Estimating Repair Costs

[Gage Green]

What is everyone doing to estimate rehab costs? I'm new, I'm learning and one thing I haven't really gotten a grasp on is how to estimate rehab costs. A highly important metric for doing the BRRRR method.

When doing the calculators for estimating cash flow, most properties I put in, after expenses including, pm10%/capex10%/repairs10%/vacancy8%, they normally cash flow anywhere between $100/mo - $300/mo. However that is with a 30-50k rehab with Houses normally 1500 sqft or less, and using the numbers from the rent estimator the BP provides. What Im stuck on is how to get a real ball park number on rehab costs. I don’t know much, I don’t know anything about rehabs and I know prices on materials are way up right now, and honestly I’m just tossing numbers out there. With that being said I’m not getting a real reading on what things cost or real cash flow numbers, in essence I’m just throwing out number “hoping it sticks”. But this is doing me a disservice by not being honest with myself. 

Can anyone suggest any reading or methods on estimating rehab costs please. I am open to any and all suggestions. Please and thank you for your time and info in advance!

[David Robertson]

Hi Gage,

This is a common problem and question for new investors that don't have construction experience.  Learning to estimate rehab costs is a process that takes time and experience.  

Here is the process I recommend to learn the basics so you can start to feel more comfortable estimating rehab costs and putting together budgets:

#1 Read 'The Book on Estimating Rehab Costs'

First, you need to build a foundational knowledge of construction, inspecting properties and putting together a detailed SOW.

JScott's 'The Book on Estimating Rehab Costs' is a great resource for new rehabbers to learn how to Estimate Repair Costs on 25 common rehab repairs.

https://www.biggerpockets.com/store/the-complete-g...

#2 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.

#3 Contact Local Contractors for Labor Pricing / Hire a GC to Consult

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.

Note: Some contractors will be reluctant to share pricing without seeing the property, but tell them you are just looking for a rough budget number you can use on future projects.

You can also pay a General Contractor a consulting fee of a couple of hundred dollars (per house) to walkthrough a few properties with you and provide a detailed estimate of prices that you can use as your 'menu for future projects.

#4 Compile Your Prices into 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.

The Book on Estimating Rehab Costs comes with a spreadsheet that you can use to help you populate your own database of labor pricing and material pricing. Or you can download my estimating templates I have in my Biggerpockets fileplace:

Simple Estimate Spreadsheet

Detailed Estimating Spreadsheet

There are other Estimating Softwares available as well which can help you manage the Estimating process as well...

#5 Practice, Practice, Practice

Walkthrough potential rehab properties (or find properties virtually online) and practice creating detailed scopes of work, quantifying repairs and estimating rehab costs for the projects.

#6 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!

If you aren't comfortable estimating costs on your own or aren't willing to put in the work to learn how to estimate rehab costs then you need to team-up, partner, or hire a GC as a consultant that can help you estimate your first few projects.