The Book on Estimating Rehab Costs: The Investor's Guide to Defining Your Renovation Plan, Building Your Budget, and Knowing Exactly How Much It All Costs

by J. Scott

Entirely revised and updated!

How much does it really cost to flip a house?

Learn detailed tips, tricks, and tactics to accurately budget all house flipping projects from expert real estate investor and fix-and-flipper J Scott. Discover the tried-and-tested steps of his professional framework and methodology for precisely estimating product price ranges, special details in all types of homes, and tasks within a scope of work. Determine how to accurately estimate all the costs you are likely to face while flipping a home—and get all of your rehab questions answered in a single place!

Whether you are an experienced home renovation specialist or still trying to learn how to screw in a light bulb, this handbook will be your guide to staying on budget, managing contract pricing, and ensuring a timely profit!

Inside, you will learn how to:
* Decide which upgrade options provide the biggest bang for your buck
* Repair the 150+ most common problems you'll likely encounter
* Expertly interview contractors to get the best possible bids
* See big problems (like mold and termites!) and quickly fix them
* Determine which contractors are best for certain repairs or projects
* Correctly estimate the top 25 major components of a renovation
* and so much more!

You don't need to be a carpenter to flip houses, but you do need to know the fundamentals of budgeting and pricing your renovation from cosmetic renovations to complex installations and upgrades. This book gives you the estimation tools needed to produce the income you desire on your first—or next—flip!

Genres: Business, Finance, Nonfiction, Personal Finance, Personal Development, Money, Buisness

205 pages, Paperback

First published March 22, 2013

About the author

J Scott is a full-time real estate investor and rehabber currently living in the suburbs of Washington, DC. In 2008, J and his wife decided to leave the 80-hour work weeks behind. They quit their corporate jobs, started a family, and decided to try something new: real estate. Nine years later, they've built a successful business buying, rehabbing and reselling single family homes.

J and his wife have rehabbed over 300 of their own houses for millions of dollars in profits. These days, the team has branched out, now flipping houses in different parts of the country and focusing on larger new-construction projects.

Reviews

[Nick E · Rating 5 out of 5]

Bought this thinking it’d be only applicable for real estate ~investing~ but walked away thinking this should be called the “Read this before inspection when buying a house” book. J Scott goes through each facet of a house (which, right then and there you learn so much!), and also covers what typically is wrong / should be identified pre-purchasing a property.

That’s why I feel like this would be great for anyone to read during the inspection of buying a house. You don’t want to micromanage, I get that, but being able to ask “did you check the sheathing? How about the fascia?” feels like it’d only pay dividends later. Versus blindly trusting someone’s going to not cut corners 🤔🤷🏼‍♂️

So yeah! Gonna save this one and re-peruse if / when I ever get into the home buying experience. I recommend others do the same! 🤘🏻

[Mark Manship · Rating 4 out of 5]

A good reference for those looking to learn the framework for rehab costs. Costs are broken down into 20+ major categories with associated (and expected) labor/materials expenses. Definitely one I’ll hang on to as I get more and more familiar; I do wish it had come with some bonus material, i.e. worksheets/checklists/etc

[Kristin · Rating 5 out of 5]

This book is so helpful! It breaks down all the various components to rehab work and explains how the major systems in a house work. A go-to resource in learning how to estimate costs and keep yourself organized about it.

[Ava · Rating 5 out of 5]

Really helpful to get a high level overview of what to look for and estimating ballpark costs .

[Harry Harman]

scope of work (SOW)

breakdown estimation. This is the method I use and what most experienced rehabbers I know use. It involves walking the property and determining line item by line item, in gory detail.

The size of a roof is generally measured in unit called a “square.” A square is 10' × 10', or 100 square feet. As an example, a flat roof that measures 28 feet long by 25 feet wide would be 700 square feet in area, which roofers call 7 squares.

I’ll typically multiply the length of the house by the width of the house and then multiple the result by two to get an approximation of the square footage of a typical roof.

