Estimating ARV & Rehab costs

[Andrew Diamond]

Hey BRRRR enthusiasts,

If you identify a property (through the MLS or any other method) and want to run the numbers on the BRRRR calculator just to get a ballpark estimate if this property is worthwhile to pursue (visit in person, bring appraiser in, contractor in, etc), how do you estimate ARV and rehab costs?

Any help would be much appreciated!

Thanks,

Andrew 

[Dave Vona]

Hi @Andrew Diamond, that's a question I've been trying to solve myself as I start to do out-of-state BRRRR's. I start by looking at the rent, asking price, and ARV. This will help me filter out properties that don't have a chance of cash flowing after a refinance. If it's a potential deal based on that information, I then have to get some idea of the rehab costs.

I start with photos and also have my real estate agent visit the property at this point. This can start give me some indication of the level of rehab needed - if it's 10K, 30K, or 50K. I start to plug these numbers into the BP BRRRR calculator to see where I'm at. If it still looks reasonable, I then contact a couple of contractors, and even a inspector. The contractors can provide feedback on the photos and also visit the property to provide an estimate. On the last property I made an offer on, the inspector was able to provide a "risk assessment" for about $250. He looked at major systems and mechanicals - roof, foundation, AC, furnace, electrical, etc. This provided additional information that I was able to use to make an offer.

I've heard of some people using price per square foot numbers, based on the condition of the property.  I'm not familiar enough yet with the rehab numbers to be able to use this approach, so I have to get other people involved that are a little more experienced than I am.