Real estate can be a great thing. Rental properties can be a great thing. But what is the #1 thing that scares people off? The fear of the unknown? The renovations? Or both?
Truth is, you can’t know everything that will go wrong with a property. Something might appear to be in good shape and then break 2 months later. People that don’t account for potential repairs can often be left with an impossible situation. Those that don’t account enough for potential repairs can lose big.
How do you prevent that thought, and successfully acquire a property at a good deal?
Know the expenses! Here are 23 categories that you need to account for when using a home rehab cost estimator:
General Interior Expenses
General Exterior Expenses
Carpentry should be the most obvious expense to account for when using a home rehab cost estimator.
Carpentry, as with any of these potential rehab costs that you should account for in your home rehab cost estimator, can take either time, or money.
If you don’t have the money to pay a carpenter for a rehab, the alternative is that you do it yourself. If you don’t know how to do it yourself, either find a way to learn, or be prepared to pay.
How much do you pay? Depends on the property, and what’s wrong with it. Carpentry can range from framing walls, to repairing stairs, to marking and measuring everything to ensure it is stable.
The carpenter is one of the more important contractors to pay well, because they are doing some of the more important work. Don’t skimp on your carpenter.
Cabinets oftentimes fall under the carpenter’s jurisdiction, but sometimes you want someone who specializes in cabinets.
If you’re going to invest your money into a room to increase the value of a home, the kitchen is generally a safe bet. And what is the best way to upgrade a kitchen? Cabinets and countertops.
A lot of times, you will find that cabinets are outdated or damaged, and it is an expense you should account for if needed.
Plumbing is often a worrisome expense because it is generally an expensive expense when something goes wrong.
Make sure you talk to a plumber about the price it would cost to fix something when it goes wrong, and then talk to at least 2 other plumbers to see what their price is. This will help give a better idea of the going rate without getting ripped off.
HVAC fits along similar lines as plumbing in terms of a worrisome expenses. Your A/C just went out? $3,000, minimum. It obviously depends on where you live, and how much of the work you do yourself, but expect to cough up at least a couple thousand bucks for HVAC.
Homeowners on average spend between $2,500-$5,000 on electrical upgrades in a remodel.
Whether it is fancier light fixtures, more efficient windows, or even solar panels, electricity has come a long way. But how do you know if “more efficient windows” would be a worthwhile investment?
Estimate how much you would save from those windows, or whatever electric upgrade you want to calculate.
If you save $2 a month for a $1,000 upgrade, it wouldn’t be a good investment at all. However, if you save $15 a month for a $1,000 upgrade, it could certainly be a worthwhile investment depending on how long you are holding for.
You also need to account for things like power, amps, and breakers. You need to ensure everything electrical is in working order, and find guys that won’t rip you off, but also know what they’re doing.
A lot of people screw up flooring during a home renovation, and they generally screw up in 1 of 2 ways:
- Buying too cheap
- Buying too expensive
A lot of people just go after whatever is cheapest, but that is a terrible idea. If flooring costs $500 to replace with a material that to be replaced in 2 years, but the $700 material lasts 5 years, which is a better deal?
A lot of people also do the opposite. They find the fanciest flooring they can find “for property value” or “to be attractive for the tenants”, and it serves to practical purpose. Get good, quality flooring at a good price and be done!
Obviously longevity of a floor also depends on how the tenants treat it, but in general, try to avoid floors like pure hardwood and carpet. Try floors like laminate.
Ask your carpenter of painter who their favorite drywall guy is, because you’re going to need a good one.
How much the sheetrock costs depends on the level of finish that you want to apply.
- Level 2 Finish is a wall that has been taped and mudded, but has not been sanded. Level 2 walls are typically found in garages, utility closets or on walls that are hidden behind wall tile.
- Level 3 Finish is a wall that has been taped, mudded, rough sanded & textured. Level 3 walls are able to be left relatively rough because the texture coating helps hide wall imperfections. For this reason, Level 3 is the least labor intensive and cheapest option and is typically used in rental-grade properties.
- Level 4 Finish is the classic, most common wall finish which receives a smooth sanding and a 2nd layer of joint compound over the joints and seams. Level 4 requires more sanding so it is slightly more expensive than Level 3 Finish.
- Level 5 Finish is the highest possible finish of drywall in which the entire wall receives a mud ‘skimcoat’. Level 5 finish is the most labor intensive and most expensive drywall finish and is typically only found in high-end homes. –FlipperForce
The average cost to install insulation in a 1200 sq ft. house is around $2,000 if you hire someone to do it. Labor is a very large chunk of that, so if you want to cut the price down, find a way to do it yourself.
You carpenter should know about demolition, so you may not need to find someone that specifically demos properties, although you may need a clean-up crew if you don’t want to do it yourself.
According to Home Advisor, average costs of a demo per room is:
|Kitchen Demolition Cost||$500-$3,000|
|Bathroom Demolition Cost||$500-$2,300|
|Basement Demolition Cost||$300-$4,000|
|Bedroom Demolition Price||$500-$1,200|
Also according to Home Advisor, the average cost for a flooring demo would be as follows:
|Vinyl & Linoleum||$0.25-$0.50|
Use these as a very rough estimate, because your costs may differ depending on how much of the work you do yourself, and how much you need done.
