This article uses excessive amounts of bad analogies. If you despise bad analogies then please proceed with caution and read at your own discretion.
One of the questions that I constantly hear new house flippers asking is 'How Much Does a Rehab Cost? The problem is, that's like asking how much does a steak dinner cost? It depends!
I'm not sure if the 'steak dinner' is a good analogy or not, but I'm going to use it to hammer home the point that Rehab Costs vary significantly depending on many different factors!
My Bad Steak Dinner Analogy
The cost of steak dinner varies significantly depending on the location of the restaurant, quality of the restaurant, quality of steak, other courses provided and drinks.
I can get a flank-steak dinner with a baked potato and a PBR tall-boy from the local dive-bar for $10.99 or I could get a 3-course steak dinner with filet mignon, Caesar salad & triple-chocolate cake for $120 at the NYC Michelin Star restaurant.
- Location of the restaurant - Are you dining in Schitt's Creek or downtown Manhattan?
- Quality of restaurant - Is the restaurant a dive bar or a Michelin star restaraunt?
- Quality of steak - Is the meat chuck steak or filet mignon?
- Size of the steak - Is the steak a 6oz filet or 12oz filet?
- Sides - What sides are provided; french fries or potatoes au gratin?
- Other courses - What other courses are included; appetizers, salads, & desert?
- Drinks - What drinks are included; 24 oz PBR tall boy vs rare red wine)
The point is, generic questions like 'How much does a rehab cost?' are impossible to answer without defining the characteristics of the project and considering the different factors that can influence costs.
If you compare the factors that influence the cost of a steak dinner, they are really the similar factors that influence the costs of a rehab:
- Location of the property (expensive West coast city vs affordable Midwest town)
- Quality of the craftsmanship (skilled labor vs unskilled)
- Quality of materials (builder grade vs custom grade)
- Type of Labor - (Contracted out or DIYed)
- Size of the property (1,500sf vs 3,000sf)
- # of beds & bathrooms (2:1 vs 3:2)
- Scope of the repairs & improvements (cosmetic rehab vs gut rehab)
A cosmetic rehab on a D-Class property in middle America may cost as little as $15 per SF (dive bar steak dinner), whereas a gut-rehab of a historic Brownstone in New York City will likely cost $100+ per SF (4-course Michelin star steak dinner).
Okay Dave, enough with the analogies! How should I estimate rehab costs!?
Sorry Stanley, one more analogy!
In order to create an accurate rehab estimate you need to create a detailed list of repairs and prices that take into consideration all of the factors mentioned above.
To estimate rehab costs efficiently, you need to have an 'Ala Carte Menu' (database) of common repairs and prices that you can use to help you quickly estimate costs for your projects.
Your 'Ala Carte' Menu of rehab items should have a list of common repair items and prices that uses YOUR materials you have selected from Home Depot or Lowes and includes installation prices from YOUR local Contractors.
For each project you will use your 'Ala Carte Menu' of repair items to calculate a 'Total Bill' for the project.
#1 Read the Book on Estimating Rehab Costs
#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.
Once you find the materials you want to use in your rehabs, put the material pricing into your Estimating software or spreadsheet that can be used for future reference.
How would you know what a steak cost, if you've never been to a butcher shop or in a steak house?
#3 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.
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.
NEXT: 3 methods of estimating rehab costs
#4 Create a Database of Prices (Menu)
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.
This spreadsheet or software will be used as your 'ala carte menu' of items that you can use to quickly estimate rehab costs and tabulate a bill for your project.
Our Estimating Software comes pre-built with a database of over 500 common repair items and unit prices that can help you get started. You will want to customize your database with your own personal pricing that fits your specific market, materials and specific project needs.
You can then use our Estimating Software to practice estimating rehab costs for potential rehab projects.
Learn more about our Rehab Repair Cost Estimator Tool