PPSF repair costs?

Question

As I work with more investors and rehabbers, I am noticing that their estimated repairs vary by great amounts. I thought the challenge would be to predict the resale value, but it seems that repair costs are the biggest question mark for me.

Would any of you seasoned pros be wiilling give me some average PPSF numbers for rehab projects. I know that the number varies for cheaper rentals to high end rehabs, but if you have any "average expected costs" data to help me based upon you experience, I could REALLY benefit from you knowledge.

Thanks!!!

J Scott · Answer

The differences in numbers can be accounted for by the following: 1. Different geographical locations 2. Different level of finishes 3. Different contractor/labor prices (retail contractors vs investor contractors) 4. Different finish decisions 5. Different rehab methodologies (GC, no GC, doing work yourself) 6. Different level of experience (new investors tend to over- or under-rehab)

J Scott · Answer

My guess is also that most rehabbers have this number, but again, it's going to be dependent on location, contractors, finish decisions, materials, etc. For me, the number is $10/sf for interior cosmetic renovation. This includes demo and disposal, paint, carpet/vinyl flooring, new cabinets/countertops, new finish electrical fixtures, new finish plumbing fixtures, HVAC maintenance and appliances, refinishing/polishing tubs/showers and house cleaning. Basically, a completely remodeled interior.

Andrew Fortune · Answer

Excellent info James. Thanks so much!

James Martin · Answer

Working with other investors is great. Find out were they are getting their materials from and see if it would be ok to buy using their account at stores. Just as Don said, I have a small warehouse that we keep over-stock material from last rehab. Every rental has the same paint color, carpet, countertops, doors, and etc. We hardly ever go to home depot unless it is after 5pm and got to have it. We shop at mom and pop discount supply yards. This give us a great advantage with pricing, running tabs for when my workers are stopping to get material. If I was you, I would always hire someone to do the rehab. I found out early in the game that I was not saving money by doing all the work myself, but was merely controlling the cost. I could have spent my time better looking for the next deal and marketing the property that I had. In the end you have to do what fits your business model.

Andrew Fortune · Answer

Thanks J. Yeah, I understands your points. I've been working with other investors as their Real Estate agent, but I'm walking through the whole rehab process with them to learn. I don't make much money at all representing investors. 95% of my income comes form residential home buyers. I work with the investors to learn. It's worth much more than money to me. That is also why I appreciate this forum, because guys like you take the time to share info. I guess I should have titled this thread, "Do you have a standard PPSF estimate for cosmetic repairs, and if so, what is it?" I'm not really sure how many people have this number, but my guess is most of them do. Don, thanks for the advice. I am the type who try's to do everything myself, so I will always be aware of my weakness in this area. I remodeled my own house last year myself and it costs half as much and has higher end materials than if I were to contract it out. This doesn't help my ego when it comes to DYI projects. I have resigned myself to stay out of the rehab process and just manage though. It's going to be hard!

Don Hines · Answer

I can give you a pointer I have just learned.... I hope some one kicks me in the south end if I tackel another major rehab DYI. I figured my contingencies at 10% and I think I would have been OK with 20%. I tried to put some goodie in the budget to pay me or a contractor to do the job. I think I would have came in just about right with contractors because.... 1. They don't have to stop and think as long as I do about a situation. 2. They have all of the little agrevating screws, bolts, nuts, gaskets, fittings, ETC on their truck. Each little peice does not require a trip to Home Depot. 3. In reference to #2, you will not have a bunch of stuff "for the next project" to keep up with because you bought the wrong stuff in the first place. I got off on a different subject than what you asked for just thinking about how different my last project was from the one before it. Seasoned rehabbers use the same paint, flooring, appliances, cabinets etc. and probably have an automatic number to apply to a project. Stuff like that is good to know so you can make a better guesstimate for the other stuff that happens to you in a rehab. Takes time and experience to know what works for you. Don

Andrew Fortune · Answer

Thanks James. Yeah, I always factor AC/heater, foundations, or roof repairs separate from the rest of the costs, as they completely change the game. I'm trying to get a good grasp on cosmetic repairs PPSF, since most every deal I look at in Houston's needs a complete cosmetic overhaul. I've had people qoute $27 to $14. Your number of $8 is the lowest I have heard yet, but I understand that it is for rentals. You're doing good. I'd like to hit that number. Thanks for your valuable input. I really appreciate it.

James Martin · Answer

If you don't know or have experience with what things cost, there is no fast way of doing this. Every property is different. The best I think is to physically walk through the house noting everything that needs to be done to it. Take your list to home depot and get prices on the things you need. Also get bids from contractors for labor on everything that you will not be doing. On the properties I buy and rent, my budget is somewhere between 6k to 10k, but things like needing a new roof can skew your figures up quick. I also make a detailed list of everything that needs to be done and place a price next to it. While I'm doing the rehab I place the actual price next to the budgeted price to ensure that I am within budget and adjust as needed throughout the rehab process. So I would guess for low end rentals will be somewhere at $8 a sqaure foot? Honestly, you just don't know what it will cost until you do your due dilligence.