The Science of Flipping - Estimating Reno Costs

Episode Date: January 27, 2021

Estimating Reno Costs

What's up guys, it's Devin Burr, aka Mr. Burr. I hope everyone is doing amazing. It is Wednesday and I'm feeling good even though I slept wrong last night and I got a little bit of a kink in my neck. So if on this video, if you're watching this and I seem a little stiff, that's why. So I wanted to come to you guys real quick and talk about the renovation portion of the BRRRR method and how you can really gauge what the renovation costs are going to be on a project fairly quickly. And this will actually enable you to look at more properties, look at more deals, and be able to determine if in fact it's a deal relatively quickly. What I'm going to do is actually share a spreadsheet that I use, or I used, because now at this point I can comp things pretty darn quick, figure out what

renovation is going to be pretty quick. But I used this for quite a while to actually gauge what renovations were going to be on a property. So what this is for, again, is so you can gauge renovation fairly quickly, have it be somewhat accurate. This isn't going to be the end all be all, but it's going to give you an idea if a deal is worth looking at further. And then once you have those numbers, you can actually do, basically you can get a property with an inspection period. So if these numbers pan out, you get an inspection period on the property. So it gives you a little bit of time to have you and your general contractor walk the property and get an actual estimate on how much it's going to be to renovate the property. But again, this is just a baseline.

So you guys can get, you know, kind of a feel for how much it's going to be to renovate the property. But again, this is just a baseline. So you guys can get, you know, kind of a feel for how much it's going to be. And you don't waste your time on something that's just not a deal because of how expensive the renovation is. So that being said, if a property is super, super clean, really doesn't need anything, but to be cleaned out professionally, you're gonna be looking at about three to $5,000 in renovation. So that's, again, if a property is just super clean, flawless, almost, it just needs to be, you know, deep cleaned, so to speak, three to five grand. Now next is going to be if you just need a little bit of work, like some new flooring, because the carpets are all worn out. If you need a little bit of paint because

there's scuff marks, things like that. Just a very, very light renovation. With that, you're going to be looking at about $7 to $8 per square foot. So let's just use very simple, a thousand square foot house. You're going to be at about seven to 8,000 bucks. All right. So that'll give you an idea if, you know, seven to eight grand makes sense and it works within the numbers. Awesome. And then after that, you're going to be looking at if it needs flooring paint, maybe some cabinets, things like that, some countertops, that kind of thing. Not a full remodel, but it definitely needs some updating. At that point, you're going to be looking at about $16 per square foot. So again, that same thousand square foot property is going to be about 16,000 bucks. Okay. Now the next is

going to be basically a full remodel. So you're going to be looking at new floors, new cabinets, hardware, appliances, countertops. So for the most part, a full renovation. Now with that, you're going to be looking at about $22 per square foot. So now for that same thousand square foot house, you're looking at about $22,000 in renovation. And then the last one is going to be if it is a full rehab and you've got big ticket items, like maybe a new AC unit, it needs maybe a new roof, you know, things like that. That's going to be the max amount. And you're looking at about $28 per square foot. So a thousand square foot house, about 28,000 bucks in renovation. Now, what I personally do is I add in 5,000 to 10,000 bucks

of, oh crap money. Okay. So let's say, you know, you think it's going to be this amount, but something always ends up coming up usually. So I always just add that in as like a safety net. So that way I'm just not wasting my time on properties that I know could maybe work, but there's probably going to little bit just to be safe. And again, I'm going to share this spreadsheet with you guys so you can use it, get familiar with it. And it's very, very simple. And once you use it a few times, it's very easy to look at a property based on the square footage and based on how much work it needs. You can pretty much get pretty close on the renovation of what it's going to be. But again, I cannot stress this enough, guys. This is not the end-all be-all. It's just a tool to be able to look at a property quickly and see if it's going to be worth looking at more. If it is, you get an inspection period on the property and then you take your general contractor

there and get him to actually bid it out and let you know exactly what it's going to be to do the renovation. So hope this helps guys. Obviously you're going to have the Excel spreadsheet so you can use that. And I mean, renovating a property is the biggest part in my opinion, just because so many things can go wrong. But if you do it right, then you can be very profitable with the Burr Method, get all your money back, sometimes even get more than you have in the deal.

So hope this helps guys. Until next time, peace out.