I will typically hire one painting crew to paint both interior and exterior of the house

Concrete is a mixture of cement, sand, gravel, and water

any attached garage should have at least one step up from the garage floor to the house when entering the house. This is because carbon monoxide—a by-product of car exhaust—is heavier than air and will sink to floor level.

In houses that don’t have public sewage hook-ups, such as houses in rural areas or older neighborhoods, waste disposal is handled by a septic system. A septic system takes water and waste from the house, filters out the liquid waste, and stores the solid waste for future removal.

A septic system consists of two main components:
1. Septic tank
2. Leaching field

When the liquid—known as “effluent”—is expelled from the tank, it travels through a pipe to the leaching field.

Septic systems will generally need to be cleaned and emptied every three to five years, and you should budget for this cleaning regardless of when the last cleaning took place

If the toilets or sinks are backed up and not flowing properly, this could be an indication of a failed or full septic tank.

Also, any time you get a recommendation from a structural engineer that you plan to implement, make sure you get the recommendation in writing and with the engineer’s stamp. Not only will this be useful when a building inspector wants to review your plans, but if there is ever an issue with the fix, the engineer will take some or all of the liability, instead of you or your contractors.

Additionally, after a contractor completes work recommended by a structural engineer, I highly recommend paying the engineer to come back, review the work, and sign off on the fact that it was completed to his specifications. This too will reduce any liability you might have should the fix not be sufficient to solve the problem.

The other major component you should be aware of at this point in the plumbing system is the pressure reducing valve (PRV). This mechanical device is used to regulate the pressure in the house, reducing the high pressure of the incoming water to a more comfortable pressure for the fixtures in the house.

Typically, the PRV will keep the water pressure between 30-60 pounds per square inch (psi). If the PRV fails, water pressure will increase above this acceptable threshold and you may hear rattling in your pipes or have issues with your plumbing fixtures. When this happens, your PRV will need to be replaced.

if the property relies on well water, you should include a contingency in your contract that will allow you to get the water tested. Contaminated wells can be one of the costliest issues you ever face

Next, if the property was previously on a well, and either a new well has been dug or the property is now on municipal water, you should bring in an expert to verify that the old well was properly abandoned. This is now a requirement in many jurisdictions, and the cost of properly abandoning a well can run well into the thousands of dollars for deep wells.

you can turn the interior water off at the main water shutoff valve and observe the meter. If water is flowing through the meter when the main shutoff is closed, this is an indication of a leak between the meter and the shutoff valve. In many cases, that leak will be in the main line running from the street to the house.

try to determine the age of the heater. Typically, there is a sticker. In some cases, you can glean the manufacturer year from the serial number. If the water heater is more than eight years old, you should seriously consider replacing it.

A common failure point of water heaters is that the bottom will rust, and water will leak out of the tank. Obviously, large amounts of water leaking from the tank can do major damage to the house, so I recommend taking a thorough look around and under the water heater to rule out any major rust or leaks. If you see rust on or under the heater, I recommend replacing it to reduce your risk of a major leak.

You will want to verify that the size of the water heater is appropriate for the size of the house and the number of bathrooms. If the property has more than one bathroom and you expect more than two people will be living in the property, you should ensure that the water heater is a minimum of 40 to 50 gallons. For three-bathroom properties and above, consider a larger tank of 60 to 80 gallons.

Finally, you should turn on the hot water at one or more fixtures to verify that the water heater is working properly and heating the water.

If you have a house that is more than 80 years old, you should determine if the supply lines are made of cast iron, steel, or lead piping. For cast iron and steel piping, a thorough inspection of condition is recommended; for lead piping, I recommend getting the water tested to ensure that lead isn’t contaminating the water.

I recommend testing every plumbing fixture in the house. This includes faucets, showers, toilets, appliances, and hose bibs. Even if you plan to replace some or all of these fixtures, testing them can reveal leaks, backups, and water pressure issues that you otherwise might not catch until after you’ve finalized your budget.

