How Far Does $50k Go for Rehab?

Question

Looking to get into the BRRRR game and trying to estimate how much renovations will cost for an average distressed 2-3 bedroom home roughly 1200 square feet or less. I still need to link up with a contractor and talk this out, but I'm wondering if anyone had examples where they put around $50k into a home and what the results were.

I keep hearing that costs of labor and supplies are rising (when aren't they?) so I'm wondering if around $50k is reasonable to get a smaller single family home up to speed where it looks something like what you'd see on HGTV.

I understand that starting condition and location will play a factor here, but just wondering what your experience has been. I'm in Michigan if that matters for specifics.

Edit: I don't plan on doing any of the work myself aside from the most basic of things. I'd rather stay out of the way and let professionals do their thing.

Jake Baker · Answer

@Chris Kay

Cosmetic Updates - If you focus on flooring, paint, fixtures, and a basic kitchen and bath refresh, $50k is doable, especially in markets like Michigan.

Full Kitchen and Bathroom Rehabs: Depending on finishes, these can eat up to $20k-$30k alone. Opting for mid-grade materials will help stretch your budget.

Structural/Mechanical: If the home needs a roof, HVAC, plumbing, or electrical work, that can take a big bite out of your $50k fast. A roof replacement alone could cost $8k-$15k.

Here is a "general" rule of thumb for my market in Jacksonville, FL. Light Cosmetic ($40 x Sq. Ft)Medium Cosmetic ($50 Sq. Ft)Heavy Cosmetic ($60 x Sq. Ft)Studs Down ($85 x Sq. Ft)Luxury ($175 x Sq. Ft)

Gregory Schwartz · Answer

This is not the way to analyze a deal. Dont fall into the $/sf trap or start thinking "$50k SHOULD be able to update a small house". Take the time to break down what needs to be repaired and what upgrades you will be doing. Rough numbers are ok but at least list it out.

Simon Walker · Answer

Last house I did all the work myself except for drywall and insulation. 1150 square feet, down to the studs, everything new except the roof and I spent $66,000. That’s without my labor, I finished in 8 month, so let’s say 40 hours, at my minimun I used to charge was $75 and hour. That would be $94,500 in labor. That’s western Pennsylvania. A lot of mechanical  trades are at a minimum $100 an hour around me for any company that’s actuay good at what they do. You can find cheaper options on some other stuff, but I hope this gives you some Insite as to what money can buy these days.

Drew Sygit · Answer

@Chris Kay it depends what level of renovation you are doing!

Which will also depend on the neighborhood.

You want to, "rehab/maintain to the Neighborhood".

Most investors go overboard on their first rehab and waste a decent amount of money.

Sherry McQuage · Answer

Jaron Walling said something that caught my attention, "search for and buy a bad roof, leverage it during the negotiation"....especially of the property has been sitting on the market longer than normal for the current market, a "bad roof" might be a gift from the real estate genie.

My point is this: get good at estimating and fixing a bad roof (or any particular problem found with most houses that sit on the market longer) and you'll get comfortable buying/fixing properties that scare off other buyers.  You can use the "bad roof" or other problem to negotiate a lower purchase price.  You'll learn what contractors are good at such repairs, and eventually people will start bringing you "problem properties" with that issue.

Another related idea: contact a good local realtor and ask them if they know of any on or off market properties that would be a hard sell for most buyers.  Find out why, see if you can learn/hire to fix that problem, and you might have found your niche.

Do you know anyone or have a family member that is licensed in one of the trades?  You might learn from them, hire them, get advice from them.

Best to you!

Chris Kay · Answer

@Jake Baker Thanks, that's helpful! Okay that seems like good news for making a BRRRR work in my market since I was looking to spend something like 45-75 on rehabs for these smaller sized homes.

Unfortunately I feel like a new roof is going to be pretty standard on the things I'm looking at so it might just have to get done on a regular basis. Almost nobody in the Upper Peninsula has air conditioning though so maybe can save money on just doing a new furnace and not a full HVAC, we'll see.

Now I gotta get linked up with a good contractor and see what they have to say.

Alecia Loveless · Answer

@Chris Kay I spent about $50K on a 3/1 reno about 5 years ago. We had to do a lot of electrical work, bathroom, kitchen rehab, total paint and a new roof.

This was my first investment property and I had a poor inspector who missed all the electrical and even though the roof had about 5 years left my insurance company made me do that.

Since then it’s generated top dollar and I’ve maybe had to put a total of $500 into it.

Learned a lot from that one.

Now we’re doing cosmetic rehabs on 1000 sq ft 2/1 apartments for about $7,000. Maybe $8500 if I have to replace the appliances. This includes flooring, painting, bathroom upgrades new light fixtures, usually there’s about $800 in electrical costs factored in here and all new cabinet hardware. We buy the cabinet hardware in bulk on Amazon and do flush mount hinges, new handles and knobs. Usually runs about $200 for 100 of each and then we use them over and over in all our units. Ravinte is what the knobs and handles are called. The flush mount hinges are about $8 for 2 at the box stores and I think I’m getting boxes of 50 for around $60.

Sheryl Sitman · Answer

As folks are telling you it is hard to say since it all depends on what you need to do. Definitely no way to do a full gut rehab or close to that for $50k today. Things like a new roof can range - here in Philadelphia where i do a lot of work, our flat rubber rowhome roofs are fairly inexpensive and standard . . . But structural issues can kill you. You will also likely be paying more than more experienced investors as you build your team and knowledge. Learn as much as you an about how to scope a property and estimate the investment. $50k sounds like a lot to you but with the price of materials and of qualified labor, it does not go too far. Contractors are paying their experienced workers $250/day these days in our parts.  Good luck!

Andrew Syrios · Answer

Not nearly as far as it did when I got started... ugh I hate that I am now old enough to say such a thing. Ugh.

In all seriousness, I think for $50,000 with a 1200 square foot house in Michigan should be able to modest rehab. Not nearly enough for a gut job or to cherry it out. But enough to make to do all the cosmetics along with a few major items like HVAC, appliances, etc. I know that's vague but it's hard to be more specific on questions like this.

Jaron Walling · Answer

@Chris Kay Lots of good comments already and I agree with @Gregory Schwartz and @Alecia Loveless. My wife and I have never really followed the $$/sqft. approach because it's not as accurate. If you're just starting out every dollar needs a purpose. Every project needs a quote and you should be able to estimate the material costs. This stops you from over paying and renovating beyond the neighborhood. The budget was so small on the first few properties I BRRRR you'd think I was joking. You'll learn way more renovating a few properties. It's a balancing act if you DIY projects to save some money.

Search for and buy a bad roof. Leverage it during the negotiation. It's a valuable repair and boosts your ARV which is everything when doing a BRRRR.