Whether you’re a new or experienced real estate investor, one of the more challenging tasks is estimating a rehab. Over estimate it, and you may walk away from an ROI-filled property; underestimate it, and you can put yourself and your real estate business in financial trouble.
That’s why I’m sharing an awesome secret that I learned from a good buddy of mine: Bob Norton.
Quick reminder: Bob has been a high-level investor across the nation since the mid-2000s. He first dominated the Detroit market, then branched out throughout Michigan, and now does deals in metro markets across the U.S.
So, this cool hack he taught me is how to quickly master assessing the typical costs to rehab a house in any market. It’s something you can rinse, repeat and apply in any of your target markets. As you probably know, reno costs can vary widely from state to state… but with this secret, you can do it quickly and pretty easily.
It does require you to be in person, boots on the ground — but just for a day or two.
Now, without further ado, I’m going to teach you what Bob taught me about how to quickly estimate average costs to rehab a house in any area, whether you’re doing a “gut rehab” or a “lipstick and mascara” job.
How to Quickly Estimate Rehab Costs for Real Estate Investors
Ok, first, to get a feel for prices in your target market… use a house you don’t even own. Get access to it and the lockbox code. Then call 15 to 20 contractors, plumbers, roofers, window and carpet installers, etc., and set up walkthroughs from 9am–7pm.
Hang out all day, meeting with these guys as they walk the house. And ask them for quotes on the work that’s needed…
So, you’ll learn very quickly actual prices for work. (Yes, it’ll be an exhausting day or two, but so worth your time and effort.)
Then, ask questions like:
“Well, I just talked to a guy a half hour ago and he said the roof is only $4,000,
you’d charge $7,000? Why is that?”
And if they can’t give you solid reasons why there’s such a higher price, then you know they’re full of it.
See, with this method, you can not only develop a lot of reputable contacts very quickly… but also zero in on average prices in that specific area.
It lays a lot of groundwork for you — you’ll meet some quality contractors and learn what’s really going on for rehab pricing in your target market(s). (That’s a twofer, folks!)
So, where are you going to head to first to set up a day of walkthroughs?