If you have any concerns about the proper functioning of the drain lines or sewer line, you can close and fill all the sinks and tubs, and then allow them all to drain at the same—flushing the toilets simultaneously. If any of the fixtures drain slowly, or not at all, this can be an indication of clog or backup.

Lastly, you should check for water stains under sinks and discoloration on ceilings, which can be indications of water leaks.

Any time a plumber visits your property, he will charge a minimum fee for his time and expertise. This minimum is generally referred to as a “service fee” or “service call fee.”

if you’re installing a new tub/shower combo, if the existing hardware is very old or if the existing model is not standard, you’ll need to replace both the trim kit and the internal mechanism of the hardware as well (called the “mixer”).

four basic components to a home electrical system:
1. Service and meter
2. Circuit breaker panel or fuse box
3. Rough wiring
4. Finish electrical

For a typical 3-bedroom house with standard appliances, 100-amp service is most common. In larger single-family homes and multi-family properties, 200-amp service is typical. Heat pumps (central electric heating) will generally require their own 100-amp service

a household electrical system brings the main service wires into the house and then distributes that electrical service through the house via smaller lines called circuits.

A fuse box (in older homes) or a circuit breaker panel (in modern homes) is where the main electrical service will be divided into many individual circuits. Circuits will typically range in size from 15 amps to 40 amps, with some larger appliances requiring circuits up to 100 amps in size.

The purpose of a fuse or breaker is to cut the electricity to that circuit if the amount of electricity suddenly exceeds the designated circuit size.

groundfault interrupter (GFI or GFCI) and arc-fault circuit interrupter (AFCI). GFCIs are now required in all new wiring in kitchens and baths, as water poses an increased risk of accidental electrocution. AFCI is required in bedrooms and basements by most building authorities.

Purchase an outlet tester

In some cases, homeowners upgrade to three-pronged outlets, but the ground wire wasn’t added. This can be a safety hazard and will be flagged by your buyer’s inspector and perhaps his lender as well.

The service meter, fuse box, or circuit breaker panel and rough wiring can easily last decades; it is the finish electrical components that are susceptible to the most wear and tear and will deteriorate the fastest.

My recommendation is to ask the cost of replacing a light or fan to gauge the price range of the electrician, and if the electrician is competitive on those prices, you can move onto the more complex task pricing when getting bids on an actual job.

“Manual J Load Calculation.” This is the scientific method for calculating furnace sizes that many HVAC professionals use.

I recommend turning on the heat as soon as you enter the property. Do this even on a hot day in summer.

While the furnace is running, listen for loud or strange noises and notice if there is unusual vibration. Both of these things can be an indication of furnace issues.

Many HVAC companies will quote you a price for the more expensive brands, so always ask, “Do you supply another brand with the same characteristics at a lower price?”

A basic wall consists of three parts:
1. A 2x4 piece of lumber running horizontally along the bottom of the wall. This is called the bottom plate.
2. Two 2x4 pieces of lumber running horizontally along the top of the wall—the top plates.
3. 2x4 pieces of lumber running vertically every 16"—the studs.

The ability for a particular material to insulate is measured using a unit called “R-value.” As an example, if one inch of a particular material had an R-value of three (R-3), six inches of that same material would have an R- value of 18 (R-18). So, if building codes call for an insulation level of R-24 in a certain location, you could use six inches of an insulating material with an R-4 value.

The other aspect of sheetrock inspection that many investors don’t spend enough time investigating is smells. Because sheetrock is porous, it can capture smells like cigarette smoke and animal urine. For sheetrock that has been exposed to these types of odors for long periods of time, it can be very difficult—or even impossible —to remove the smell. I’ve seen plenty of situations where it was more cost effective to tear out and replace sheetrock than to try to cover it up with primer, paint, or some other type of odor-reducing agent.

carpentry tasks:
-Install doors
-Install windows
-Finish trim

A gallon of paint will cover about 400 square feet of wall or ceiling space, which is about the square footage of a 10' × 10' room.

