What is up? Financial freedom fast, fam. Today is going to be another short, but another valuable one for you, and this could be a little bit different from your market. But what I want to do today is basically give you my idea of how I look at renovation projects and estimate what my renovation is going to cost. And, to be honest with you, I have been so good at just eyeballing things. I barely even write out exactly what I need. I can walk through a place, see exactly what I feel the place is going to need, and it usually ends up being right, which is the crazy, crazy thing.
Speaker 1:
So I wanted to convey this out to you guys and just tell you what I do and this is more of a mindset thing as well, guys, we want to know what our rehab is going to cost. Why do we want to know what our rehab is going to cost? Because we want to know what we should be able to offer on a property. And, honestly, if your rehab is calculated a bit higher than it actually might be, that is good. I like to do that, but if you're overshooting by leaps and bounds, you're never going to be able to make a solid offer to get a property. And well, you might be able to get a solid offer on a property. You might be able to get a property, and if you get it with a huge, huge, high budget that's not actually realistic then you're going to make out really well in that property, but it's probably going to keep you from getting a lot of offers accepted. So what I want you to do is I want you to learn what the average cost of product is. And now it's not like oh, this piece of wood cost 260 per foot. I don't know any of that, guys. I barely even know how to swing a hammer. I don't really know a lot of the crazy things. I can now just look at a floor and see the size of the floor, the length of the floor, and basically say like, oh, that looks like it's like a $4,000 floor, because I have done floors in the past. Right, I've done flooring in different apartments and I see that the floor costs what it costs and it's the same size everywhere. So you can estimate it pretty well. And but it's also really easy Like, home Depot has flooring at $2.50 a square foot. You can find somebody else that will install it for $2.50 a square foot, which is actually a little bit high, but so $5 a square foot all in you have 1,000 square feet It'll cost you $5,000. So you need to learn these numbers so you can calculate what these things are going to be.
Speaker 1:
Now, if you have something like the furnace which is the big thing usually in the basement that heats the entire house I don't even know what the difference really between a furnace and a boiler is. And if you're one of these types of people that doesn't know that, that is okay, because I have bought 22 apartments and I still don't even know what those things are Like. I don't know the difference between a boiler. What does it do? I think it has gas and it boils water and the water lets out steam that's hot and it heats the room. I think that's what it does, but I couldn't be sure and I couldn't really tell you that and you know what. It doesn't matter, but I know what it costs. I know it cost me $5,000 to get a brand new one. I know for me to re-pipe for all that stuff. I've never actually had to do that but it would probably cost right around $8,000 per unit if I wanted to re-pipe for one of those types of units. If it came to that, I would likely switch out and say, no, we're not going to do that type of heat, we're going to switch to electric baseboard and not do that type of heat. But that I haven't had to run into that yet. So what I'm just trying to say is there's things you can know what the costs are going to be because they're the same basically across your entire market. So learn what is the pricing of a new floor.
Speaker 1:
If I wanted to go in and do a new floor Now, especially if you're just doing flips and you're doing the cosmetic stuff you want to learn, like what does it cost to paint a room? Who are the painters in my area? Who's going to do it well and what is it going to cost me? And you want to use the guys that are not not the Taj Mahal guys. If you don't own the Taj Mahal but you also don't want the cheapest guy, because they are going to mess up your stuff and it's going to be more of a problem with you for you.
Speaker 1:
I'm telling you, guys, I have gone through the problem with bad contractors. They make everything a living nightmare. They make you have to do more, especially if it's your own dollars. I know you want to use the guy who's 50% cheaper than the one guy, but there's a reason. The other guy will cost you less stress and let you just go on and actually scale from there because you know you have a good guy that can get good work done. So a good team that's going to do good stuff is great. And then once you learn their pricing on those projects, you'll be even better and easier to go in and estimate what something is going to cost.
Speaker 1:
But right off the bat, if you're doing something without actually knowing what it costs, just go on Home Depot and like what is the price. Or even like go on Facebook Marketplace in your local area. If Google Town your town page and look, hey, I'm looking for a painter for this apartment, it's got 20 walls that are 20 by 10. Let's say that's a big place, but like the number of walls and the size of the walls, like how much would that cost to paint? And a bunch of people will reach out to you and then like you ask for their work and you see what it'll cost.
Speaker 1:
But you can get a cost basis by doing things like that and you can also look at the material costs online so you could look at the cost of a furnace. You could ask an electrician what it would cost to redo the entire electric system in a place, just to wire up a few lights. Do things like that. You want to ask people and learn what that cost basis is and then you'll be able to walk through some type of unrenovated property and basically say, okay, I've got two units, the electric works, all the lights are working, cool. It looks like this furnace is pretty old in both of these, so I'll have to replace two furnaces. I want to repaint and reflore each unit and you know what? We could use some new countertops. So if I wanted to do that, I know countertops are going to cost me about $1,000 a piece. So that's $1,000, $2,000 because there's two units, then the floors in each unit, depending on how big.
Speaker 1:
Let's say it's a 1,500 square foot place and honestly, I don't even know I don't even know square footage what that really looks like. I just know when I walk through a place what it's going to cost about. I could feel it for some reason. But if you just ran with a dollar basis at $4 a square foot to do 1,500 square feet. Let's see what is that $6,000. So you have $6,000.
Speaker 1:
So let's say each apartment was a 1,000 square feet, so you've got two times $4 a square foot. So you have $4,000 for each apartment and then it's $8,000 altogether. Then you've got so $8,000 for the floors, you've got $2,000 for the countertops, and then you've got two old furnaces that you want to replace $5,000 a piece. Just boom number. $5,000 a piece Could be $6,000. So let's run it with $6,000, because we like to go higher than we like to go lower. So now I know it's going to be $12,000 plus what did I say? $12,000 plus $8,000, plus $2,000, which is $22,000. And then we've got one other thing that I wanted to do there, which was paint each apartment, and I know that I could paint each apartment right around $1,000 to $1,500. So I'll go with the higher number, so $3,000. So we were at $22,000, so add $3,000, and now we're at $25,000. That's a rough estimate, guys. That's all in my head.
Speaker 1:
That was a hypothetical situation, but it was literally just like all right, if I had a duplex, where this is, I needed paint, I needed floors, I needed countertops and I needed two new furnaces. That's literally what I would do. I would just say that that's what I do and then that will help me. If the value of it would be $200,000 after that, I would take that times like 70%, right, so that would be $140,000. And then I would take off my construction costs, which is $25,000, but I would also add a little bit to that construction cost, like for contingencies.
Speaker 1:
So probably take it from like $25,000 renovation costs to like $35,000-ish. So I would take that $140,000, and I would take off $35,000. That brings me to $105,000, and then take off some closing costs, maybe right around $195,000. So I could offer $95,000 on that. And that's just like a quick math that you can do all the time, guys. That's why you want to know the cost of things. I kind of just rambled, but I wanted to get that point across and I wanted to show you guys what I do in my head and how I think about things. And that is how, one of the ways, how I reach financial freedom fast, and that's what this podcast is all about. Love you, peace.
