How to Improve Your Ability to Estimate Repairs in Your Real Estate Renovation Projects
What was your way of becoming good with repair estimates?
As an investor, if you don’t know already, the most important numbers are your current or after repair value, and your cost to get the property to top potential value.
To arrive at either the after repair value or the current market value, you need to understand how to equate repair costs.
Although, there is much depth to understanding full construction costs, there are common repairs versus not as common repairs.
You’ll at least want to know how to equate the most common repair needs.
Then, when you run into something more extensive, you can seek help and then learn from that experience.
Today, we will share a few techniques and resources that will help you become more proficient at estimating repair costs.
Let’s get started.
To start, you need to understand how a home operates.
Major components are the most important because they can cause extreme repairs and cost the most. These components are essential and are expected to be maintained although they don’t add value.
- Foundation (including structural components), plumbing (including well and septic), electrical, HVAC and the roof, are the essentials. Replacing any of these will usually cost you over $7,000.
- To gain understanding of how these essential items may need replacement or repair, you can learn a lot from inspectors.
- Here on our YouTube channel under Real Estate: Estimating Repairs playlist, you can watch several educational videos to help.
- Start with the inspection videos. See several other playlists for help with many other topics as well.
Once you get a good overview of how the components of a house work together, you can start learning the costs of repairing those items when necessary.
It is vital that you know when repairs are extensive and when they are minor.
Your awareness of potential costs related to a property’s current condition is what you’ll be striving for.
Let’s review the next your next steps.
Your next step in gaining understanding of costs, is to identify when a repair is needed and begin associating costs to that need.
Now that you can identify major components and their possible needs, you can now begin learning about the next layer.
The next layer of components are primarily insulation, framing (including subflooring), drywall, flooring, paint and then kitchen and bathroom components.
- Kitchen and bathroom components are equally as important because the cost could be close to, if not more, than all else mentioned besides the essentials under the Repairs 101 section.
However, you’ll want to learn things one at a time. So, we’ll come back to kitchen and bathroom components last.
Learning by doing is the best teacher.
So, walking a property and having a contractor provide a scope of work that includes labor and material costs is very helpful. Try to do this either with a partner’s project or for your own. This practice will help you immensely gain understanding of costs.
For my first project, the project’s evaluation (or scope of work) was extremely helpful in me gaining knowledge of repair estimates.
Once you’ve had a chance to review a scope of work and get familiar with labor and material costs, you’ll be prepared to begin your own practice inspections by walking properties to assess the level of repairs needed.
When walking the properties, you’ll need a checklist to document call outs.
When you first start, you won’t be able to quickly estimate costs. What allows you to gain enough experience to estimate repair costs accurately in just 10-15 minutes of walking a property, is experience.
- Use this Property Analysis Walk Thru checklist, to help you document needs and notate concerns. See several more free resources on our Free Resources page.
A key concept to keep in mind while walking properties are units of measure.
- Total Square footage
- Linear footage of cabinets, countertops, floor trim, gutters and tile needed for shower walls or backsplashes.
- Amount of windows, doors, light fixtures (interior and exterior) and outlets or switches.
There are many numbers that you’ll want to retain. Either write them down or create visual snapshots of what you see so you can create approximate costs later.
In the next portion of your tasks, you’ll want to capture all necessary detail so your estimations are accurate.
This is where you’ll want to be aware of the cost of your kitchen and bathroom components and grade level finishes throughout the project.
- Cabinet grade, countertop type/grade, flooring grade, tile grade, paint grade and light fixture grade, all matter.
Knowing the grades of what you’ll use are essential in this next phase of estimating. Each product of choice, in addition to the unit of measure needed, play a significant role in total cost.
Within this portion of the estimating, you’ll also want to consider contingency costs also.
Contingency could easily be associated by age of property and what you observe during your walk. There is usually a surprise, whether big or small within a project. Become as good as you can with detecting possible surprises and apply into your contingency costs.
After reaching this point of your learning curve, you are now prepared to begin full project cost estimations.
- Separating the labor from the materials is an important aspect of understanding total repair costs.
Yes – you will need understanding of the time necessary to complete the labor. So, you will need to ask questions. When you evaluated the scope of work from the Experience in the Field section, you should have grasped perspective on time needed to complete tasks. For what you don’t know ask, and after-all remember, we are estimating and becoming better and better.
You will learn by doing. So, don’t be too hard on yourself or expect to be too proficient too soon.
- Use this Construction Investment Calculator tool to help you capture costs during your analysis. This tool along with several others that cater to investing are located in our Shop.
- Don’t forget to use our Free Resources page where some tools are free.
Although this is a start to your journey, they key to success is practice.
Don’t give up, ask questions, establish effective tools and stay the course.
Thanks for joining us today faithful readers – future leaders.
Love ya and continue to strive for growth.
Please comment your success tips for practices that help you gain understanding of estimating repair costs.
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