How to estimate a rehab
Hello Everyone,
When looking at pictures of a home, how do you go about estimating what the cost of the rehab would amount to? Do you ask for more in-depth pictures of the property and then go to the contractor and ask for a rough quote? I can imagine this would get annoying for every single home. Another thing I am thinking about is getting pictures, and then writing out the items that need work, putting an upper band figure on it, and then using that in my analysis.
But I want to hear from the more experienced folks, how are you guys able to accurately analyze rehab costs?
@Ugo O., I think it would be EXTREMELY difficult to work from pictures. If you must, get video because with video someone can slowly pan across and capture almost every surface.
When I am looking to buy properties, I have to walk through personally to not only see the aesthetics but also the systems and layout which are hard to evaluate from pictures. It isn't realistic to ask contractors to work up estimates for a bunch of houses you don't even own. That is a lot of work for them they don't get paid for.
Here are the basic steps I take to estimate a rehab at a high level for the purpose of making offers:
1. Develop a high level scope of work during the walk-through
2. Generate my own personal estimate for each line item and ALSO a % confidence I have in that estimate. Then I use that % confidence to generate a high and low value. Those v
Example:
Item Estimate % Confidence Low High
Demo $1,000 90% $900 $1,100
Roof $10,000 80% $8000 $12,000
-----------------------------------------------------------------------
Totals $11,000 $8,900 $13,100
When you are done, you have an estimate a low and a high. If everything goes wrong, you end up at the high estimate. So, if that number looks ok you are golden because that should never happen.
3. Budget a line item for misc items that you didn't account for in your scope of work.
4. You also need to have project management skills to keep the project on target. As things come up you can make decisions to try to keep the money in line. Identify and understand where those items are.
Perhaps adding an additional half bath is optional and could be eliminated if issues come up or perhaps for someone who is hands on perhaps they could take on more work themselves if they needed to and extend the rehab time period. Many possibilities.
Thanks, @Kevin Sobilo for the feedback, I appreciate it. The issue is that I am a Canadian investor looking to invest in the US and I have a hard time estimating rehabs and the like. So going in person would be too expensive and time-consuming.
I am thinking of a system where my investor-based agent gives me a ball park, and after that I pay contractors to go in and give me itemized bids, what do you think about that?
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- Real Estate Agent
Hey Ugo, it's tough to assess the property's condition just from pictures. I usually connect my investors with my contractor or inspector to walk through the property so that everything can be sorted out in one go, or I have my clients make an offer subject to a walkthrough, allowing us to get the ball rolling. Let me know how I can help!
Quote from @Ugo O.:
Thanks, @Kevin Sobilo for the feedback, I appreciate it. The issue is that I am a Canadian investor looking to invest in the US and I have a hard time estimating rehabs and the like. So going in person would be too expensive and time-consuming.
I am thinking of a system where my investor-based agent gives me a ball park, and after that I pay contractors to go in and give me itemized bids, what do you think about that?
@Ugo O., I have never considered doing a rehab where I didn't control the scope of work to be done. If I was going to do that I would be more comfortable forming a partnership with someone local with experience.
An experienced local investor with "skin in the game" would be someone I would more easily trust to define what works needs to be done. An agent might look at the rehab differently and they have no vested interest in the rehab. A contractor is better at doing the work they are told than they are identifying issues like an inspector or making decisions about the type of rehab work to do.
Paying contractors for bids sounds expensive. You might evaluate 10-20 properties to get one under contract. That is a lot of payments to the contractor for estimates before you ever make an actual deal. This is why I have my own system for estimating. I know that combined with decent project management skills can bring a deal home.
We are Canadians investing in the us and have a great system in place for getting our costs more then willing to share with anyone who wants to chat
Here is a "general" rule of thumb that I use for my market in Jacksonville FL.
Light Cosmetic ($40-$50 x Sq. Ft)
Medium Cosmetic ($45-$55 x Sq. Ft)
Heavy Cosmetic ($55-$65 x Sq. Ft)
Studs Down ($80-90 x Sq. Ft)
Luxury ($150-200 x Sq. Ft)
The first thing I look at before viewing a property is the permit history. This can tell me a lot about the age of the plumbing, roof, HVAC, etc before actually walking it.
