Determining construction budget

[Matthew Dovner]

I've been flipping houses for 2 years now but still can't really walk into a home and know right away how much it will cost to fix. My past deals have all been mls so i've brought contractors in for quotes. I am ramping up a marketing campaign and I will be visiting home owners directly. Sometimes decisions have to be made quickly. Do you guys eyeball it and put a number on it or ask the home owner if you can get your contractor in there? Just curious how all you out there are doing this.

Thanks!

[J Scott]

Spend time reviewing your budgets from previous projects. Then break down the rehab tasks into the basic components (plumbing, electrical, HVAC, sheetrock, paint, cabinetry, flooring, etc) and get a feel for how much you spent to complete the level of finish you're accustomed to.

As an example, you will likely find that you tend to spend about $X on electrical -- this is your typical number based on the types/sizes of houses you do, your contractors, your level of finishes, etc. Do this for each of the components and you should start to see trends.

As an example, I was rehabbing the same types of houses over and over in Atlanta using the same contractors and the same materials/finishes. At one point, I knew that for a full interior cosmetic rehab (new paint, flooring, cabinets, countertops, light fixtures, plumbing fixtures, appliances, etc), that I was spending almost exactly $14,500.

So, I was able to walk into pretty much house of that type, and I immediately knew that my starting point was $14,500 (I always did at least a full interior cosmetic rehab). On top of that, I could add in additional stuff -- HVAC replacement, new water heater, new doors/windows, roof work, siding work, landscaping, etc. But, having a baseline went a long way towards putting together a back-of-the-napkin budget.

For more information, I've actually written a book on the topic of estimating rehab costs that BiggerPockets has published:

http://www.biggerpockets.com/flippingbook

Disclaimer: Please don't anyone look at my $14,500 number and assume that's the cost of a full cosmetic interior renovation! This was my cost for the one particular type of house, my specific contractors, my finish material costs, my location, etc. It's unlikely anyone else would have the exact same costs unless they were doing the exact same thing in the exact same place.