We will typically paint every house that we renovate, whether we think it needs it or not.

Cabinets are one area where having a good network of investors can be very helpful.

Most renovations are going to require at least some flooring replacement, and many will require all flooring to be installed or replaced. Because of this, flooring can end up being one of your largest renovation expenses.

before putting down any flooring material, you’ll want to ensure that the subfloor (the material under the flooring—usually plywood) is in good condition, is uniform in height, and covers the entire area of the floor.

If your house has a strong urine smell, and you suspect it’s in the carpet, pad, or other flooring, consider that not only might you need to replace the flooring, but you might need to replace the subfloor as well. Pet urine will eventually soak through the top layer of flooring and into the subfloor. While an oil-based paint primer on the subfloor may be able to mask the smell, you should consider that there’s a risk that this won’t be enough, and the subfloor may need to be removed and replaced as well. Factor that into your budget.

The most common pad weight is 6-pound pad, with 8-pound pad being a standard upgrade. Higher-density padding can make lower-end carpet feel like upgraded carpet, and pad is considerably cheaper than carpet.

I will provide the carpet and pad myself and allow the installer to provide the tack strips and other installation materials as part of their standard pricing.

For all flooring jobs, to account for waste I would recommend budgeting for 10 percent more material than actually measured.

General Contractor fees are 7 percent-15 percent of renovation costs.

if you were to do a mold test outdoors, you’d find that the mold spore count is pretty high.

mold needs two things: moisture and a food source such as wood, insulation, sheetrock, or cloth.

An air quality test (AQT) can tell you the count and type of mold spores in the air, so you’ll know if the problem has been adequately resolved

Some people believe that if you smell mold, there is a big problem. In reality, many distressed houses haven’t been lived in for long periods of time, and it’s pretty common for these closed up houses to smell musty without there being a major mold issue. In many cases, opening up the windows for a couple days or getting the air conditioning running again with take care of the smell, and an AQT will indicate that there are no remaining mold issues.

the first course of action is going to be to determine the source of moisture and get it remediated. This should be done prior to bringing in a mold remediator, as remediating the mold won’t be a long-term fix if the moisture problem isn’t resolved—the mold will just grow back.

mold remediation of any area larger than ten square feet is not a DIY project

some areas have very strict biohazard rules around disposing of moldy material.

in some states, you will be required to disclose the mold to future buyers; if you had the work done by a reputable contractor, you should also have a warranty that will ease the buyer’s minds and you’ll hopefully find that resale isn’t any more difficult than if the mold were never there.

On any property where I find or suspect mold, I will open up some of the vents and ducts to investigate if there is mold growing in the HVAC system. This is a common health hazard that is often overlooked by investors, but for the couple hundred dollars that it costs to have HVAC ducts cleaned and disinfected, it doesn’t need to be.

Don’t hire a mold remediator who plans to only encapsulate instead of killing and removing the mold—this is a substandard method that many scam remediators like to use.

Depending on which part of the country you invest in, termites may or may not be common problem. In Atlanta, where I typically do my rehabs, termites are a way of life.

While many people are scared of termite-ridden or termite-damaged houses, these types of properties can be a great opportunity for knowledgeable investors, as other investors are often scared away. When it comes to dealing with a termite issue, the process is actually quite simple:
1. Remediate any existing termite damage.
2. Get a reputable pest/termite company to treat and maintain a termite bond.

I’ll randomly poke the tip of the key into any wood trim or siding. If the wood is sound, the key will bounce off with a dull thud; but, if there is termite damage, the key will either leave an indentation or go directly through the wood.

Once your house has been inspected and treated, and the pest control company is satisfied that there is no termite issue with the property, they can supply a letter to this effect that you can provide to your buyer. Many buyers will require that you provide a clean termite letter prior to sale of the property, so even if you don’t suspect you have a termite problem, getting an inspection and termite letter is a good idea.

