Flipping houses is an exciting and lucrative business – if you’re good at getting the right estimates of rehab costs. If you want to be a pro, you need a system. This comes with experience and after some time, it will be easy for you to walk through your fix and flip project and quickly and precisely asses the rehab costs, including labor and materials. Keep in mind, however, that material prices fluctuate over seasons. There are so many variable, steps, choices, and work that goes into a rehab project that you’ll want to make sure you do it right – right from the beginning.
Ready to learn the tips and tricks of the trade that will turn you into a pro? Read on to find out.
Material Costs
After your walk through, make a list of the materials you need and visit your local supply stores to compare prices on paint, tile, flooring, lumber, windows, doors, and more. From here, you can contact local lumber yards or other stores to find competitive prices. Expect to shop at a few different stores. You’ll probably find yourself buying paint from one store and lumber from another. Keep in mind that there’s a difference between working with the big box stores and specialty stores. For one thing, the owners of specialty stores are “specialists” and have the expertise to help you pick the right materials. Not everyone working at big box stores fits into this category.
To save money, talk with a manager about membership benefits and pricing. The more work you do, the more chance you’ll have of negotiating a better price for your materials.
Time is Money
Have you ever replaced a roof or renovated a full size bath? Do you know how long these projects take? If you’ve answered “no” to these questions, take a step back and do some research before you tackle a rehab project. For example, installing a new roof should only take a few days, but there are contractors out there who will tell new investors that it will take two to three weeks. In fact, many projects can be done quickly on a rehab flip. That’s why it’s important to know the exact time it should take for a project – you are paying labor costs after all! – before hiring a contractor.
Base Estimates on Function and Category
Typically, you would think to categorize your expense by project. You’d add up everything needed for the kitchen remodel, the master bath renovation, etc… But this method isn’t the best way to go about a rehab. Instead, list by function and category, like plumbing, flooring, electrical, and windows. Put it into this perspective: you don’t hire a kitchen contractor. You hire a plumber. You’ll hire a carpenter to do your trim work. An electrician to do your electric work.
Once you draw up a Scope of Work using this method, you’ll easily see the flow of the project and what order it needs to be done in. This will help you know whether your contractors are on schedule and what materials to have on hand and ready to go.
Don’t Forget the Finishes
After knocking down walls, ripping out countertops and putting everything back together again, you’re done. But hold on, don’t forget about trim and finishes. All that work you put into your rehab project still needs some added touches. In fact, these extras add value to your property, make it more desirable to buyers, and overall improve the aesthetics of the property. This means that when you’re creating a Scope of Work sheet, you’ll want to include estimates for things like doorknobs, door stops, outlet covers, baseboards, and miniblinds. This is a somewhat expensive part of the rehab process, so it’s important to have it properly estimated for materials and labor in the beginning.
If you’re new to flipping properties, it’s always better to start with a smaller project rather than a gut job. This way, you can ease into learning about calculating the costs of a rehab project and scheduling the contractors you’ll need to help get the job done. Take heart, however, by knowing that the learning curve for flipping properties is steep. It won’t take you long to figure out how to work this system and turn every rehab flip into a profit. Finally, prepare for the unexpected. Every job will hold a surprise for you so be sure to have a contingency budget tucked away.
