New house flippers often underestimate the complexity of the cost estimation process.
Knowing which properties will be good deals in the long run, how much to offer, and how much to invest in renovations is crucial.
Having tools to help you get through this process can be of great benefit.
The great news is, excellent cost estimation tools exist to help house flippers decide which deals are good and which are not.
Renovation Cost Estimators
A renovation cost estimator is a spreadsheet program that acts as an accounting tool and deal analyzer for real estate owners and investors. They can vary in complexity and can be used in different ways, but their primary purpose is to organize, categorize and calculate costs of rehab items.
Once the necessary data is entered into the estimator spreadsheet, a house flipper can use it to help see the cost / benefit of investing in a property.
Items that renovation cost estimators help calculate include:
- Exterior Wall Siding
- Patio Construction
- Fence Construction
- Driveways and Walkways
- Sloped Roofs
- Bathroom items
- Kitchen items
- Floor Coverings
- General Interiors
- Bids/ Allowance
As seen here, the list gets long very fast!
Houses are made up of many, many parts and any one of them could need repair. The kitchen and bathrooms, for example, have many parts to estimate including counter tops, cabinets, flooring, sinks, and outlets. And these are for just 2 rooms in a house, not including the bedrooms, living room, garage, etc.
A good renovation cost estimator should have a pre-made database of these items and many others. Remembering all these items and putting them together into a financial picture is nearly impossible. A good renovation cost estimator spreadsheet can alleviate this burden on the house flipper.
In the end, this saves you time — and time is money!
Why Use a Home Renovation Cost Estimator?
A house flipper can make up his or her own spreadsheet on their laptop, and learn all the coding involved. However, a pre-built renovation cost estimator is immediately ready to use. This cuts down on days or weeks of work just getting a good spreadsheet going.
Good cost estimator spreadsheets include a pre-made database of items, including their names and costs. Some of these items are very detailed, and it’s likely a new investor might not even be aware of them.
Easy-to-use home renovation cost calculators allow house flippers to get project cost estimates done quickly. The best ones are quite easy to use. These can be very useful tools for house flippers and investors who need a quick way to accurately estimate home repair costs.
How to Get a Renovation Cost Estimator?
A house flipper can build one using a spreadsheet program, but this is tedious and time consuming. There are free ones available online and often times, these are enough.
However, paying for a proven renovation cost estimator is often your best bet because you get all the tools you will need in one place. These are not expensive and you can continuously reuse them, so they’re great investments. Just think how much mis-calculating a new roof could cost you!
How to Use a Renovation Cost Estimator?
These programs work similar to spreadsheets with some accounting software features — in fact, most good ones are spreadsheet-based (with custom coded windows, forms and charts) so all you need is Excel or an equivalent spreadsheet program.
Find or add in the item that needs repairing, and enter numbers such as quantity and cost. The estimator should then provide a total estimate for the entire rehab project. Tutorials often come with these programs, or you can find them on the vendor’s website or in the app.
When to Use a Home Renovation Cost Estimator
A house flipper (you) needs to decide whether to use one of these cost estimation programs.
A renovation cost estimator should be used from the very beginning of the house flipping process to decide if the house should be bought in the first place. Start by doing the obvious walk-around of the property, looking at the exterior, roof, landscaping and foundation. If you can get under the house to examine the foundation and floor joists, do so because these are “make or break” fixes. Plug some numbers in and start estimating the exterior rehab costs.
Once you get access to the inside of the house, do a thorough inspection. Make detailed notes of everything you find in every room that may need fixing or replacement. Then generate an interior rehab cost estimation.
Add the two up and include a contingency. Often this is automatically built into the cost estimation tool. Then use these numbers with what you’d be willing to pay for the property to generate a reasonable return when you flip it.
Is a Cost Estimation Tool Absolutely Needed?
The short answer is yes.
A good renovation cost estimator is an essential tool to ensure you don’t start off on the wrong foot by investing in the wrong house to flip.
Estimating house renovation costs early and accurately makes the entire house flipping process easier. Time costs money, and human errors are possible in any endeavor. Anything you can do to properly estimate your investment costs is essential.
A real estate investor will add more risk to a house flip by doing the estimating in his or her head or on the back of a napkin. Having all the data and calculations in one place on a laptop or tablet can save wasted time and money by minimizing human errors.
Good renovation cost estimators include a database of items that is prebuilt for the user. Learning all these items and their costs is difficult or impossible.
Also, the cost estimator can generate reports for investors and lenders. So if you’re working with partners or getting financing, this tool becomes essential.
In a Nutshell
A renovation cost estimator is a tool that estimates repairs and helps analyze house flipping deals. It can make tallying the costs of all the items that need replacing or fixing seamless. It can present items a new real estate flipper may not think of. You should seriously consider getting a proven renovation cost estimator to help with your future real estate deals.
Learn about more about what to look for in a home renovation cost estimator spreadsheet here>
For more info on how much it costs to renovate a house, see this article from Realtor.com