Help me figure Money it takes to do a Rehab - Posted by Gary

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Help me figure Money it takes to do a Rehab - Posted by Gary

Posted by Gary on July 05, 2005 at 20:44:54:

I would like help listing every single expense related to doing a rehab. I want to begin very soon, but also want to be very safe in my first approach.

I plan on looking for a home I can sell for around 120k (that’s generally what houses are going for where I want to invest). To be safe what must I pay for it? How long should I plan on holding it for?

These are just a few of the questions I have, and yes I’ve already been over this entire site numerous times and read many books. I’m also in a small REI Club.

I will have financing that only needs a 5% down payment.

Any help is greatly appreciated. All I really am looking for in replies here is an amount of capital that I should have before jumping in and not being able to make it if something goes wrong.


Re: Help me figure Money it takes to do a Rehab - Posted by Chuck Rosenberg

Posted by Chuck Rosenberg on September 05, 2005 at 19:51:24:

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Re: Help me figure Money it takes to do a Rehab - Posted by Atlanta_bob

Posted by Atlanta_bob on July 06, 2005 at 23:37:33:

Hi Gary:

In the price range you are dealing with, you can make money if you have at/near a $40K spread between your purchase price and your (future) SOLD price. With an ARV at/near $120K, you need to buy at/near $80K to make a decent ($15K to $20K) profit. Run the numbers with a 4 to 5 month holding period. You’ll see why $40K is very close to “right”.

Best to have at least $25K in liquid assets before you jump into REI, or adequate credit card balances to pay those rehab & holding cost expenses.

Forget about “listing every single expense related to doing a rehab”. Just forget about it.

Good “rules of thumb” on a standard 3BR/2BA ranch-style house with (about) 1,400SqFt:

  1. Paint interior and replace carpet: $5,000.
  2. Do Item #1 and replace one system: $10K.
  3. Do Item #1 and replace 2 systems: $15K.
  4. Do Item #1 and replace 3 systems: $20K.

A “system” is something like: 1) A roof, or 2) The HVAC system, or 3) Electrical panel. This “rule of thumb” assumes you are doing some of the work and ARE NOT simply writing checks to pay your local contractors. Early on, its often best to complete most of the rehab work yourself so you know what repairs cost for “standard” rehab tasks (install new ceiling fan or replace bathroom faucet). Once you replace a toilet and install new light fixtures, you’ll know what repairs cost. A detailed repair list is never complete and often becomes a waste of (your) time.

Hope this helps.


Instead figure the rehabs to make the money! - Posted by DaveD (WI)

Posted by DaveD (WI) on July 06, 2005 at 14:09:00:

You need to strike a balance between listing “every single expense” and SWAG (scientific wild-@ss guessing). Otherwise, you will soon exit the business because of paralysis of analysis. You will never get to first base, let alone buy the house. Others who have more confidence in their estimating will act quicker than you, and get the deal.

Chunk down the estimating into bites that work in your market, and select those bites which apply to your deal. Know on average what it costs per foot to install floor coverings or a roof. Know what a replacement furnace and c/a unit cost. Know what it costs in labor and materials to repaint a room, replace kitchen counters, bath fixtures. Figure a budget for exterior landscape spruce-up. Don’t forget to add in your aquisition, holding and selling costs. You should have a good idea within about 5 minutes of touring the house.

I frequently hit my estimates so close it is scary. I’ve also gone way over. So what. Still made a ton of money. If you have to nail the expenses to the penny to make a buck with your deal, you are probably paying too much!

Re: Help me figure Money it takes to do a Rehab - Posted by Mike (Seattle WA)

Posted by Mike (Seattle WA) on July 05, 2005 at 21:02:38:

Light Rehab:
Paint in and possibly out
Minor Drywall repairs.
Misc. Fixture upgrades

about 10K

More work means more money or credit to handle the job. This is where my nice company Home Depot and Lowes LOCs come in handy :slight_smile:

Re: Help me figure Money it takes to do a Rehab - Posted by rusty

Posted by rusty on July 07, 2005 at 13:47:15:

$5K for an electrical panel? what do you mean by that? I am looking at a rehab project right now on a home built in the 1950s. Its got the old glass fuses in the fuse box. I was told by another rehabber to expect to pay $750 to update it. What is the difference here?

heather flower - Posted by heather flower

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Well said (nt) - Posted by Boyd (MA)

Posted by Boyd (MA) on July 06, 2005 at 20:15:52: