Rehab Cost Estimates

[Rich Wahl]

Hi guys!

I have a question for the experienced wholesalers out there. How does someone, with no construction background estimate the rehab cost of a house.

I know J Scott wrote a book on it, and I will likely pick that up, and I have read in another book, that making a spreadsheet (or having one available) with all of the common things found in each room is a good way to start.

So if the kitchen needs (for example):

-new countertops

-new tile floor

-new backsplash

-new stove

I would just measure everything, write down the materials that are already in there (i.e - granite countertops), and price it out at Home Depot or something?

As for the labor costs - how do people usually go about estimating that? I feel it could get very expensive, and/or time consuming having a bunch of different contractors come out and give quotes, or even more expensive, a GC.

Any input or methodologies on this subject that you all have employed succesffully would be so much appreciated! Thanks!

[Tom Sylvester]

@Rich Wahl - Everyone may not agree, but here is my honest feedback. Don't start with wholesaling. That's like asking someone with no automotive background to estimate the cost to fix a car that they found abandoned on the side of the road. If you want to learn more, check out a blog that I wrote in the past - Thinking About Real Estate Investing? Skip Wholesaling

With that said, here would be my recommendations to answer your question.

1. Pick up both of J Scott's books. Read the rehabbing one first, then read the estimating one. J does an extremely thorough job of detailing the rehab process and every potential aspect of a renovation.
2. Create a detailed spreadsheet (maybe using J's book as reference) for every potential aspect of a renovation. Call around and get quotes on some of the major ones (ex. cost per square for a roof replacement, either tear-off or 2nd layer). Put these in your spreadsheet.
3. When evaluating properties, work backwards like most rehabbers do. Determine the ARV, multiply by 70%, the subtract out all of the rehab costs. Multiply your estimated rehab costs by 20% for your fudge factor. If you really want to be great, actually have some contractors come out to the property to give you quotes.
4. Now that you have a vetted deal, start marketing it.

Again, I would recommend that you not start with wholesaling if you have no experience in renovations.