Doors fall under a similar jurisdiction as flooring, meaning that people typically spend either too little, or too much.
You don’t want to buy a crappy door that is going to fall apart when you slam it, but you don’t want to spend twice as much as you need to for a gold door that shines brighter than any other door on the street.
Generally, your carpenter should be able to replace the door, just another reason why you should pay for a quality carpenter.
Painting is one of the most common renovations needed, so it is extremely important to know about it. You can paint parts of the property yourself very easily, or hire someone if you don’t have the time.
Expect to need paint every time you buy a new rental property.
Don’t go overboard on appliances, because you will nickel and dime yourself to death. Get quality appliances that you need, and make sure you get them at a good price.
You may need a new washer and dryer, or a new freezer. Be prepared to replace these things when they break. But when they do break, focus on getting a long-lasting appliance that is the best bang for your buck. Looks aren’t as important as practicality.
Vinyls gutter are typically your best bet, because they don’t rust or corrode, they are easy to install, ad they are cheap compared to other materials.
Expect about $5 per square foot of gutter that you need to replace if you use vinyl.
Septic can go into the thousands of dollars depending on how major your repair is, but I wouldn’t expect this to be often at all.
This is just something to keep in mind as a possible expense category when using your home rehab cost estimator.
The deck is another category that is typically overseen by the carpenter, just reinforcing the fact that you CAN’T skimp out on your carpenter. A poorly-made deck is a deck that will need to be replaced sooner, rather than later.
The price of a deck completely depends on what kind of deck you want, what kind of material, and how big you want it to be.
You really shouldn’t add a deck to a rental property, but if there is a rotten deck that needs to be torn out, you may consider putting a better one up.
It is probably better just to pay to take the deck out and deal with having no deck, because new decks cost an average of around $10,000.
The garage is a bright spot for a lot of renters, and can appeal to a certain class of people. Mechanics, car and truck enthusiasts, motorcycle riders, and the list goes on.
If it already has a garage, great. If it doesn’t, don’t build one just for a rental property. But if it has a garage that needs a rehab, be prepared for the expense, because there are all kind of expenses that can come from a garage.
Landscaping is relatively simple, just ensuring that the grass isn’t grown too high, and it looks nice. You don’t need to “stage the property” like you may see on HGTV. Get it looking good, don’t spend too much time on it. Landscaping can be a very cheap expense in your home rehab cost estimator
Roofs are probably the pinnacle of new investors’ fears. This is because a lot of roofs wear out because they aren’t made right.
But once you replace a roof, you may never have to worry about it again. It depends on what your goals are:
Do you want a roof that will last 10-20 years but is cheaper, or a roof that will last 30+ years that is more expensive up-front? If you plan to hold the property, the latter will probably be your best bet.
Asphalt shingles are among the most popular roofing styles, because of the easy installation and cheap material. Asphalt shingled roofs should be expected to last about 20 years before you’ll need a new roof, and will cost you about $8,000 per roofing job.
Metal roofs are also a popular roofing style, but not because of the easy installation and cheap material. A metal roof will cost about double what shingles will, depending on the material. However, they will also last 40-70 years, which is over double what a shingled roof will most likely last.
Concrete is generally not a needed expense, but if a driveway is in very bad shape, it may be in your best interest to get it fixed. A typical driveway job will run you about $1,500, but can also increase the value or the property along with the rents, so it could be worth it depending on your situation.
Concrete is typically not an expense, but it is one to keep in mind.
Exterior paint is typically more expensive, but also more weather-resistant, obviously.
This may need to be done upon purchase or when you prepare to sell the property, because the paint plays a major role in a potential buyer or renter’s decision.
This is something that is very, very rare. This is because if a property has foundational issues, you’d better know what you’re doing, or know someone that does.
To replace a foundation, that’ll run you about $11,000 on average. Not a very enjoyable CapEx expense…
Sometimes, siding breaks. Siding gets knocked off in a storm. It happens, and it needs to be fixed.
Vinyl is the winner in terms of siding, because of the cheap price, ease of installation, and reliability. If you don’t do the labor yourself, expect siding on a 1500 sq ft. house to run you about $5,000.
The bottom line is, you need to look at the property. You need to see what kind of potential expenses there are. This guide pointed out the main ones, but there are all kinds of things to be prepared for. Get connected in your community, and ask someone to come with you to check it out.
23 Categories for Home Repair Cost: Home Rehab Cost Estimator
The information from this article came from Brandon Turner and his book, The Book on Rental Property Investing.
The Book on Rental Property Investing teaches beginner and intermediate investors how to create passive income through buy & hold real estate investing, ranging from the mentality a successful investor holds to buying a deal, to rehabbing, to financing, and delivers a great overall guide on rental property investing.
The book was written by Brandon Turner, author, investor, podcaster, and VP of Growth for BiggerPockets, the largest real estate investing community. Turner has accumulated around 300 rental units since beginning in 2007, and has used his experience to spread knowledge to newer investors through videos, podcasts, books, and forums.