buying a foreclosed home, need estimate on general expenses
I am planning on buying a foreclosed home and would like a general idea on what the costs would be to fix one up. Could you guys attempt to give estimates on how much costs would be for things like: repainting all the walls, repairing damaged walls, putting carpet down, getting carpet professionally cleaned, putting in doors, adding in walls, fixing roof, fixing furnace, general water damage repairs, and other similar things? This is my first time so being able to estimate a price that I can throw on top of the cost of the house to make it inhabitable will be tremendous help in picking a house. I really don't need super specifics, just estimates because I have no idea.
Of course bids from local contractors would be the only way to nail the costs down. We also need to consider the possibility of hidden defects that would add to the cost. Just as a general rule of thumb, you are looking at $30 per square foot (SWAG formula).
There is no way to estimate this given the information provided. You don't mention if this is a home you will live in or plan to fix up and sell or rent?? I would be very careful here because the fact that you would even consider asking this without providing square footage, whether it has a basement or not, etc, means that there is no way you'll get even a close to accurate number. There are so many options for materials as well. Even when you do find a home that you want to buy and you go through with a checklist to estimate costs of everything that needs fixing/replacing, you'll end up having to add anywhere from 15-20% to your total for the unexpected things that ALWAYS come up in a reno.
Glenn (above) didn't mention what SWAG formula stands for.....it's "Stuipid Wild Assed Guess"......It gave you a starting point, I guess, but do you really want to make a decision based on that?
You also need to factor in closing costs and carrying fees (if borrowing)..taxes, insurance, utilities, permit fees, appraisal and realtor costs when it's time to sell (if thats what you'll be doing). Make sure you check the comps in your area when you run your numbers too so you don't end up over-improving.
Sounds like you really need to talk with other investors at your local Real Estate Investors Association (REIA) to determine a good starting point for repairs in your area.
You really have to have a good idea of the costs specific to the home you want to buy and what materials/labor costs are in your area to come up with your Maximum Allowable Offer (MAO).
This advice comes from experience as I recently completed a flip on a home I bought at an auction and looked like it hadn't been updated since it was built in 1949! It needed "everything". (This reminds me....be careful on the homes age because if you need asbestos removal, your estimate will be out the window. Lead paint could be a concern as well).
I'm not trying to scare you here, but there are so many Gurus and Home Improvement shows out there that are overglorifying these kinds of projects but sooo many new investors learn the hard way that there is wayyyy more involved that what they tell you so educate yourself before you do this.
Just tracking your spending on all of the little things and sorting out what can be written off as a capital expense vs ordinary repairs when it comes tax time is a job in itself. You may estimate your profit only to find it greatly reduced at tax time due to capital gains tax if your planning to sell this. (You must hold for over a year to go from paying short term vs long term cap gains tx).. Make sure you understand the tax implications for whatever it is your planning for this purchase.
That being said...there is no better feeling than the sense of accomplishment when your reno is complete and you can look back and say..."I did that!"
(darn...after all that, I just noticed the question was from 11/2008! I thought it was a new question! ...Oh well, maybe this will help someone else)!
Between $20 a square foot and $250 per square foot. Depends. :2cents:
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