Learning about renovation costs is a process that takes time and experience. Here is my boilerplate list of the steps you should take to learn how to estimate rehab costs:
#1 Read the Book on Estimating Rehab Costs
Expert house flipper J Scott discusses the fundamentals of budgeting and pricing rehab costs and reveals the steps, tips, and tricks he uses to accurately estimate costs for 25 common trade categories and hundreds of repairs. The Book on Estimating Rehab costs is a must-read book for new rehabbers that struggle estimating rehab costs for their rehab projects.
Keep in mind, this book is a little dated so the prices may not be accurate today, but it still should provide the basic process of estimating the different trades and scopes.
#2 Walk Through Distressed Properties and Spy on the Competition
Walk through a couple of completed rehabs that a local real estate investor has completed in your local market and study the types of repairs they made and the level of finishes they installed in the property.
Spying on the competition and understanding what buyers are looking for will help you determine what type of repairs and level of finishes you need to install in your own properties.
#3 Explore Lowes and Home Depot to Learn About Material Pricing
Take a tour through Lowes and Home Depot (or their websites) and look at finishes materials and fixtures that you will consider using in your rehab projects. This will help you get a better idea of what tile, hardwood, carpet, plumbing fixtures and light fixtures costs for your rehabs.
#4 Contact Local Contractors For Pricing
Call local Subcontractors and get budget pricing for common repairs on your typical rehab project.
For example, call a roofer and ask what their average cost per Square of Architectural Asphalt Shingle Roofing would be on a 1,500 sf house, with a 6/12 pitch.
#5 Build Out Your Database in a Spreadsheet or Estimating Software
Once you start to get a better understanding of Labor and Material costs you will want to store this data into a spreadsheet or software that you can use to help you streamline the estimating process.
#6 Practice, Practice, Practice
Walk through distressed fixer-upper properties (or find properties virtually online) and practice creating detailed scopes of work, quantifying repairs and estimating rehab costs for the projects.
This will help you get acquainted with common rehab repairs, rehab costs & estimating terminology.
#7 Get Your First Rehab Project!
You can practice all you want, but ultimately you will learn the most about estimating rehab costs by actually rehabbing a house. Getting your first rehab project will require you to create a SOW, talk to contractors, compare and review bid proposals, review budgets, & make countless trips to Home Depot.
You will inevitably make mistakes and underestimate things, but you will learn 90% of what you know by just doing your first rehab!
#8 Learn from Your Experience!
Once you complete your first house flip project, take some time to review your actual costs that you spent on the project and compare it to your initial estimates and budgets.
Reviewing your final numbers will help you gain a better understanding of how much you actually spent in each Category and identify areas where you underestimated cost and blew your budget.
When you buy your next house flip project you will have this valuable learning experience to help you build a more accurate estimate!
As your continue to do more and more houses, you'll gradually gain more experience and be able to develop accurate estimates quickly and confidently!
