How to estimate the cost of a renovation

[Charles Pell]

Hi all,

 

I am about to embark on my first property renovation (yay?!?). So far I have made a few offers, and missed all of them. I have a profit margin I hope to achieve of 15% minimum. In order to hope to meet this target, I imagine it pays to have a pretty accurate idea of what a property might cost. I have made attempts to try and price jobs up based on a variety of sources, but I don’t feel comfortable doing it since I have no idea whether my estimates are too high or too low, and I don’t know even whether some of the jobs I am allowing for need doing, or whether I haven’t accounted for certain jobs that would need doing.

 

I have started to wonder whether I should get a professional to do this side of things, allowing me an insight into how a professional would go about it. So my first question is this; should I ask a professional to do it, or would it be better to jump right in and make my own crude estimate, and learn from the mistakes I will inevitably make. (Part of what puts me off doing it myself is that I could be drastically overestimating the cost of a job and therefore not offering enough for a property).

 

The second question: If I was to go down the route of asking a professional in to make an accurate estimate, what kind of professional should I ask? I have read in a book specifically on property renovation that you can get contractors to do it, or quantity surveyors. I don’t know who to approach basically. 

 

I look forward to reading what anyone has to say :)

 

Charles 

[Alja nosm]

Depends on size of project. But a simple house renovation you should know what you need and how to do it. 

If it's a complex project or new build then a quantity surveyor would be a good idea then you can cross reference it to check it's alright. 

[Martin Evans]

Have you thought of partnering up with somebody for your first flip to see how they’d do it and get some hands on experience and then for your second flip you’d be more confident in your numbers

[Jason Phillips]

What's the reason you don't know whether some of the jobs need doing?

 

Most jobs should be obvious from just looking at the property - plastering, new windows, roof work, new kitchen and so on. I'd recommend accounting for a rewire if the property hasn't been refurbished in a long time.

 

There might be some things that catch you out, unforseen structural issues for example, but with a low level of experience I'd suggest trying to find a property which has a low probability of structural problems to begin with. I'd also avoid repos for sale via an agent too, we got gazumped on one.

 

Don't forget that with any project there will always be an element of unknown (which you must reduce as much as possible) but stick 10% contingency on your refurb cost and be very realistic with your estimates (no point underestimating to make your spreadsheet work then paying the price later).

 

I'd also say that you do have to hunt for a good house deal where the numbers stack up, they don't hit you in the face (or if they do I'd like to learn how), so be patient, be clever and move fast with your property search (only searching Rightmove isn't clever - try auctions, leaflets, agents, banks). >20% ROI is achievable, we are in line to achieve 31% with our 1st flip (FTB offer accepted, sale progressing, fingers and toes crossed). We did all the work ourselves with the exception of some electric works. We also added value with a simple garage conversion. If we took a modest 2k per month salary each out of the deal which we aren't, we would be looking at 20%. We definately have an opportunity to be more clever with our house sourcing strategy too.

 

I'd second the comment about partnering up to make a stronger team. I partnered up with a joiner, he brings trade experience, I bring business management (and now plastering!) experience. We both have a 'can do' attitude, difficult to measure but very important for making things happen in my opinion. 

 

Good luck!

[Flo Butler]

On 8/3/2018 at 11:55 AM, richard brown said:

Hi Charles

 

Rather than writing it all out again long-hand, please see the attached article on Undertaking Works that I wrote for Your Property Network magazine. It contains a couple of ways to estimate works and, as Jason said, most of the big jobs should be quite apparent. This formed part of a mini-series on The Property Investment Lifecycle and if you you (or anyone else) wants a copy, just drop an email to admin@thepropertyvoice.net and ask to receive it (quoting this thread).

 

Short version: builder, quantity surveyor or an experienced person from the trade that I refer to as a 'trusted adviser'. You will get used to scoping out offers alone and then firming them up later. Build more contingency in when you are less certain.

 

Best

Richard

 

RichardBrown_YPN110 Undertaking Works.pdf

Thanks for sharing this PDF, an incredibly useful article! 

A quick question, when you break down the costs of a kitchen and bathroom for example, and then again for a cosmetic/more complex/structural refurb over different sized houses - do these figures include labour or are they based on a DIY approach? The kitchen figure looks like it would be a DIY approach, I know we had quotes for our home kitchen instal of over £3000!

Thanks =)

[Dave D]

Hi Richard, 

@richard brown I read your post above from back in 2018 where you referenced an article you wrote. The link to the PDF is no longer valid. I wondered if you'd mind posting it again please? I would very much like to read it. 

Kind regards