | |
| Dishwasher | |
| Disposal | |
| Fridge | |
| Fixures/Other | 200 |
| Living Areas | 3150 |
| LR1 | 1700 |
| Walls | 500 |
| Floors | 1000 |
| Ceiling | 0 |
| Fixures/Other | 200 |
| Fireplace(s) | 0 |
| LR2 | 1450 |
| Walls | 500 |
| Floors | 750 |
| Ceiling | |
| Fixures/Other | 200 |
| Fireplace(s) | 0 |
| LR3 | 0 |
| Walls | |
| Floors | |
| Ceiling | |
| Fixures/Other | |
| Fireplace(s) | |
| Bedrooms | 2800 |
| MBr | 1200 |
| Walls | 300 |
| Floors | 700 |
| Ceiling | |
| Fixures/Other | 200 |
| Br2 | 800 |
| Walls | 300 |
| Floors | 400 |
| Ceiling | |
| Fixures/Other | 100 |
| BR3 | 800 |
| Walls | 300 |
| Floors | 400 |
| Ceiling | |
| Fixures/Other | 100 |
| BR4 | 0 |
| Walls | |
| Floors | |
| Ceiling | |
| Fixures/Other | |
| Baths | 4225 |
| Mbr Bath | 2700 |
| Cabinets | 250 |
| Countertops | 300 |
| Sink | 100 |
| Faucet | 50 |
| Tub | |
| Shower | 1000 |
| Walls | 300 |
| Floors | 500 |
| Ceiling | |
| Fixures/Other | 200 |
| Bath2 | 1525 |
| Cabinets | 100 |
| Countertops | 250 |
| Sink | 75 |
| Faucet | 50 |
| Tub/Shower | 50 |
| Walls | 300 |
| Floors | 500 |
| Ceiling | |
| Fixures/Other | 200 |
| Bath3 | 0 |
| Cabinets | |
| Countertops | |
| Sink | |
| Faucet | |
| Tub/Shower | |
| Walls | |
| Floors | |
| Ceiling | |
| Fixures/Other | |
| Common Areas | 2650 |
| Fixtures | 400 |
| Ceilings | |
| Flooring | 750 |
| Walls | 1500 |
| Exterior | 3750 |
| Paint/Brick | 2500 |
| Landscape - Front | 750 |
| Landscape - Back | 500 |
| Pool/Other | |
| Roof | |
| Other | |
| Other | 700 |
| Doors - Interior | 200 |
| Doors - Exterior | |
| Windows | |
| Water Heater | 500 |
| HVAC | |
| Plumbing |
Sorry...those tables looked fine, when I pasted them in, but BP ate them. Just hit me up, and I'll email it to you.
Hello @Hattie Dizmond what kind of option fee do you offer? Is it a set price or a percentage of the purchase price? Is that something that is common or just common in your area?
Thank You,
Paul
The Option Fee is discretionary and negotiable. I haven't seen a buyer demand a higher Option Fee than whatever I propose. I usually offer $50 or $100. It's going to be non-refundable.
I guess you would call it a "Texas thing". There isn't an assumed or defacto inspection period in Texas. The promulgated TREC contract includes an optional Option Period as a selection.
Thanks @Hattie Dizmond that seems very reasonable and is something I am going to jot down in my book of notes.
Paul
Sorry...those tables looked fine, when I pasted them in, but BP ate them. Just hit me up, and I'll email it to you.
Post the document in the BP "fileplace" and then put a link to that posted doc here.
Sorry...just know that if I'm snarky, it's always in fun!
Actually, finding information was probably what I struggled with most, when I first started on BP. The way search results are presented can make it a bit difficult. It takes a little while to develop an approach to how to sift through the information. So, in the spirit of fair play, I've done a little research to get you started. ;-)
I also appreciate your snark and agree with your statement about the search results.
It can be very time consuming sifting through threads that are similar in topic, but don't quite have what you are looking for.
Hattie, I sent you an email.
Quoting the post of @Hattie Dizmond will make the table readable on your screen.
Sorry...those tables looked fine, when I pasted them in, but BP ate them. Just hit me up, and I'll email it to you.
Post the document in the BP "fileplace" and then put a link to that posted doc here.
Thanks, Steve. Great idea. I'll do that tonight, when I'm no longer behind my corporate firewall.
Sorry...those tables looked fine, when I pasted them in, but BP ate them. Just hit me up, and I'll email it to you.
Post the document in the BP "fileplace" and then put a link to that posted doc here.
Thanks, Steve. Great idea. I'll do that tonight, when I'm no longer behind my corporate firewall.
@Hattie Dizmond thank you! Great post and some good info on there. I'll definitely take a look through that. Sorry it took me so long to respond, I have been on kind of a vacation.
Sorry...just know that if I'm snarky, it's always in fun!
