Interesting method for creating a rehab estimating forumla

[Austin Davis]

I was speaking with a local real estate investor that mentioned his quick glance rehabbing formula he uses on houses he doesn't have the time or ability to do an actual walk through on (he does a lot of volumes, and quite a few of his deals in different markets). I was little skeptical at first because I've seen quite a few gurus trying to sell systems for virtual wholesaling to automate or make a simple formula for rehabbing estimates, or sell you some software. He basis his rehab formula based on the market and he does the following:

1). He picks out of 7-10 "common" rehab category cost items (replacing carpet, painting, etc.) , for different trim levels.  

2). Get between 3-5 estimates for  each category and then averages the cost of each job. He gets pretty specific on the estimates (asking for name brand paint or carpeting). I got a little confused at this point if he's basing the average on a sqft or per job.

3). Once he has the average cost per category for the 5 categories he's chosen, he'll compare each local category cost to the national average (which I believe he's getting from home advisor possibly a more in-depth service).

4) He takes the difference between the local average and the national average, and then averages the difference. I.e.  category a; local- $10  national- $20 ; category b: local-$20  national $10 ; category c: local 10  national 20. "local cost category modifier"= category a: (+10) + category b (-10) + category c (+10)/ 3. "local cost category modifier"= (+$3.30) more than the national average. 

5) He'll make arrangements with local house inspectors to do a walk through the of house and take extensive documentation. If he can't get a house inspector or similar to do a walk through, he'll assume worst case scenario based on his notes and go from there.

Said the entire process will probably take him anywhere from 3-10 man hours (most of that time is spent contacting, communicating, and reviewing estimates from the contractors in step 2). He outsources alot o the work to his VA's and he won't do a deal in a new market if he's not sure he'll do at least 3 more in that same market over the next year and/or if he can't identify the potential for more deals. He ties the "local modifier" to local cpi or something , and he'll use it for about 3 years before updating it again.

Honestly it seems like a rather ingenious way of estimating rehab costs if you don't know the local market all that well. Obviously it probably won't be that accurate, but probably gets you in the ball park. From talking to this guy and seeing the deals he's done....seems like its working. Thoughts?