Estimate rehab cost and time?

Question

How do you estimate rehab costs and time? Do you roughly estimate or get very detailed? Do you leave it up to a contractor or handyman? How about if you do most of the work yourself?Do you add a certain percentage to allow for errors and unforeseen issues?

David Robertson · Answer

When first looking at a house I can roughly price the rehab costs in my head based upon past project experience.  If I think the #s could work then I put together an itemized list of all the repairs with a price for labor and material.

As far as contingency, some investors will just add a blanket 10 to 30%+ contingency on the overall project cost.  So for example on a $50,000 rehab, they may add $5k to $15,000 to cover the project unknowns and unforseen issues...but I personally try to evaluate all of the risks on the project and allocate money toward those risks instead of just plugging a random blanket % of the overall project.

So for example if a house has a foundation issue, but I'm not sure how much it will cost I will plug in an allowance of $10,000 (or whatever seems reasonable) in my estimate to cover that cost.  This helps me get a better understanding of what the project risks are and helps better understand where my budget overages/underages are when I get bids from my contractors.

Outside of the risk allowances I may carry a small 5 to 10% contingency to cover miscellaneous change orders or buyer's inspection issues that aren't in my estimate or allowances, but it will really depend on the risks I see in the project.

Greg Dickerson · Answer

I use very detailed specs and standardized pricing. I set the prices but I also know what the costs are on the market right now. If you aren’t sure of how to price things out you can meet with some contractors and suppliers and create price lists and build your cost database.

I always plan for a 5-10% contingency depending on the cost and scope.