Sanity Check on 1st rehab - Posted by J.R.

Posted by Marcos on April 09, 2002 at 08:11:59:

I just have a few problems with your estimates. I think you need to shop around a little bit. Some of these estimates are quite high.

When I get estimates from a contractor, I want all estimates broken down into material cost and labor. I won’t do it any other way. The problem is if you don’t know exactly where the money is going, you don’t have a way to control it. I break it down into these components because it’s easier to control the negotiation.

For example, a 1000-1200 sf house that needs to be reroofed in Atlanta should cost around $500-600 in materials(perhaps less, depending on the shape of the roof and how many extras are needed). It takes two guys two days to do it. So, if you pay $5k to reroof a house, you’re paying them $4400. $2200 a piece. $1100 a day. Or almost $140 an hour. (I did roofing one summer 12 years ago, I wish I had gotten paid $140 an hour). My last roofing job was pretty extensive, I had to replace some of the roof supports, I had a licensed roofer do it, we broke out materials and labor. I paid $150 a day labor per worker, and I paid for materials. Total costs on a 1,000 sf roof with these major repairs, around $1,000). If you’re paying $5k+ you’re paying high end retail.

Cheapest Rehab windows at Home Depot or Lowes, usually cost around $60-70. And we’re talking nice Aluminum, beautiful windows. Double Hung should be around $80-90. Go to Home Depot or Lowes right now, they have windows in their circular. So, per window you’re paying $100 in labor. Two guys can replace a window in about 1/2 an hour. Depending once again on the complexity, IE do you replace with the same size windows? So, you’re paying $50 an hour to put a window in per worker. I shoot for around $110 per window myself.

Now, I don’t recommend doing your own rehabs. But, I can heartily recommend doing some of the work on your first few so that you get a feel for what it takes, and you don’t get ripped off.

For the same work you are doing, here’s how I see the costs assuming a 1200sf house.

bathroom - toilet, tub, sink, floors - $1,200
kitchen - the works + appliances? - $2,500 (I buy scratch and dent appls)
whole hse plumbing - $2k (My best friend is a plumber so your mileage may vary)
electrical - $1,200-1,500
new windows? those are killer. i got the cheapest rehabber windows around: $110 each
new roof - $1,200-1,500
drywall whole house - 500-1,000
Central HVAC - 3k(I agree)
tile, carpeting, = Roughly 1,000 to 1,500 I pay about 7-10 a yard installed
paint = One of the cheapest Upgrades costs me about $1k out and in.
fixtures = Depends on how extensive I go. I usually go about $1k or so

Assuming replacing around 15 windows, we’re looking at $17,700 is my repair estimates on the high side. And I’ll probably add 25% just to cover cost overruns. So, we’re looking at $22k.

Now, granted my rehab experience isn’t as extensive as some of the people here. I recommend you talk to someone like RonMD(Ron Guy), I can bet he doesn’t pay $5k for a roof on a 1200 sf house. If I recall correctly his total rehab top to bottom is about 20-25k.

Now what I did when I had a rehab I contacted over 60 different contractors to bid out the property. Most people contact one or two. They like someone and think that is fair, so they go with them. WRONG. I put a lockbox on the property. I contact everyone I can find, I give them two days to get to the property. I want a faxed bid sheet. List of at least 5 references. Much like we do in buying real estate. You don’t go look at two houses and buy one. I spend at least 20-40 hours determining who to use for my jobs(I only invest this time once). That time is returned to me 10-fold. If you’ve ever had a bad contracting job then you’ll understand. I also will go down to the county courthouse pull the last permits that the contractor has filed from about 90-180 days out, and will track down the owner and call them and ask them about the job that was done. This is an EXCELLENT way of finding out what the contractor is really like.

Hope some of this helps,

Marcos

Sanity Check on 1st rehab - Posted by J.R.

Posted by J.R. on April 08, 2002 at 10:03:23:

I have an opportunity to purchase a distressed home for $40k, the comps reflect sales of 71k-80k. The tax rolls say the home is 921 sq. feet. The home needs a new bathroom, kitchen, plumbing, electrical panel, several new windows, a new roof (still trying to figure out whether I can get away with patching it up), drywall work, cieling fans, tile and carpeting, paint inside and out and either central a/c or wall units.

I have estimated +/- $20k to bring it up to saleable condition plus the acquisition costs, insurance, taxes, etc. I am worried about putting too much $$ into the house.

