Rehabbing is a big part of a real estate investor’s business. After all, run down properties often offer profit potential. Accurately and quickly estimating rehab costs is an essential tool. In this post I want to go over how to quickly estimate three major rehab components, roofing, HVAC and electrical panel upgrades.
Rehabs Contain Many Components
Every major rehab will contain several major components and many smaller ones. Some of these components can be estimated fairly quickly because there are established, industry wide standards. Moving quickly with a rehab estimate towards making an offer is important because there is often another investor right behind you.
For the purposes of this post, I focus on the basic standards and materials used for single family and smaller multi-family properties on three major components. In future posts, I will add to this component list and bring the components together.
Roofing
Every property needs a solid roof, but weather and time take their toll. A new roof is often one of the more costly components of a rehab budget. Estimating the cost of a new roof is not too difficult however.
The standard measurement to remember that is used in the roofing trade is the square. A square is 100 square feet. The cost to replace a square of roofing with average materials and labor is fairly standard. You can of course get up on a roof and measure the actual square footage of the roof and then divide by 100 to find out the number of squares. But there is an easier way.
A quick rule of thumb for roofing is to budget about $2 for every square foot of interior space on the house. Square footage can usually be looked up quickly on the internet. Thus, if a house is 1,500 square feet, you can budget about $3,000 to replace the roof. Of course there is usually some rotten wood and decking that needs to be replaced. So adding on an extra $500 or so is not a bad idea.
As I said, this is only a quick rule of thumb. Other factors such as pitch (or angle), height, the number of old shingle layers that need to be removed and the amounts of rotten wood can add to the cost. But for a typical single-family family house the formula works fairly well.
HVAC
Most buyers and tenants today want modern conveniences. One of those conveniences is central air conditioning. Budgeting for the addition of a central heating and cooling unit is also fairly straightforward as there is a standard measurement that is used. This measurement is the ton.
A ton of HVAC will usually cool about 600 square feet of space. Each ton costs approximately $1,500 to install. Again, using our 1,500 square foot house as an example, a 3 ton HVAC unit should adequately heat and cool the house. Cost for complete installation, including all ductwork, vents, etc., is around $4,500.
Again, this is a general rule of thumb and connections to electricity and gas or ease of accessibility can affect the cost.
Electric Panel Upgrades
Many older homes were built before modern circuit breaker panels were used. Fuse boxes were the norm and can still be found on many older homes. Today it is often best to upgrade these fuse boxes to modern circuit breaker panels. Modern appliances such as clothes dryers and central cooling demand it.
Upgrading a fuse panel to a circuit breaker panel is not very difficult or time consuming for the trained electrician, but it is a little costly. Expect to pay around $1,500 for a new panel. Keep in mind that the $1,500 applies to each panel. So if you are looking at a duplex property where each unit has its own separate electric meter and panel, budget $3,000 to replace both.
The Big Three
These three items are some of the most common big ticket rehab items that can be fairly easily estimated. Your local market may vary a bit and these prices are not from the folks you see advertised on the billboards all around town. If you see something out of the ordinary or are not sure, get a trusted contractor to take a look.
