1st Time MD Homebuyer need learning exp. Estimating Repair Costs

[Luke Councell]

Hello,

Long-time lurker looking for some advice on purchasing an older home in NW Maryland (cheaper than most places in MD) and estimating repairs on it. I will be looking at the home today, and I'm not quite sure how to estimate repairs. This home will be primarily purchased as a place to live, but secondarily as an investment learning opportunity. We are tired of renting and want to learn all the things that come with buying, owing, and then renting/selling a home. Therefore, our target investment goals are a bit different than a typical BRRRRR or Flipper.

The home is an old, 1890s Cape Cod with a tin roof and just under 1000 sq ft. Just from the pictures I can see some floor issues and ceiling/roof issues. Could be cosmetic, could be a deal-breaker. The home will need mainly paint and cosmetic touch-ups that me and my partner will be doing together, but it's the big ticket items that I need to budget for. 

House is priced for 160k, I've been preapproved for 300k but the actual lending amount is the reason I'm here. How much more over the 160k should I be expecting to borrow for the rehabs? Initial thoughts had me at 200k so I'll have 40k for repairs, but then a friend told me her bathroom required 10k in repairs, all through a contractor though. 

In buying this home we hope to gain some knowledge of benchmarks like, how much exactly does it take to repair a bathroom, bedroom, kitchen, roof? We hope the smaller square footage will allow us to remodel with not rental quality materials, but not top-of-the-line/high-end either. We just want a nice home to live in for a couple years while we learn how to fix things up and what the time/costs are. 

If anyone has some comps (i.e. "it took us 5k to remodel our 50 sq ft bathroom in Minnesota" or whatever.) on what I can expect for an older, smaller single-family home, in a cheaper area of an expensive state, that would be much appreciated.

[Brian Tome]

Unfortunately there are no shortcuts to estimating rehab costs.  It takes hard work, lots of experience, and is still fraught with hazards.  The best thing you can do in the beginning is get properties as cheaply as possible and use quality contractors to do the work right.  

You have set yourself up nicely by doing it on a home you will use as your personal residence and staying well under your max loan approval amount.  That way, if you end up over budget you can live in the house and wait out any financial shortfall.  That is the cushion inherent in a live in flip or house hack opportunity.  They offer levels of safety because they offer other "exit" plans.

I agree that The Book on Estimating Rehab Costs, together with the calculator in the tools section can be very helpful. 

If you invest in a property where a payout is anticipated at the end, you could bring in an experienced flipper/contractor as a partner to assist with the estimating process. However, I doubt you will find anyone excited to work with you if there is no JV style payoff at the end, and if you are just going to hire them to do the work, your interests are not aligned, so I would be careful how much credit you give their estimates/assessments.

Whatever the outcome, you will be happy you did it if you just know your numbers and take action!

Let us know how it turns out.

Best of luck!