Rehab Costs
I am looking at a place that I am considering rehabbing. I am really struggling with the rehab cost though. The books I have read have told you to look for the real ugly places that need tons of work. Then they break down the rehab and come up with something like $15,000.
The house I am looking at is a 4bed/1bath 1400 Sqft single family. It basically needs everything. Now I dont know much about rehab costs but I do own my own house and I know what it costed me to put in new windows, siding, toilet, etc.... When I look at this place and estimate the costs myself I can come up with $50,000 easily. I know thats a real high cost for a smaller home. I think something like $4,000 for windows, $4,000 for siding, $2,000 for a roof and I am 10k already. Then you look at plumbing, electric, walls and all the other stuff and
I would basically have to offer $20,000 on this house. Well its listed at 54k mainly because of brand new 3 car garage and a great lot. W
What can a person do with this type of place, besided rehab very cheaply? Is this the wrong kind of house.
Oh yah ARV is about $100,000.
I only Rehab what it will take to make the property look nice and be rentable/re-saleable. I usually do roof, electrical, plumbing fixtures, countertops, carpet, paint, and cleanup. I try to stay away from structural or carpentry work. Only that that needs to be repaired. Most Rehabs I have done were 10-17K
I don't try to fix all I would for me to live there or I would never finish (My residence is always under construction)
I just try to make it a clean, nice livable place for a tenant.
Thanks Scott
The place I am looking at is about 100 years old so there are old lead pipes and old fuse electric. Have you done places like these? If so how have you gotten away with those total costs? I could see redoing the electric alone to be $6,000. I dont want to estimate too much but man this is hard.
How many have you done? I've done a few and maybe for a beginning effort this is not the one. Get contractors in there with you to give you actuals on costs. My contractor can do most plumbing etc. For a total rewire, I'd get an electrician.... You really need to nail down those expenses, then determine what you need to make to do the deal, then there's your offer price. Submit it... the worst they can do is say no. If the numbers don't work, they don't work. For a home owner in love with the potential it might, but for an investor it's a different ball of wax.
let us know!
bonnie in nj
There have been many post about this topic, rehabbing cost.
There is no set in stone formula to rehabbing cost / estimates. Each house is a case by case basis. With Remodel and New Construction you can get books and programs that can get fairly close...however Rehabbing is a different animal.
Rehabbing, means to rehabilitate....fix something broken or deteriorated.
Remodel has to do with redesigning rooms, structure and even adding rooms.
Unless investors are experienced with knowing how to estimate a true Rehab, it is in their best interest to contact a professional for estimates.....at least for the more challenging ones.
Good luck
NC
billfaith - the problem you are having is one of perspective for lack of a better word.
Are you judging what the house needs done to it using your eyes as if you were going to live there, or through the eyes of the prospective buyer? Keep in mind if this property will have comps in the 100k range, then the buyers will be looking at other houses in the 100k range. What do those houses have? What are those conditions? Is every competing house the buyer will be looking at perfect? Will they have defects, pluses and minuses?
Keep in mind that to another person your $50,000 rehab could actually be not enough. They could see that they need to put a pool in the back yard, put granite counters in the kitchen, put in a whole house audio system. Do you get the point? You need to set the bar at the correct level. If you were rehabbing with the intentions of you living in the house for the rest of your life, you would do it one way, if you were doing it to sell you do it another way.
Does the house need the entire electrical system replaced for the house to sell to a retail buyer, or is there a cheaper solution that would make the house not perfect, but still marketable?
In rehabbing it is all about making the house marketable, not perfect.
Theoretically you could never be done rehabbing a house, there would always be something here or there you could tweak or upgrade, or throw money at.
Take a look at the house like a buyer would who is looking at other comparable houses and shoot for that level of rehab. If it still comes out at the figures you are saying, there is something wrong, and walk away.
I suspect you are over-rehabing this place. Keep in mind you are not Norm on this old house, restoring a old house to greatness, you are billfaith, fixing it up to sell and make money.
Good reply NC_YANK. If your numbers are correct $100,000.00 ARV -$54,000.00 asking price-$15,000.00 rehab cost=$31,000.00 gross profit (before carrying cost,sales cost,and taxes). Looks like even at asking price the numbers would work,but try to get the price discounted.
Thank you so much for all the replies. I will take them all into consideration.
Hi, Ive been a rehabber for about 7 years now in the eastern ohio area. In many cases I use a rule of thumb, if i wont live in it, who else would want to live in it. This usually means that on a rehab, I am replacing the bath, kitchen , carpet paint, fixtures and servicing all of the mechanicals. Most of the time the roof siding and drive are in good shape but not always. Always look at your final number. If you can make some cash after closing and holding costs, the work should not be an issue. Ive heard this before and I have followed the rule. I always look to make at least 15k on a rehab or flib after repair costs or its not worth my time. Hope that helps too. I think someone may have hit on this earlier in the post.