Projecting rehab costs

[Jason Polykoff]

Hi BP,

I'm a hopeful investor who is still learning a lot about REI. My latest quest is to figure out a quick and easy way to estimate rehab costs and ARV by just looking at the specs and pictures of a house online. Obviously, I know a lot could change when I get in the house with a contractor, but I'd like to figure out a way to decipher if the house is even worth pursuing in the first place.

In my research, I came across a flipper online who provided me the following chart. This flipper was a former construction worker who has flipped over 100 houses and swears by this chart for initial rehab costs. He is based out of Arizona and I am trying to figure out if these numbers would hold true is my area (Philadelphia and Delaware County) as well. Can anyone tell me, especially if you’re from the Philly area, if these numbers look about right?

Calculating Reno Budget

Light = carpet/paint

Medium = carpet/paint/kitchen/bath

Heavy = complete gut job

Square Feet

<1500 1500-2500 2500-350 3500-4500

LIGHT $10k $15k $25k $30k

MEDIUM $25k $35k $45k $55k

HEAVY $50k $75k $90k $100k

[Troy Sheets]

Originally posted by @Jason Polykoff:

Light $10k (<1500 sqft) / $15k (1500-2500sqft) / $25k (2500-3500sqft) / $30k (30500-4500sqft)

Medium $25k (<1500 sqft) / $35k (1500-2500sqft) / $45k (2500-3500sqft) / $55k (30500-4500sqft)

Light $50k (<1500 sqft) / $75k (1500-2500sqft) / $90k (2500-3500sqft) / $1000k (30500-4500sqft)

Looking at what I assume is supposed to be "heavy" since you have "light" listed twice, not likely. At $50k for 1500 sq ft for a "heavy" rehab you're at $33/ft. Ignoring the fact that Philadelphia is one of the more expensive markets to build in, you have to remember that our housing stock is very old and very neglected. AZ is probably a bunch of newer ranchers that are paint, carpet, drywall, and kitchen/bath rehabs for the most part (I'm guessing). The least I've spent, using a friends dedicated crew that does the lower income rehabs all day every day, was around $40k on a 900 sq ft 3/1 and it was a no frills rehab, very low end, no electrical but did replace boiler (no a/c in the house) and redid kitchen, bath, patched the roof, new gutters, flooring, paint, and some windows. I replaced a fence and concrete patio out back but that was additional work I subbed out through laborer types. 

In my mind, "heavy" rehab means you're gutting the place and potentially some minor structural repairs as well. I'd guess you'll be at least $80/ft for that type of rehab (honestly more but being generous here). Looking at the "light" rehab numbers, they're at ~$6/ft. for 1500 sq ft, which is large-ish for a Philly rowhome. Flooring alone for cheap LVT installed is going to run you $2-$3/ft. and that doesn't have money for someone to rip it out and dispose of it. Hopefully some others with more direct experience can help out but these numbers seem way too low.