digest
Short Summary
Main recommendation: Estimate rehab costs using three methods: get expert help from contractors (line-item bids), use a square footage multiplier as a rough ballpark, and build a detailed breakdown estimate yourself. The video frames these as a progression from easiest and most newbie-friendly to most advanced, and stresses that accurate rehab numbers are essential before you can know whether a deal is profitable.
Key Points
- The three ways to estimate rehab costs are: (1) Get Expert Help, (2) The Square Footage Estimate, and (3) The Breakdown Method.
- Rehab costs vary by market, so generalized figures must be adjusted to your local area.
- Detail level should match your strategy: wholesalers may use a rough budget, while fix-and-flippers and landlords needing loans need line-item detail.
- Line-item bids from two or three contractors on the same property let you compare pricing apples to apples.
- A good contractor walkthrough can also serve as a negotiation tool with the seller.
Details Worth Noting
Concrete instructions:
- Find contractors by networking with investor-friendly contractors, taking referrals from other investors, and asking the Pro Desk at Lowe's or Home Depot for contractor recommendations.
- When a property is ready for evaluation, get two to three contractors to walk it, each providing a line-item bid that breaks out every task and its price (e.g., paint supplies separate from paint labor).
- Compare the line-item bids side by side and build your own spreadsheet to establish typical cost ranges for that size of home.
- For the square footage method, ask other investors for their rule-of-thumb multiplier or backwards-engineer one from a recent project (cost divided by square footage). Speaker-cited ballparks: about $5/sq ft for a very light rehab, $10 to $15/sq ft for medium-light, and $25/sq ft or more for heavy. Light rehab covers cleanup, carpet, paint, and light refreshes; medium adds counters, light fixtures, bath and kitchen finishes, and one major system like a furnace or electrical panel; heavy adds more major systems such as windows, roof, cabinets, appliances, and flooring.
- For the breakdown method, walk the home with a list of every item and system (fixtures, flooring, outlets, trim, doors, toilets, tile, vents, windows, paint, carpet, ceiling fans), take notes and measurements, then price each item back at the office.
- Pro tip for beginners: pool $50 to $100 each with four to ten investors and pay a contractor roughly $500 for about two hours to walk a property and answer questions.
- Action steps: gather three to six contractors and keep extras in reserve; analyze line-item bids from contractors or other investors; and analyze many properties to build experience.
Additional context:
- The speaker explicitly says the square footage method is not very accurate and is not used as a final number by serious flippers or landlords; it is useful only as a ballpark.
- The speaker says most experienced investors still hire contractors for bids even when they know the breakdown method, keeping it as a backup.
- Rehab costs in cities like Denver, Portland, Oklahoma City, or Tallahassee will differ for the same scope of work.
Bottom Line
Use contractor bids as your most reliable starting point, treat the square footage method as a rough sanity check, and build your breakdown skills over time so you can confidently determine whether a deal works before making an offer.
