This is for people who want to really understand how much contractors charge to rehab and renovate their homes. Why is it so hard to get actual numbers from this secret society? 😑 Well, here they are.
There are a ton of articles that will explain to you what a FHA 203K loan is. In a nutshell, you can get a loan from a mortgage lender to buy a fixer upper and renovate the property.
This loan is perfect for first time homebuyers who want a low down payment, may not have great credit, and want to rapidly build equity, as long as you can tolerate living through a 3-6 month renovation.
Even better, you can use this to buy a multifamily and live in one unit, while renting out the other. House hacking, as they say, is the easiest way to create wealth through real estate.
How much Does it Cost to Repair Based on Your Budget…
First, these numbers are high because this is a $1.1MM house with alot of square footage in the most expensive market in the country that needs a gut renovation. Most people aren’t spending that much on a home so your repair costs should be much lower.
What Stands Out? Redoing the Plumbing, Electrical, Replacing the Roof, Heating System take up most of the budget. Any house that requires this work should be severely discounted.
The Labor costs justs as much as the Materials! Therefore, you can probably save money on either. Just know that you get what you pay for so if you hire cheap labor and buy cheap materials, you may get poor results.
The Process – How Much Will You Spend and Make
They key is to:
- Buy the right property for the right price – get an agent – List price $1.1MM (offering less than that)
- Estimate the repair costs – really not easy – $320,000 max.
- Estimate the after-repair value(ARV) of the property – get an agent for comps – $1.6MM.
- 6 month potential equity = Roughly $300,000 + $2,400 monthly rent from tenant.
Work with a real estate agent to do steps 1 and 3. The hardest, longest and scariest part is step 2. Everyone has a horror story about getting ripped off by a contractor. Fortunately, with an FHA 203K consultant, you’re protected.
You (must) hire this person to watch your back. They coordinate with the subcontractors and the mortgage lender and only pay when the work has been inspected and properly completed.
Detailed Cost to Renovate a 2,700 square ft Home (Kitchen, Floors, Roof, Bathroom…)
Here is an actual example of a beautiful historic (1899) property and scope of work estimate from a 203K consultant for a home (2-unit brownstone) in NYC we’re looking to potentially purchase.
This property needed a TON of work. Kitchen remodel, cabinets, floors, bathroom, roof, sidewalk, plumbing, electrical, permits etc…Lawd! We don’t even know what half these items mean.
And we’re in NYC where the cost of labor is through the roof so if you see numbers from a contractor higher than this on your quote, you’re probably getting ripped off. Use this as a guide, it’s not exact. Here’s an Overview. Detail below.
Detailed Itemization of Repair Costs for the Home
How Much Does it Cost to Replace and Repair the Roof?
How Much Does it Cost to Repair the Front Gate, Steps, and Sidewalk (you’re responsible for that too)?
Detailed Itemization of repairing stairs, walkway, gate
Landscaping Repair Estimates – Optional
How Much Does it Cost to Install Double Hung Windows
Repair Estimates to Replace the Door of the Home
How Much Does it Cost for an Open Floorplan – Tear Down Walls
How Much Does it Cost to Paint the Interior 3 levels of a 2,700 Square ft Home
Detailed Cost to Sand, and Refinish Hardwood Floors
How Much Does it Cost to Replace al of the Floors of the Home?
Replacing and Installing Fixtures
How Much Does it Cost to Upgade and Replace the Electrical throughout the Entire Home?
Cost to Remove and Replace Furnace and Install Water Heating System
How Much to Replace and Install Kitchen Cabinets
Kitchen – Cost to Install Dishwasher, Gas Range, Microwave
Cost To Take Down Walls on Two Floors and Open Up the Floorplan, address Termite Damage
Picture a beautiful 120 yr old brownstone in Brooklyn…now picture the inside. That’s what we’re facing.
Did we move forward? Not yet. Are the numbers high? Yes, those in the know may be laughing to themselves, but the other 99% of you will hopefully have learned something.
Contact us via answering the questions on the homepage if you need a realtor or lender/loan officer. Email hello@blackrealestateagents.com with any questions.