My questions - does it seem like I am spending too much money on this project (either on the sale price and/or the rehab costs)? Recommendations on central a/c vs. wall units? Where else can I cut corners?

All comments, questions, advice welcome.

Re: Sanity Check on 1st rehab - Posted by limeydale

Posted by limeydale on April 09, 2002 at 01:03:21:

In a word YES!!!40,000+20,000+10,000(aquisition costs)+selling costs+holding costs.71,000-80,000 comps DO THE MATH!!!However,depending on lot prices,location of lot etc…you may be better off scrapping the house and building new.Or flip it to a builder for a small profit.Then you can find a less insane rehab project.

Re: Sanity Check on 1st rehab - Posted by Billy Boy

Posted by Billy Boy on April 08, 2002 at 17:10:26:

Remember a “Golden Rule” of most any business deal. or project: Everything “Costs More” and “Takes Longer” than you originally plan…real life truism.

Re: Sanity Check on 1st rehab - Posted by eric-fl

Posted by eric-fl on April 08, 2002 at 11:05:13:

There are rehabs, and there are REHABS. What you’ve got here sounds more like a construction project. You could have probably made a shorter list by stating what DOESN’T need done, LOL. About all I can think of that’s not on your list is the foundation and exterior walls. I realize you’re at 50% FMV (maybe), but you want to be in the 50-65% FMV range for cosmetic rehabs, vs. structural ones, which it sounds like you’ve got here. Plus, when you say things like “new kitchen and bath”, that leaves a lot of room for interpretation. Are we talking about some dingy cabinets and avocado-green appliances, or are we talking about a room that you think might have been the kitchen, based on a dangling 220 cord in one corner and some pipes in the wall in the other corner where the sink might have been, exposed plywood subfloor where the old linoleum (or was it vinyl) rotted away because there is a large hole in the ceiling where the water leaked in to rot it away. Don’t laugh, I’ve been there. If you think it’s a deal, try to tie it up with a small deposit, and get some real bids and inspections done to be sure of yourself. Keep the inspection period reasonable (around 10 days) so the seller knows you’re not a tire-kicker.

Re: Sanity Check on 1st rehab - Posted by Mark-WV

Posted by Mark-WV on April 08, 2002 at 11:02:23:

J.R.,
Seems like the price is a high. At 70% of arv - 20k rehab costs the most you should pay would be 29700.

Most of you numbers tally out to what I would pay here if hiring out all work. Maybe you should look at the project with the eyes of a buyer in this area instead of what you would want in a new home. The two views might be different.

A reroof does make a good selling point and at 100 per sg it is recoverable in the sale. The bath and kitchen are the main focal points for a buyer, take care of these two rooms and the rest of the house will be overlooked to a point.High cost items such as air are a option and here are not really nessesary to sell the house,but I live in a cool climate so that might not apply where you are.
Mark (WV)

Re: Sanity Check on 1st rehab - Posted by GL(ON)

Posted by GL(ON) on April 08, 2002 at 10:54:06:

You can’t cut corners and do a decent job. If you do save money, by doing the work yourself or hunting up a good deal, you should keep it not give it to the seller .

An experienced rehabber wouldn’t touch that mess.

If this is your first rehab, don’t do it. It needs too much work. It will bankrupt you, kill your spirit and drag you down. Keep looking for a better deal.

Re: Sanity Check on 1st rehab - Posted by rstevens

Posted by rstevens on April 08, 2002 at 10:32:51:

jr:

i’ve done extensive rehabs to two small houses (1000 - 1200 s.f.) and it looks to me you could be in deep on this one. 20k seems a light estimate. maybe you live in a somewhat rural area where labor/materials are cheaper (or maybe youre a handyman doing this all yourself?), but here in atlanta, here’s what you are looking at for serious rehab:

bathroom - toilet, tub, sink, floors - $2k
kitchen - the works + appliances? - $5k
whole hse plumbing - $3k
electrical - $2k
new windows? those are killer. i got the cheapest rehabber windows around: $170/each installed
new roof - at least 5k
drywall whole house - at least 1k
cental HVAC - 3k
tile, carpeting, paint, fixtures… another 5k if you go with professional painters for in/out

in short, be careful. it sounds like you are going for a TOTAL job, which on a small house usually runs 20k - 30k. with a sales price of 40 you might only break even. you want to build a profit into the deal for all your hard work.

again, my experience comes from atlanta, which is a very hot market. you could be talking rehab in south dakota for all i know… and of course, the costs would be nothing like that.
good luck.