How to Accurately Estimate Repair Costs for House Flippers
The biggest mistake you can make as a newbie is underestimating rehab costs. I see it all the time. A new wholesaler sends out a deal, that isn’t a deal at all, because they grossly underestimating the rehab cost.
The truth is, rehab costs have gone up substantially over the past few years. Both labor and material. YouTube videos, books and other reading material about repair costs from a decade ago are way outdated. In many cases. costs have nearly doubled. It’s also important to understand your market. The the cost of labor in California will be a lot higher than in Michigan. There is a correlation between cost of living and labor rates.
Without further ado, let’s jump right in to itemized rehab costs. This is estimated costs for a standard 3 bed 2 bath home with 1,500 square feet of living space.
Itemized Rehab Costs for Flipping Houses
- New Roof – $6,000 – $10,000
- Including soffit and fascia – $3,000
- New Furnace – $4,000 – 5,000
- New A/C – $3,000
- Foundation Repair – $2,000 – $20,000 (best to get professional quote)
- New well – $4,000
- New Septic Tank – $2,000 – 3,000
- New Drain Field – $5,000 – $15,000 (mound system more expensive)
- Install new siding (vinyl / aluminum) – $4,000 – 8,000
- Replace windows – $600 per window or $4,000 – 6,000 for entire house
- Flooring – LVP $3-5/sq ft (may need to add extra for installation and removal of old flooring)
- Flooring – carpet $2-3/sq ft
- Kitchen cabinets – $3,000 – 7,000
- Countertops – $1,200 – $4,000 (hard surface such as granite or quartz much more costly)
- Appliances – $3,000 – 5,000
- Toilet – $500 installed
- Vanity + Sink, faucet and plumbing – $1,000
- Shower + fixtures and plumbing – $3,000
- General Rule of thumb to completely renovate small half bath – $3-4k
- Full bath with shower – $5-7k
- Painting Interior – $2,000 – 3,000
- Painting Exterior – $3,000 – 4,000
- Trash out – $300-500 per dumpster ($1,500 – $4,000 depending on how much junk)
- Electrical & Plumbing: Big range of cost depending on what the house needs
Breaking down repair costs into categories
Here is a general rule of thumb I use for houses less than 2,000 sq. ft. Once you have a little more experience, you will be able quickly determine what category of repairs is needed.
Light rehab (10-15k)
Some flooring, paint, replace some bathroom fixtures, new lighting, some patching, drywall work, minor kitchen improvements.
Moderate rehab (25-30k)
Replace flooring, paint, replace most bathroom fixtures such as tub, toilet, vanity. New lighting, some drywall work, some electric or plumbing work, new kitchen appliances, counter tops, possibly cabinets if it’s a smaller kitchen but this can be a big expense. Exterior paint, landscaping.
Heavy Rehab (40-60k+)
Replace all flooring, paint, new everything in bathrooms, kitchen. New lighting, mostly new electrical and/or plumbing. Drywall repair, patch walls, ceilings. Exterior work such as new siding, decking, landscaping.
Overestimate Rather Than Underestimate
I see it all the time. New wholesalers posting deals on Facebook where they clearly underestimated rehab costs. Why do they do this? Inexperience. They try to force the numbers. If the deal looks skinny, inflate the ARV and reduce repair costs by a tad to make the numbers work. It might look good on paper, but cash buyers will run their own numbers.
If you are unsure about something, add it to your repair budget. For example, if the floors are in decent shape but the style is dated, budget for floors. If the kitchen appliances are in good shape but 15 years old, budget for appliances. Most house flippers aim to deliver a high-end product and will have an extensive rehab budget to get there.
Know Your Market
I would highly recommend finding a local wholesaler, house flipper or contractor to help you estimate repair costs on your first few appointments. Every market is different, and all contractor’s bid jobs differently. Labor rates also vary significantly depending on where you live. For example, the cost of living in California is much higher than Indiana. The labor rates for certain trades might be nearly twice as high in west coast market versus midwest markets.
It’s important to know your market and become familiar with the average costs for each trade. Soon you will become an expert and will be able to determine the cost of repairs on the spot!