All Forum Posts by: David Robertson

Hi Brandon,

I have a spreadsheet for analyzing flips and estimating rehab costs uploaded to my fileplace here on BP, see link below:

https://www.biggerpockets.com/...

Hi Dan,

Real estate is fast-paced game and you need to be able to submit your offers quickly and confidently without waiting around for an inspector or a contractor to walkthrough the property and give you an estimate.

Contractors are extremely busy right now, and it often takes several days (or even up to a week) to get an estimate back.

You obviously can't wait a week in order to make an offer on a property, so you really need to be able to put together an estimate yourself without a contractor so you can submit an offer and get the property under contract before your competition.

Unfortunately, if you don't have any experience with construction costs it can be nearly impossible to confidently put together an estimate, so here is the process I recommend for learning the process of estimating rehab costs:

#1 Read 'The Book on Estimating Rehab Costs'

First, you need to build a foundational knowledge of construction, inspecting properties and putting together a detailed SOW.

JScott's 'The Book on Estimating Rehab Costs' is a great resource for new rehabbers to learn how to Estimate Repair Costs on 25 common rehab repairs.

https://www.biggerpockets.com/store/the-complete-g...

#2 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.

#3 Contact Local Contractors for Labor Pricing / Hire a GC to Consult

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.

Note: Some contractors will be reluctant to share pricing without seeing the property, but tell them you are just looking for a rough budget number you can use on future projects.

You can also pay a General Contractor a consulting fee of a couple of hundred dollars (per house) to walkthrough a few properties with you and provide a detailed estimate of prices that you can use as your 'menu for future projects.

#4 Compile Your Prices into 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.

The Book on Estimating Rehab Costs comes with a spreadsheet that you can use to help you populate your own database of labor pricing and material pricing. Or you can download my estimating templates I have in my Biggerpockets fileplace:

Simple Estimate Spreadsheet

Detailed Estimating Spreadsheet

There are other Estimating Softwares available as well which can help you manage the Estimating process as well...

#5 Practice, Practice, Practice

Walkthrough potential rehab properties (or find properties virtually online) and practice creating detailed scopes of work, quantifying repairs and estimating rehab costs for the projects.

#6 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!

If you aren't comfortable estimating costs on your own or aren't willing to put in the work to learn how to estimate rehab costs then you need to team-up, partner, or hire a GC as a consultant that can help you estimate your first few projects.

I need to get my stats updated for my BP Profile t-shirts this year! 😜😉

If anybody wants the Photoshop file for creating your own BP Profile t-shirt design let me know, it was a great ice breaker!

Hi Christian,

Another suggestion for learning how to inspect properties would be to hire an inspector to walk the property with you.

I actually just heard an interesting tip from Tarl on this BiggerPockets video at 16:21:

Investment Property Inspections & Pre-Purchase Decisions w/ J Scott & Tarl Yarber

Tarl said when he was first starting out, he would hire a home inspector to inspect the property with him and follow them around the house and ask them questions.  

Typically a home inspector might charge $400 to inspect a house, but that's because they spend several hours putting together an inspection report.

Tarl said to keep the costs down, he told the inspector he didn't need the formal inspection report.

Hi Christian,

Learning to estimate rehab costs is a process that takes time and experience. Here's the steps you should take to learn the basics of estimating rehab costs:

#1 Read 'The Book on Estimating Rehab Costs'

First, you need to build a foundational knowledge of construction, inspecting properties and putting together a detailed SOW.

JScott's 'The Book on Estimating Rehab Costs' is a great resource for new rehabbers to learn how to Estimate Repair Costs on 25 common rehab repairs.

https://www.biggerpockets.com/store/the-complete-g...

#2 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.

#3 Contact Local Contractors for Labor 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.

Note: Some contractors will be reluctant to share pricing without seeing the property, but tell them you are just looking for a rough budget number you can use on future projects.

#4 Compile Your Prices into 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.

