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Monday, January 9, 2012

Rehabbing House #8: The Budget

Like I had mentioned in previous posts, House #8 was not only going to require a lot of work but it was going to be more expensive work and more extensive too.

Putting together a detailed budget proved to be a challenge because the repairs were very diverse and because of the size and price range of the property they were also harder for me to estimate.

For example, although I have replaced roofs before and have pricing figures from previous roof work, the roof on this house was huge and steep which adds to the overall difficulty of the job. So while in the past I had roofed houses for $3,000 to $4,000 this one was going to be $6,000+.

The other aspect of estimating this was that this house being a higher price range than what I had done before it needed to be finished nicer than the basic homes I had rehabbed in the past. This meant granite counter tops instead of Formica. High end stainless steel appliances rather than basic black. Lots of crown molding, 8 inch base board instead of 4 and more finish trim overall. The list goes on…

What all this meant was that it took me longer to estimate and put together a budget. I had to bring in the roofer, plumber, electrician, pest control, flooring, carpet and drywall guys. Plus I spent a LOT of time roaming the aisles of Home Depot and shopping for appliances.

BTW, if you ever come across one of those combo units that are microwave and oven be aware they are hard to find and seriously expensive…

So after all that legwork here is the budget I put together:

 First thing I noticed was that at an estimated $44,000 this was my most expensive project to date!

Second thing was that even with this there was still a few items, especially when it came to carpentry and handyman work that could not be quantified very closely. That is because we would not know how much work was needed until we actually started doing the work.

This was mostly due to some water damage from a roof leak. We needed to remove quite a bit of drywall first so we could tell how far the damage went.

But…this is part of the ”excitement” of the rehabbing business. We’ll see… 

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  1. I'm curious, when you put together a budget this big for such a large project. Do you allow room for unexpected stuff or contingencies?

  2. John, good question. Yes I do and I do it in two ways. First, my estimates above I use the highest price possible. Especially when it comes to labor I can get many of these prices for less than what I estimate here but I err on the high side.

    Second I just add a flat fee of 10-20% to the above estimated final price. If I feel comfortable with the estimate and feel my pricing is good and/or is a simple job then I add 10% or less. If I am unsure of many of the costs or it's a complicated rehab then I add 20%.

    Over time I have gotten better at coming in at my estimated number or I have been estimating better...whichever way you want to look at it.


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