How to Figure Out Repair, Rehab, and Renovation Costs on Any Project

Provided by Bigger Pockets

The question is asked all the time: How can I estimate average rehab costs? Well, there is no average rehab cost because there is no average rehab.

Some properties will need major structural modifications; others just a lipstick approach. Some may have a recently remodeled kitchen, and others may have a 1950s galley kitchen.

But since this is such a popular topic, let’s see if we can try to make it at least (a little) feasible for a newbie to the construction world.

Ways to Go About It

First, there are several ways to get a price range for needed work on a property:

1. Have a general contractor walk the property.
2. Have a home inspector give you a report and use that to put together a budget.
3. Develop a square footage cost per square foot for the whole project.
4. Develop a square footage cost for each trade, like tile and drywall.
5. Use an online calculator.
6. Ask friends for help—ones that have had a recent remodel or may have some kind of construction experience.

Who to Work With

Of course, the best and by far the safest way, in the beginning, would be to use a veteran general contractor (GC) to walk the property and throw a rough number at the necessary and/or desired repairs or improvements. This is certainly possible, but most contractors will expect to be paid, and they cannot always fit such a small task (for them) into their schedule because you have a deadline due to escrow.

And note that I used the term “veteran” in describing this GC. It does you no good to use a new or young contractor fresh out of the exam room. You need someone with decades of experience, who can throw out a semi-accurate price just by looking at a property in an hour. They must have done dozens or hundreds of projects to be able to throw out an accurate price after a one-hour walk-through a house they have never seen before. 

Note: You can (and many do) find a good general contractor who will walk every property for/with you and always give you a good, solid number. But be mindful that everyone—even this veteran old GC—can and will be wrong on occasion. Or sometimes, there are surprises hiding in the house that you will not see until demo is complete, or the building inspector makes his first visit to the property.

You can also use a home inspector to gather a list of information on needed repairs and deficiencies. You will (and should) use a licensed home inspector to inspect the property that you are considering purchasing. You do this once you have an accepted offer on the property, it is under contract, and you are within the inspection period. 

But they can’t and won’t be able to throw a number at those tasks for you. It’s just not their job. Home inspectors are specialists, and most will have no true construction background. They might see it as opening themselves up to liability issues or, worse yet, a conflict of interest.

How to Calculate Costs

However, once you have this list, it’s certainly a good starting point. Then, you can use the internet to attach a price to each item on their report. This is a sensible and fairly safe approach.

But what about additional improvements you might want to have done, like adding a bathroom or remodeling the kitchen? Maybe you’d like to open up an old, claustrophobic house and convert the living room, dining room, and kitchen into a great room. Now you’re back to square one. 

Develop a square footage cost. This will take longer, but as you complete a few jobs, just do the math and keep track of what you are paying. Does the tile contractor always seem to get about $5 a square foot for his installation? Does the drywall crew always end up at about $6 a square foot? These are real-world numbers that you can rely on.

You can also try to contact various subs and see if they will give you this square foot price. Some will, but many will not want to be bound by it.

There are online calculators out there, even one on the BiggerPockets site. They can be of some use, but I would warn not to completely rely on these. They cannot always account for different areas, or current price fluctuations, or a sudden change in the economy. But they can be very handy in assisting you get together a well-priced scope of work.

Ask people that you know and trust about their recent projects. Maybe you’ll get a good price on kitchen cabinets from one friend, and another will let you know what she paid to have her bathroom retiled.

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How to Customize Your Approach

I would suggest using a different approach for different sizes and types of projects. For example: 

• You find a house that needs a complete remodel, right down to the studs. This will absolutely demand that you hire a GC to go to the site and walk it (with you there to watch and learn) and give you a rough price. You cannot be off by 20% on a $150,000 remodel project—there goes your profit, and that might actually turn into a loss. That’s not why we got into the business.
• You’ve found a nicely priced older home that has been well cared for, but nothing new or modern has been done to it in 30 years. It needs a modern kitchen, two new bathrooms, new flooring and paint, and a new roof. That’s maybe $45,000 worth of work. Once again, you can call the GC, or in this case, you can call subcontractors yourself and ask for prices on each trade. How much is the cost of cabinets? How about paint, tile, flooring?
• For a small job, $10,000 or so, possibly needing only paint, carpet, and new appliances, measure (very carefully) and go shopping yourself. Don’t forget to include all costs like taxes, delivery, installation, and the like.

It can be a sound approach to use a variety and combination of these possible choices until you find the most comfortable way for you to come up with a price range that you are willing to invest.

And it must be noted that, as you would expect, prices vary greatly by region, from state to state, and even city to city within a state, i.e., San Diego versus Los Angeles or San Francisco, or New York versus Buffalo.

Final Thoughts

The more you get your hands dirty and invest some of your own elbow grease in this process, the better you will get at estimating prices. It’s not easy, and yes, you can make mistakes that can cost a lot of money. But it is absolutely invaluable to be able to walk through a prospective fixer-upper house and put a pretty firm number on your construction costs. This will set you apart from your competition and should help you become profitable—there is a lot of money to be made in fixing up distressed houses!

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