Estimating Repairs for your Rehab Projects
How to Flip Houses / Estimating Repair Costs
Overview
In this lesson we will learn the basics of Estimating Repair Costs for your Rehab Projects.
In this lesson we will learn the basics of Estimating Repair Costs for your Rehab Projects.
Estimating Methods
There are a few different methods for estimating construction costs for your rehab projects. Generally, there is a direct correlation between the amount of time you spend on an estimate and the accuracy of the estimate.
Estimating Methods
- Lump Sum (quickest, least accurate)
- Cost per Square Foot (quicker, less accurate)
- Detailed Estimates by Scope / Room (slowest, most detailed, most accurate)
Lump Sum
Lump Sum Estimation
Lump Sum Estimation is the process of estimating the entire project as a single 'Lump Sum' number.
Lump Sum Estimation is the process of estimating the entire project as a single 'Lump Sum' number.
Example:
A flipper walks through a property and uses a SWAG ('stupid wild ass guess') number and says I think this property will need around $50,000 in repairs.
A flipper walks through a property and uses a SWAG ('stupid wild ass guess') number and says I think this property will need around $50,000 in repairs.
WARNING: Obviously, estimating with 'swagged' Lump Sum numbers can be a dangerous way to estimate if you don't have any project experience or cost history. Lump Sum numbers should only be used by flippers that have rehabbing experience, or flippers that have a contractor's bid proposal.
Cost per SF
Cost per Square Foot estimation is a quick estimation technique that uses an estimated $/SF value and multiplies it by the property square footage that is being rehabbed. If a rehabber has experience estimating costs and rehabbing houses, they can reference their past projects & calculate an average $/SF that they can use to quickly calculate rehab costs for potential deals.
Cost per SF Example:
Below is an example of a rehabber's project cost history. This cost history can be used by the rehabber to calculate the average $/sf that can be used for their typical rehab project.
Below is an example of a rehabber's project cost history. This cost history can be used by the rehabber to calculate the average $/sf that can be used for their typical rehab project.
| Project | |||
|---|---|---|---|
| 1234 N. Main St. | |||
| 678 Elm St. | |||
| 3456 Cherry St. | |||
| 2345 Oak St. | |||
| Averages |
Based upon the rehabber's cost history, their average $/sf amount is around $35 to $36/SF.
So let's say a rehabber finds a prospective property that is 1,500sf, and wants to quickly estimate the repair costs. The rehabber can quickly calculate a repair estimate by multiplying their $/sf amount by the square footage.
Repair Cost Estimate = Property Square Footage x $ per SF Amount
Repair Cost Estimate = 1,500 sf x $35.00/sf
Repair Cost Estimate = $52,500
WARNING: Similar to 'Lump Sum' estimation, estimating costs per SF can be dangerous if you don't fully understand the costs that are included in the $/ SF value. $/SF numbers can vary widely depending on several factors including:
You should only use $/SF values if you have rehabbing experience and YOUR OWN PERSONAL cost history. To find YOUR right $/SF value, review your past rehab project costs, and calculate your average cost per SF that you can use to estimate future projects.
Note: Our Estimating Dashboard automatically calculates your $/SF amount, so you can review your past project estimates and calculate Your $/SF Values.
- Project scope of work
- Location of the project
- Materials used
- Contractors /type of labor used
- Seasonality
You should only use $/SF values if you have rehabbing experience and YOUR OWN PERSONAL cost history. To find YOUR right $/SF value, review your past rehab project costs, and calculate your average cost per SF that you can use to estimate future projects.
Note: Our Estimating Dashboard automatically calculates your $/SF amount, so you can review your past project estimates and calculate Your $/SF Values.
Detailed Estimation
Detailed Estimates by Scope of Work or by Room involve a lot more time and due diligence, but it is generally the most accurate way to estimate repair costs.
Creating a detailed estimate can be a difficult task if you don't have a system in place. You will need to build a spreadsheet or utilize a software that has a cost database to organize and streamline the estimating process.
Checkout our Flipper Force software includes a Repair Cost Estimator tool w/ a database of over 30 Scopes of Work and over 500 common items and unit prices.
- Inspect the Property - With detailed estimation, you will first need to walk through the property to inspect the property's condition and evaluate what work needs to be completed. Walk around the property and take pictures of the exterior, kitchens, bathrooms, living areas and utility closet so you can use the photos for future reference.
- Quantify the Repairs -While you are at the property, takes notes on the quantities of work of each repair so you can use those quantities to create your detailed estimate.
- Pricing - For each repair item you will
- Estimate the Repair Costs
Creating a detailed estimate can be a difficult task if you don't have a system in place. You will need to build a spreadsheet or utilize a software that has a cost database to organize and streamline the estimating process.
Checkout our Flipper Force software includes a Repair Cost Estimator tool w/ a database of over 30 Scopes of Work and over 500 common items and unit prices.
Estimating Software
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Our Flipper Force Software includes a Repair Cost Estimator tool that can help you estimate repair costs for your rehab projects. The Repair Cost Estimator is pre-built with a database of over 30 Common Scopes of Work & over 500 budget items, so you can take your newly learned estimating knowledge and practice estimating costs for your projects. Learn more about our Rehab Repair Cost Estimator Tool |
Repair Cost Estimator Tool
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