Estimating Renovation Costs During Deal Analysis

[Chris Mooney]

Hi all,

I've been spending a lot of time analyzing deals in Excel, just pulling random listings off of Zillow or Realtor.com. The trickiest thing for me is to estimate renovation costs going into a property. I have been able to figure out where to get data for other major expenses and costs, but renovation costs, I feel like I'm just guessing.

I found  Scott's calculators online, but they're quite in depth, and seem like they'd be useful in a second level analysis. So its not very time efficient it seems.

Does anyone have any advice on how they look at a listing and come up with an estimate just for the sake of quick analysis? This part has me stumped.

Thanks in advance!

Chris

[Brenden Mitchum]

Hey @Chris Mooney

I think we all have this same issue until we've done a few deals with reno. Until you get into the property and take a look at every square inch of the place, you're really just playing a guessing game. But just for analysis purposes, especially when you're getting started it does help to have a rule of thumb. As we all know, rule of thumbs are nothing more than a way to help get an idea of whether the property is worth taking a deeper look at. 

For estimating a rehab budget I use a rule of thumb that was given to me by a seasoned investor in my area. I recommend speaking with some investors in your area to get the same. You can also take a bit more time and actually find out how much it would be to replace the floors, repaint, put in a new roof or whatever else you think the property needs. This is great practice as you will soon be able to estimate these items fairly quickly.

Hope this helps a bit. Read J. Scott's Book on Estimating Rehab Costs if you want to get real serious. Feel free to shoot me a message anytime if you have questions or just want to chat!