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How to Estimate Rehab Costs

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One of the most difficult parts of improving your real estate investment skills is learning how to properly estimate rehabilitation costs. It feels like a magical trick to see veteran investors properly look at the devastation and quickly quote a $ 75,000 refurbishment budget.They arrived at that number how?? Do they have a secret computer in their brain? However, as long as it takes time to learn the basics, rehabilitation cost estimation turns out to be easy in practice.

There are several reasons why learning to quickly estimate rehabilitation costs is so important for novice investors. Understanding the potential costs will help you reach the exact maximum permissible offer. There is no smart investment that starts with spending too much money! Before you buy, start each fix and use rehab predictions to flip or buy and hold your purchase. This will prevent you from being in the water immediately after signing the closing paper.

In addition, wholesalers who have a good understanding of expected rehabilitation costs can more accurately present information to cash buyers.

Please note that this article does not explain all the ways to accurately estimate rehabilitation costs.To do that, you need to get a copy of Book on Rehabilitation Cost Estimates: An Investor Guide to Define Remodeling Plans, Budget, and Know All Costs Accurately According to expert real estate investor and flipper J Scott.

This is the “magic” process that an experienced home flipper should follow. You need to follow these six steps to get an accurate and quick estimate of your refurbishment project. Our methodology is simple and doesn’t take much time. Before you know it, you’re all on a budget and ready for your own successful rehab project.

Understand your buyers and neighborhood

Before you start calculating rehab costs, understand what your final product will look like. Some high-end mods will take several months. It takes several days to repair cosmetics. What level of finishing are you (or your wholesale buyers) aiming for? Is it a luxurious kitchen, a simple IKEA setup, or just a cabinet painting task? Need to add a master bathroom, or are potential buyers or borrowers happy with the new half bath?

If you’re not sure, take a look at your neighborhood. If a property near you is for sale, join an open house. What is the standard?Repair any of the above Also Below the area standards can take a lot of time.

In cheaper areas, the money spent on the finest finishing is wasted. Buyers don’t pay extra for upgrading a luxurious kitchen like a six-burner stove. But in expensive areas, submarket-finished homes stay in MLS for a long time.

So if your house is in a working class neighborhood where most of the working class rentals are, you don’t have to spend hundreds of thousands on rehabilitation.

Thorough tour of the property

Next, after understanding how you want the finished product to look, walk slowly through the property. Take lots of pictures or record videos on your mobile phone so that you can easily remember the situation later. Believe me, you won’t remember it all!

Be aware of major issues such as roofs that need repair, cracks in foundations, mold, HVAC issues, termites and more. These rehab tasks can quickly destroy even the most detailed budgets, if not initially considered. Moreover, without knowing, the scope of the refurbishment cannot be truly understood. all problem. So please explain in detail here. You will not regret it.

If you are buying directly from the seller, or if you are buying in a wholesale situation, the seller may be at home. Let them know that you take a picture, but they are only for analysis. We will not publish your photos. Don’t make them feel like you’re invading their privacy.

Write down the problem

While you are still in the property, go room by room and note the condition and any necessary repairs. For example, if you walk into the living room and find a carpet that looks and smells like dog urine, write down “Please replace the carpet in the living room.” Also, write down a brief estimate of the size of the room. (It doesn’t have to be accurate. Make the best guess.)

Also look at the exterior of the house and be aware of major issues such as roofs, siding, and annexes.

This list creates an initial scope of work. This is a convenient reference frame for visualizing refurbishment costs.

Organize the list into 25 categories

Then get a comprehensive list of repairs and categorize each into one of the following 25 categories: This includes all refurbishment of investment property. For example, if you need carpet in your living room and bedroom and you need vinyl in your kitchen, group them all and include them in your flooring.

exterior interior Universal
roof Dismantling permission
Gutters, eaves ceiling, and fascia Plumbing Mold
Siding electricity Termites
Exterior painting HVAC others
Deck and pouch Framing
concrete insulation
garage Seat lock
Landscaping carpenter
Sepsis Interior painting
Foundation Cabinets and countertops

Determine rehabilitation prices for each category

After elaborating on the 25 categories, it’s time to estimate the most difficult part: the amount of rehabilitation in each category. However, breaking everything down into the basic components of the refurbishment makes it much easier to estimate rehabilitation costs. Do you remember how overwhelming the whole project was at the beginning? Looking only at the flooring, deck, or septic tank, it feels much easier to handle.

Let’s go back to the flooring quote. You may decide that you need about 1,000 square feet of carpet and another 500 square feet of vinyl. You can use that information to call your local flooring or large store and ask for the flooring charges you need. Multiply the quantity by the unit price to get a complete picture of the cost of this aspect of the property.

Speaking of big stores, it’s a good idea to spend a lot of time in the first stages of your investment career. What is the material cost for the most common repairs? Learn more about flooring, paint, cabinets, countertops, appliances and more. The more rehab you manage, the sooner you will know how to get the maximum value for your money. You can also quickly price upgrade options if they are relevant to your surrounding area.

For an estimate of labor costs, double the price of materials. Again, this is only a rough estimate, but it turns out to be fairly accurate. If you work with a contractor, they can provide you with updated costs for each rehab task. And after making multiple refurbishments, you should be able to quickly budget for a general refurbishment. Once you’ve priced one leaky toilet, set all prices. (Of course, except for major system problems.)

Consider creating a database of each repair cost, including a final receipt, a quote, and other details that will help you later derive the exact price.

If in doubt, ask for help

Don’t be afraid to ask for help. This can be done in several different ways.

  • Visit the Bigger Pockets forum And what to ask people they I’m paying. This is a very useful tool and you can see inside what other investors are spending. Do you have a rehab question? Our members can answer.
  • Ask your local contractor for help. You may have to pay them for their time, but the cost of an hour or two of in-house consulting can be a valuable investment. Many wholesalers actually include detailed line-by-line bids from authorized contractors when presenting to cash buyers. Even if you’re rehabilitating for a flip or rental, it’s highly recommended to do so. Contractors may offer bids for free because you (or cash buyers) are likely to use them for work.
  • Ask a local real estate investor to come with you.. Estimating rehabilitation costs quickly is an important skill. Therefore, consider working on your first deal with someone who is around the block and can share your knowledge.

Whether this is your first rehab project or your 100th time, following this 6-step strategy will ensure you understand the scope of your work and the budget you need before swinging a single hammer. Are you ready for your next refurbishment or investment contract? Get out there and start your search.

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