The Book on Estimating Rehab Costs comes with a spreadsheet that you can use to help you populate your own database of labor pricing and material pricing. Or you can download my estimating templates I have in my Biggerpockets fileplace:

Simple Estimate Spreadsheet

Detailed Estimating Spreadsheet

There are other Estimating Softwares available as well which can help you manage the Estimating process as well...

#5 Practice, Practice, Practice

Walkthrough potential rehab properties (or find properties virtually online) and practice creating detailed scopes of work, quantifying repairs and estimating rehab costs for the projects.

#6 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!

If you aren't comfortable estimating costs on your own or aren't willing to put in the work to learn how to estimate rehab costs then you need to team-up, partner, or hire someone you like a GC as others have mentioned to help you with this process.

I agree, $20/sf sounds extremely low and I doubt JScott's Book on Estimating Rehab Costs lists a cost range of $20/sf for a gut rehab, so that has to be a mistake.

The contractor's price of $68/sf doesn't sound unreasonable, however it's really impossible to know without getting more information on the specific SOW and plans for the property.

The cost of your rehab can vary substantially depending on the specific SOW, location of the property, quality of the renovation, materials used, etc

It sounds like your contractor walked the property with you and should have a better understanding of the SOW than anyone on this forum, so is there a reason you are doubting your contractor?  If you don't trust your contractor's bid, I would recommend getting 1 or 2 more bids to confirm.  

Also since it's a gut rehab of a property built in the 1800s, I would also consider adding a generous contingency (10 to 20%) on top of your contractor's bid to account for any surprises and change orders that will inevitably arise.

I've been curious about the BP Conference as well.  

I bought tickets to last year's event that was cancelled and kept them for this year, but I haven't heard anything yet about the rescheduled event?

I'm concerned that your 'additional costs' are extremely low.  Additional costs should include buying costs, holding costs, selling costs & financing costs.

Buying Costs will probably be $1,000 to $2,000 for title work, inspection costs & miscellaneous closing costs to purchase the property.

Holding Costs - You'll probably pay around $750 per month for utilities ($250), insurance ($200) and property taxes ($300).  If we assume a rehab of 3 months & sales period of 2 months that's a total holding period of 5 months.

Holding Costs = $750 * 5 month holding period  = $3,750

Selling Costs - You said you're an agent so you can save on the seller's commission, but you will still have to pay the buyer's agent's commission of 3%, plus some miscellaneous closing costs so let's assume 4% in selling costs.  (4% * $330,000 = $13,200)

Financing Costs - Depends on what your terms are, but let's assume a purchase & renovation loan at 70% of the purchase amount & 100% of rehab at 12% interest for 5 months & 2% points. 

Loan amount = $212,000 

Interest payments = (($212,000 * .12)/12) * 5 Months = $10,600

2% Points = $4,200

So that equals $33,790 in 'additional costs', so now your profit in the deal is only $6,210

If you can finance the deal with your own cash and save the $14k in financing costs, then your profit jumps back up to $20k.

Hi Stephen,

FlipperForce is a rehab project management platform that has deal analysis, repair estimation, scheduling & expense tracking specifically for house flips/rehabs.

We do have an expense tracker/job costing tool that is used for tracking your actual project expenses so you can calculate how much profit you made on your flip, but it is not a full blown accounting software, so you would still need to have a separate general business accounting software to manage other aspects of your business.

The biggest problem flippers have with accounting is they just neglect it all together...and then they wait until the end of the project or wait until the end of the year to take the pile of receipts they have in a shoebox to try to calculate how much profit they made that year.

If you use a basic expense tracking tool to log all of your expenses and take the time each week to stay up-to-date then you should have everything organized for tax season.

If you go with QB, make sure you talk to an accountant so they can set it up for you, because it is confusing for non-accountants.

Hey John,

You may want to call a local lumber company and I'm sure they have a list of preferred framing contractors that they could recommend.