How to Accurately Estimate Home Repair Costs (And What to Avoid)
Successful investors know how to quickly calculate home repair costs. It’s just part of the job. Along with the ability to find great investment properties and close deals, this is one of the most important skills learned within the investment industry – especially if you’re a flipper or rehabber. To avoid losing BIG on an investment, you need to be able to assess a property’s damage and approximate the labor and materials needed for the particular project.
Using Professional Estimates
Many investors skip learning how to estimate home repair costs in favor of hiring professionals. With the average repair cost totaling between $50 and $5,000, it makes sense delegating home estimates to experienced professionals, right? Well, it depends. While pros offer their expert eye to determine costs, they often tack on additional costs when dealing with an untrained investor.
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On average, professional estimates can run anywhere between $50 and $150, depending on the property size. Estimates for major renovations can cost even more – (nearly five times as much!) – due to the extra design fee. You may be asked to pay a “trip charge” for a contractor to drive out to the home, or a general diagnostic fee for hidden issues that require additional expertise. With all of the additional expenses, using professional estimates can drain profits and extend your rehab’s total timeframe.
Estimating Home Repair Costs On Your Own
If you’re determined to calculate repair costs without professional help, you need to realize that a proper estimate is more than just the monetary amount to renovate; an accurate estimate includes the scope of the project, the contractors needed for different aspects of the job, the terms of payment, and the cost of labor, materials, and permits. It’s an exact number that helps you – the investor – determine the property’s profitability upon resell.
Want to create an accurate home estimate without professional help? Follow these few steps to get started:
- Figure out the financing before tackling estimates. Having a base monetary allowance before estimating costs allows you to know exactly how much you can spend and where you want to drop the most money.
- Assess the property for damage. Major structural repairs will require hiring specialized contractors, but minor ones will be easier to spot and factor in the home estimate. It’s best to steer clear from properties needing extensive repairs, so you should ALWAYS inspect a potential investment before purchasing.
- Identify any common dangers that may be lurking on the property. Old homes are notorious for their lead-based paint, water damage, and propensity for hidden pests. It’s best to check for any of these classic dangers while making the initial home inspection, and factor them in accordingly.
- Determine the details. These are the small aspects of a home that provide that unique factor. It’s the choice of exterior paint, landscaping, appliances, and general aesthetic. These minute details are typically inexpensive (when compared to major repairs) and can make any cookie-cutter house an original abode.
- Estimate any additional costs. This includes labor, permitting, demolition, and staging, if needed. Additional costs can become unexpected expenses if you don’t plan ahead.
Is Specialized Software Worth It?
There are various online tools and services that evaluate home repair costs for you. While most offer acute accuracy, almost all specialized software comes with a hefty price tag. (Some are even more expensive than a professional estimate!)
A popular option is XactRemodel, an online tool used by insurance companies and builders alike. The program offers an extensive database of construction prices and retail costs for nearly everything. However, unless you’re prepared to pay retail prices on parts and labor, this home estimate tool is useless. It’s also $89/ month.
The GeneralCost Estimator – the less expensive option with a one-time $65 fee – provides standard prices on a city-by-city basis to craft a decent home estimate in your area. This software requires you to put each item into the spreadsheet to calculate reno costs; if you haven’t already fully assessed the property and know exactly what’s needed, this program is useless.
Stay Focused My Friends!