Actually, finding information was probably what I struggled with most, when I first started on BP. The way search results are presented can make it a bit difficult. It takes a little while to develop an approach to how to sift through the information. So, in the spirit of fair play, I've done a little research to get you started. ;-)
Here are some other BP links that may help...
http://www.biggerpockets.com/renewsblog/2014/04/21/estimate-rehab-costs/
http://www.biggerpockets.com/renewsblog/2009/11/5/...
http://www.biggerpockets.com/renewsblog/2013/03/17/tultimate-guide-house-flipping-costs/
Now, as for practical advice, I have a spreadsheet where I have broken a house down into components (see below). I make notes, but don't try to complete my spreadsheet, while I'm touring the property. I simply grade each area as Excellent, Good, Average, Poor and take pictures. That frees me up to continue visiting with the owner and building that relationship.
Now, I have an area I "farm" for deals. Within that area, I know what constitutes high-end, mid range and low-end finishes. Based upon the price point of the comparable properties, I know what finish buyers in that specific neighborhood would expect. I use that information to determine a rough estimate of price per for the various items within each component of the property. Once I have completed my rough estimate, I apply a 25% contingency to the total. That is the amount I use for my offer. My contract contains an option period for inspections. During that inspection period (not a weasel clause, this is standard in Texas with a small option fee), I have a contractor and/or other experts (if I suspect foundation or other special issues) fully evaluate the property. I send the contractor in with my initial Scope of Work statement, from my walk-through, estimate those costs and tell me if there is anything else that will have to be done & those costs.
If the estimates come back outside my contingency, I can try to renegotiate the price, based upon those expert findings, or I can terminate the contract, only losing the small option fee, which was non-refundable.
Since you took snarky in stride...here's a look at how I break down the house on the initial walk-through...(and if you're interested, PM me with your email, and I'll send you the Excel workbook that includes an investor presentation page and a comparable analysis report format. You'll see just how big a geek I truly am!)
| Rehab ProForma | ||
| Condition | Poor | $48,000 |
| Kitchen | Poor | $15,000 |
| Living Areas | Average | $1,000 |
| Bedrooms | Average | $1,000 |
| Baths | Poor | $15,000 |
| Common Areas | Average | $1,000 |
| Exterior | Average | $2,000 |
| Other | N/A | $0 |
After I get back home, it turns into this...
| Post Inspection Estimate | Estimate Total |
| Kitchen | 7575 |
| Cabinets | 500 |
| Countertops | 2500 |
| Sink | 300 |
| Faucet | 75 |
| Floors | 2000 |
| Walls | 500 |
| Ceiling | 0 |
| Appliances | 750 |
| Range | 750 |
| Oven | |
| Cooktop | |
| Microwave | |
| Dishwasher | |
| Disposal | |
| Fridge | |
| Fixures/Other | 200 |
| Living Areas | 3150 |
| LR1 | 1700 |
| Walls | 500 |
| Floors | 1000 |
| Ceiling | 0 |
| Fixures/Other | 200 |
| Fireplace(s) | 0 |
| LR2 | 1450 |
| Walls | 500 |
| Floors | 750 |
| Ceiling | |
| Fixures/Other | 200 |
| Fireplace(s) | 0 |
| LR3 | 0 |
| Walls | |
| Floors | |
| Ceiling | |
| Fixures/Other | |
| Fireplace(s) | |
| Bedrooms | 2800 |
| MBr | 1200 |
| Walls | 300 |
| Floors | 700 |
| Ceiling | |
| Fixures/Other | 200 |
| Br2 | 800 |
| Walls | 300 |
| Floors | 400 |
| Ceiling | |
| Fixures/Other | 100 |
| BR3 | 800 |
| Walls | 300 |
| Floors | 400 |
| Ceiling | |
| Fixures/Other | 100 |
| BR4 | 0 |
| Walls | |
| Floors | |
| Ceiling | |
| Fixures/Other | |
| Baths | 4225 |
| Mbr Bath | 2700 |
| Cabinets | 250 |
| Countertops | 300 |
| Sink | 100 |
| Faucet | 50 |
| Tub | |
| Shower | 1000 |
| Walls | 300 |
| Floors | 500 |
| Ceiling | |
| Fixures/Other | 200 |
| Bath2 | 1525 |
| Cabinets | 100 |
| Countertops | 250 |
| Sink | 75 |
| Faucet | 50 |
| Tub/Shower | 50 |
| Walls | 300 |
| Floors | 500 |
| Ceiling | |
| Fixures/Other | 200 |
| Bath3 | 0 |
| Cabinets | |
| Countertops | |
| Sink | |
| Faucet | |
| Tub/Shower | |
| Walls | |
| Floors | |
| Ceiling | |
| Fixures/Other | |
| Common Areas | 2650 |
| Fixtures | 400 |
| Ceilings | |
| Flooring | 750 |
| Walls | 1500 |
| Exterior | 3750 |
| Paint/Brick | 2500 |
| Landscape - Front | 750 |
| Landscape - Back | 500 |
| Pool/Other | |
| Roof | |
| Other | |
| Other | 700 |
| Doors - Interior | 200 |
| Doors - Exterior | |
| Windows | |
| Water Heater | 500 |
| HVAC | |
| Plumbing |
Thank you, Hattie! I really appreciate your time to post this information. I'm glad to see that I am not the only one who has a hard to finding exactly what I'm looking for on the site. There is so much good stuff, I often get "distracted" from my initial search with other items that pop up during the search.