How to analyze rehab for a BRRR investment

Question

Hey you guys I am still somewhat new to all this as I am still trying to get my first house hack. I was just wondering if I chose to go the BRRR route how do you guys go about estimating rehab expenses if you don't know anything about rehab and what certain rehabs costs.

Also people who I have networked with have given me the advice that my first deal shouldn't be a BRRR and I should look for something more turnkey. What are your guys thoughts on this?

Wale Lawal · Answer

@Justin Brown

Estimating rehab expenses, especially if you're new to the world of real estate investing and property rehab, can be challenging. However, it's a crucial skill to develop for successful BRRR (Buy, Rehab, Rent, Refinance) projects. Here are some tips to help you estimate rehab expenses and considerations regarding your first deal:

Estimating Rehab Expenses

Speak with seasoned Investors: Seek guidance from seasoned investors, builders, or mentors within your local real estate industry. They may offer advice on how much typical rehabilitation expenses for various kinds of homes and improvements should be.

Utilize Online Resources: A variety of remodeling cost estimates may be found on websites such as BiggerPockets, HomeAdvisor, and the National Repair Estimator. These can be used as a jumping off point to comprehend average expenses.

Build Relationships with Contractors: Make connections with nearby contractors. Based on walkthroughs of the property, they may offer estimates that are more accurate. Having trustworthy contractors on your team is essential to rehabilitation projects being successful.

Attend Local events: Participate in networking and real estate meetings in your community. You might be able to get information about area rehab costs from builders, rehabbers, or contractors.

Regarding Your First Deal

Turnkey vs. BRRR: There are benefits to the suggestion you were given to begin with a turnkey property. Turnkey properties eliminate the need for major modifications right away because they are move-in ready. Those who are new to investing may find this less daunting.

Experience Is Key: BRRR projects might be more difficult, particularly for inexperienced workers. They entail organizing several real estate-related processes, such as finance, remodeling, and property management. Prior to taking on more ambitious improvements, you might build confidence and expertise by starting with a turnkey home.

In conclusion, even though BRRR ventures might yield large profits, you should consider the learning curve and any potential difficulties, particularly if this is your first purchase. By beginning with a turnkey property, you may reduce risk and get invaluable knowledge. As you get more accustomed to the rehab process, you can gradually take on more complex projects.

Ali Radoncic · Answer

I am in agreement with @Jake Baker more or less.  Obviously some of these things are area sensitive.  I am in Dallas for example.

Pricing things per foot that way allows you to be quick and competitive.  Many wholesalers price rehabs this way on the acquisition side.  As always, you do have to be careful as these methods are a way of simplifying things.  Some houses need all big ticket items and a complete cosmetic overhaul inside and out.  While others need maybe a new HVAC and cosmetics only... I think you get my point.

Dont sleep on researching Home Depot and Lowes websites either.  You can get an idea what laminate wood flooring etc cost per foot + install.  You can see the price of appliances etc.. take a look down the aisles or utilize the website to see what materials cost in your market.

Lastly, if you use the price per foot method to quickly scope a rehab budget, have a contractor handy to see if their price estimate closely resembles your estimate.  You wont ever know for sure but these things help

Clint Jusino · Answer

Every location is different. I'm currently doing a BRRRR on my 2nd rental property and can share some much I have learned thus far. My 1st rental was a turnkey. Get a few estimates from GCs and then you can get an idea. Also get contractors to do a walk through so you can get a ballpark range. I'm willing to help in anyway I can. DM me for more details. You got this!

River Sava · Answer

Hey Justin, I am also in CLT!

Would love to connect with you and pass along some info that might be helpful as you start up.

In terms of your first property being a BRRRR or something turnket, it really depends on your market. CLT is a great place for both depending on how close you are to Uptown. Send me a dm to connect!

Tony Pellettieri · Answer

@Justin Brown

There is much to learn, especially when just getting started and I would encourage you to invest some time in your education.

I've found Audible Audiobooks are a great resource to learn from. I use Audible daily. I can listen to books and educate myself on whatever I want while at the gym, in the car, etc.

A couple I'd recommend to you based on your post are..

FLIP - How to Find, Fix, and Sell Houses for Profit

The Book on Flipping Houses How to Buy, Rehab, and Resell Residential Properties

This book is not currently available on Audible but a must read

The Book on Estimating Rehab Costs - J Scott

Bigger Pockets has become one of my best resources. I encourage you to get involved, ask questions, be open to feedback, and allow other seasoned investors to help guide you along your journey of Real Estate Investing.

I'd also check out local REIA meetings, this can be a great place to get to know other investors in your area and network with people.

One other recommendation... do a JV with a seasoned investor so you can jump in the passenger seat to see how it's done first hand. This experience and the knowledge you'll obtain early on in your investing career is invaluable.

Best of Luck!

Jacob Sherman · Answer

Depends on where you are in the country for labor and material costs . I would get 3 quotes from licensed GC's for an average rehab and go from there . In Philadelphia it usually comes out to be $35-$45 per sqft for light rehab , $65-$85 per sqft for major rehab and $150-$180 per sqft for ground up construction

Jake Baker · Answer

@Justin Brown

The first thing I look at before viewing a property is the permit history. This can tell me a lot about the age of the plumbing, roof, HVAC, etc before actually walking it.

Here is a rule of thumb I use for my market of Jacksonville FL:

Light Cosmetic
($40-$50 x Sq. Ft)

Medium Cosmetic
($45-$55 x Sq. Ft)

Heavy Cosmetic
($55-$65 x Sq. Ft)

My first property was a primary residence that I house hacked. Second property was a rental property that needed $8k in repairs. Third property was a flip that made a modest return. Now we do 20+ flips/brrrs per year and raise money for them. I believe this is good advice.

How to analyze rehab for a BRRR investment

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