[Brandon Vicinus · Rating 3 out of 5]

This is a nice handbook to hang onto for anybody who is planning on or actively doing a rehab project. There is really only about 20 pages of regular text before the breakdown of the 25 main components involved in a real estate rehab. Each component has a deep dive into all the possible situations that you may run into. For example, the author will talk about plumbing as a main component. He talks about an overview, different types of plumbing, different types of maintenance, life expectancy, scope of work, estimated price points, and how to determine your price point and hire for the job. I have referenced the book many times for different components, and have yet to not find what I am looking for in the book.

3 star rating because it isn't really a 'reading book' more of a reference guide.

[Ashley McMichael · Rating 4 out of 5]

This book is a helpful guide for anyone new to rehabs. While even the updated version has some typos and grammatical issues, the book itself has a lot of great content for rehabbing houses. I find that the actual costs seem kind of abstract when just thinking about rehabs in theory but it will be a great reference to refer back to.

[Minh Hoang · Rating 5 out of 5]

The other real estate books, I read maybe once or twice then stashed them on my bookshelves. But... this one.. I have it on my table next to my keyboard, and I read it again and again with every deal I'm making.

[J Chad · Rating 3 out of 5]

This book is both extremely helpful and a waste of time. The helpful part is the list and categories of things to evaluate and budget for when planning to rehab a house. The waste is the attempt to give price ranges (in many cases with ranges that literally vary over 100 percent from low to high) with caveats all around. I don’t blame the author for the variability in these prices, but I do blame him for the pretense of conveying these as something he is able to predict for readers in other parts of the country. Every chapter ends with pages of filler regarding various jobs that may occur in that category and then has a helpful paragraph regarding payment (single payment versus scheduled draws, paying for materials up front, etc). This would have been a 4-5 star book with just the list of categories, the explanation of how to evaluate each one, whom to ask for help, and how to approach payment. The excess material only detracted from the book’s utility.

[Ryan Thorpe · Rating 5 out of 5]

This was a helpful book that I read to help oversee my home remodel.

The book provides three things that I found useful: (1) a technical introduction to the trades involved in home construction that can be understood by a layman; (2) a basic breakdown of what drives price in each trade; (3) a series of questions one can ask to 'get a sense' for where a provider falls on pricing (e.g., what do you charge to replace a ten square asphalt shingle roof) as well as an intuition for when a contractor should be able to quote a price with or without visiting a house.

The author actually provides granular price ranges, but they are irrelevant for the New York market so I found them not so much helpful as depressing.

The author also writes for a reader that is trying to remodel a home to sell it or perhaps rent it out. That is not my objective, but I did find this to be the best written introduction to the subject, even if its aims were not aligned perfectly with my own.

Five stars!

[Mandy Wultsch · Rating 5 out of 5]

Good book for learning not just the costs of rehab projects, but what goes into rehab projects and what to expect during a rehab project. Split into chapters based on kind of work (for example, plumbing or foundation), it discusses the work that can be expected, lists the scope of work, and then estimates the range of costs for that area of the rehab project, with real world advice. Of course, with 2021 and the crazy rise of construction material costs, some of the costs are a little low, but still form a good foundation for making estimations.

[Matthew Mehring · Rating 5 out of 5]

This book was extremely informative. I think it would be well worth it for any propective real estate investor or home buyer to read this one. I would caution that the price ranges are likely on the low side given inflation - for example, I replaced my heat pump last year and even using an independent contractor and shopping around a bit, that ran well over the $2000-$3000 range set out in the book.

But the specifics are NOT the valuable part of the book - its J's framework for estimating the cost of a project that makes this a worthwhile read.

