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drawings if they differ on average from the houses on your open house tour
to increase the accuracy of your estimates. Remember, the goal of this
exercise is not to get exact costs of doing a rehab; it is for you to learn
how to walk into a particular property and get a feel for what it might cost
to do that rehab.
Next,
let's go shopping! If you plan on being a rehabber, plan on shopping. In
Chicago we have many choices - Home Depot®, Lowes®, Menards®, Ace® and lots
of independent home improvement centers. Go to a store close to an area that
you want to rehab in and start tracking costs, one room at a time, for each
item you are buying (with your mind only) and at the level of “bling bling”
needed for your rehab area. Buy flooring that would be right for your area
for each of the different rooms and make note of that. Then look at what a
door or an average size window for the property might cost, and add those to
your list under miscellaneous. You are getting used to “buying with your
mind.” This will help you as you walk through a possible rehab. You are
developing your ability to have a vision for a property.
By the
end of your “mental shopping spree,” you will have a total amount for each
room in your drawing and you will have lost your mind from spending five
hours in your local home improvement store and a ton on your next rehab! You
will begin to have a feeling about what a bathroom, kitchen and other rooms
in the next rehab candidate will cost to bring it up to neighborhood
standards.
I
suggest going “mental shopping” several times to add additional items, as
well as using the same drawings with different levels of “bling bling”. This
will allow you to be able to price a kitchen with high-end cabinets and
appliances, middle of the road, or low-end and improve your ability to walk
in to a property and have a good idea of costs.
Contractors and builders will often use software to estimate jobs. They are
usually geared towards new construction. Most will give averages or ranges,
sometimes based by area of the country for some of the products we
discussed. QuickBooks Pro® allows you to use certain estimation software and
import it into QuickBooks Pro® for job costing. Even software will have
variances that contractors must stick to if they gave you an actual job
cost. If they have been in business for a long time, they also make
adjustments based on their well-developed feelings and relationships with
their suppliers.
Use
your own personal estimates and safely add 30 percent for labor to compare
with contractors and subcontractors as a way to know if you are getting a
fair price for proposed work. Have them separate labor from product costs.
If there is a big difference, have them justify it. If they can't, move on
to the next contractor. Continue to practice developing the “feeling” for
estimating and you will also see your estimates get closer to those of
professional contractors.
Don't
think that the way to cut costs is to get the cheapest labor or “squeeze”
every last dime out of your sub- contractors. Cut costs by becoming a good
shopper. Always allow contractors to make fair labor costs for jobs and the
quality of their work or your reputation is likely to suffer. Most
important, next to the quality of workmanship, is your ability to build a
quality team. Without it, rehabbing isn't going to be so much fun. With it,
you will be able to breathe new life into what many others have tossed
aside.
*********************************************************************************************************
Scott
Rubin is an active investor and founder of 5 Star Property Solutions, Inc.
and 5 Star Reconstruction, Inc. For more information, he can be reached at
847-579-4830 or visit him on the web at www.a5starProperty.com. |
