Author Topic: How to Estimate A Remodel/Renovation  (Read 1623 times)

anyandall

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How to Estimate A Remodel/Renovation
« on: March 18, 2015, 11:26:54 PM »
So we're looking to move and I'd much rather find a fixer upper and renovate than find something move-in ready just for both control over personal preferences (style, layout, etc.) and sweat equity. I did this with my current home and it worked out great.

The problem is that when I did the renovation for the current home I partially lucked out and bought at the low (2003) and rode out the boom and did ok even into the recession. I may have put more $ into it than I should have and I want to avoid that a 2nd time around.

Long story short, what's a good rule of thumb when looking for a property to fix up? Half of market value? I would be doing a good part of the remodel on my own but would hire out the electrical, plumbing and some rough work (framing/sheetrocking).

Any advice would be appreciated.

hokiegb

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Re: How to Estimate A Remodel/Renovation
« Reply #1 on: March 19, 2015, 04:52:56 AM »
I looked at a lot of houses recently, and there is a huge amount variation in what people consider "some work necessary." A lot of the houses needed major work (flooring replaced, water damage, electrical updates, etc.) and yet were priced as if all they needed was new paint! So I can't give you a flat rule of thumb on % of market value. You really need to just look at a lot of houses in your area to be able to determine what a fair price is for houses requiring various amounts of work. I will say that I did screen out a bunch of properties by throwing a WAG in at $12.50/sf of livable space and calculating if the house was even worth looking at. In the area I live (SE Virginia) that number should get a mid-level rehab, so if the house was way overpriced after adding the estimated rehab cost in I didn't even bother looking at it.

KungfuRabbit

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Re: How to Estimate A Remodel/Renovation
« Reply #2 on: March 19, 2015, 05:59:27 AM »
We just bought a house on that premise. Just looks at market price for fixer uppers and fully finished. The difference is your budget, though as a mustachian you'll do half of it yourself and bask in te glory of what you saved.

ShoulderThingThatGoesUp

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Re: How to Estimate A Remodel/Renovation
« Reply #3 on: March 19, 2015, 06:03:26 AM »
I'm considering finding a rehab investment. So, I went through all the sales in the area I'm looking at in the past year and characterized each house as A (updated), B (dated but well-kept), C (functional but not nice), D (no interior photos), or F (not livable). Due do the nature of the housing in the area I also split these up by number of attached sides. The clustering on A/B houses made a pretty good-looking line on $/sqft vs sqft, so that makes me pretty confident in what one can get for it. The rule of thumb I've seen is you don't want to spend 70% of your after-repair value on purchase, taxes, and repairs. Download the local cost vs. value for high estimates on the cost of repairs.

anyandall

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Re: How to Estimate A Remodel/Renovation
« Reply #4 on: March 19, 2015, 10:03:05 AM »
Thanks guys. Yeah, the 70% rule seems like it makes sense. I just know I don't want/can't do as much work as I did on this current home. I was in way over my head on this renovation and it took years to actually finish. So hiring out a good chunk of the work will eat into my equity but it's kind of the only way to go at the moment.

Now it comes down to weeding out the "remodels" from the rest of the group.