[Alex McPhee · Rating 3 out of 5]

There is certainly some very valuable information in here but it’s a bit outdated and maybe not very applicable in the Portland RE market. Written in 2019, a lot of the estimated costs are a bit out of date post Covid + inflation. You can also expect to see much higher costs in more expensive markets like Portland. But overall still a worthwhile read to understand what to look for when you walk through properties. I would recommend this to anyone starting out as a home inspector or looking to buy their first flip/rehab.

[Nick Slattery · Rating 4 out of 5]

This would be boring if you aren’t in my industry but if you are this has very good information on how to spot potential issues early, builder/ contractor hierarchy, and how to hire the correct people for jobs. The information is kind of basic and you may need to Google pictures to reinforce the information. I recommend it to agents and aspiring investors.

The author did a great job of explaining information that you can’t really learn from a book alone without practical experience.

[Leon · Rating 4 out of 5]

Easy read for the less knowledgeable

This is a really good book for anyone who doesn't really know anything about construction. It helped me realize how much I already knew and reinforced my confidence. I really like the last section, primarily because that is what I really needed. Costs are the one thing I do struggle with in terms of rehabs, but SOW comes easier.

Thanks for the hard work!

[My sue chau · Rating 1 out of 5]

Don’t think you will be able to estimate rehab after reading this

Not what I expected. Thought I would be able to guesstimate rehab cost after reading this book. The book is basically telling that you would need to call contractors in your area for since the numbers given are so broad. Got nothing out this.

[Eli Kallison · Rating 4 out of 5]

Excellent source of information about the structures that we spend most of our lives inside of. Even if you're not an investor it's good to know the major components of a house, and what it takes to fix them (or appreciate them). Minus 1 star for the abundant typos, low-quality printing, and excessive disclaimers about lack of reliability on estimating prices.

[Riley Smith · Rating 3 out of 5]

The book has lots of great information on every aspect of rehabbing a house. It goes into many specific and helps you figure pricing for many of the projects. It is a hard book to go through because it is the finance side of real estate instead of investing. Both are important aspects of real estate tho.

[E Alves · Rating 4 out of 5]

Good book for rookie investor. Not in the top 3 that I would recommend for someone just starting out, but worth a quick read. It’d be better as a point of reference. If any book needed pictures, it was this one. Lost one star for lacking pictures.

[Josh Bastian · Rating 4 out of 5]

This book is a wealth of information that can form a rehab template to use when walking through a potential investment property. That being said, it's a dry read by nature. You're better off using it as a reference when you need it than you are reading it cover to cover.

[Bill Davis · Rating 3 out of 5]

Good overview

The struggle with a book like this is the costs section which is the most valuable is not accurate for long. So it’s a good place to start but it’s a difficult subject to have any sorta of evergreen content.

[Dayton Outar · Rating 5 out of 5]

Comprehensive yet Quick and Easy Read

This book offers those that seek to begin a career in rehabilitation of buildings a really good start and a lay of the land that will give them the confidence to start fixing and flipping houses.

[Gio · Rating 5 out of 5]

I struggle with narrow scope as I am a specialty tradesman. This gives a digestible breakdown of all the different line items you’d need to undertake for a small to moderately sized rehab. It’s nice to see actionable tips segmented in a way that makes sense

[Fred · Rating 2 out of 5]

This book is a good reference on the different components of the rehab. The guidelines will help you with the process and give you a general understanding of what needs to be done to rehab a house.

[Eric · Rating 3 out of 5]

Good introduction book to rehab costs, dont think there are many books like this out there.

[Jacob Thorp · Rating 4 out of 5]

Greatly detailed and practical advice

[Steve · Rating 4 out of 5]

Good info, worth having as a reviewable handbook

[Tiarra · Rating 5 out of 5]

This is def a good resource to have if you plan on renovating a home. It put a lot of things in perspective for me and gave me a good solid foundation to start on.

[Timeo Williams · Rating 4 out of 5]

Excellent, info-packed book filled w/ great resources and tips to excel in out of state real estate investing.

[Sonny · Rating 5 out of 5]

Will have to see how useful it is when I get to put the concepts to practice.