Worried about not knowing your construction budget? Don’t stress. As real estate investors, we wear many hats. Here’s a breakdown of what you need to know to get a good estimate.
Starting with Cosmetic Renovations
First off, reach out to a few reputable local general contractors. They can give you a ballpark figure for a cosmetic remodel, which typically includes flooring, wall paint, a light kitchen renovation, light bathroom updates, and some exterior work. For instance, a general estimate for this in Texas might be $16 to $17 per square foot. But remember, consult your contractor for exact numbers.
Let’s use an easy estimate of $10 per square foot for a cosmetic rehab. If you have a 2,000-square-foot house, a $10 per square foot rate means you’re looking at a $20,000 remodel. This isn’t precise but gives you a starting point.
Consider Additional Costs: Windows and Roofs
Windows
If you need new windows, you’ll want to look at around $300 per 3×5 foot opening. For instance, two windows in a bedroom could cost about $600. Larger windows in living rooms, like a 9×5 foot window, might be about $900. Check your comparable properties (comps); if they have new windows and you want your property to be comparable, you might need new windows too.
Roof
A roof is usually estimated by the square, which equals 100 square feet. For a 2,000 square foot house, you might need roughly 20 squares (don’t forget to add about 20% for overage). If roofers charge $200 per square, that’s about $4,800. Adding a bit more for safety, you could budget around $5,000 to $5,500.
The Big Five in Construction
Make sure you budget for the five major systems in a house: Roof, Foundation, Electrical, Plumbing, and HVAC.
Electrical
Check the type of electric panel. If you see labels such as Federal Pacific or Zinsco, budget for a replacement, which could be around $2,500. Ensure it’s not in an unsafe location like a closet. Moving an electric panel might cost $4,000.
Also, note the wiring type—copper or aluminum. Aluminum wiring could mean adding about $15 per plug and switch for extra safety measures.
Plumbing
Look at the age and condition of the hot water heater. If it’s old, plan to replace it, budgeting about $1,200. Ensure it has a catch pan plumbed to the outside.
Understand the plumbing type. Newer homes might have PVC, while older homes could have cast iron or clay pipes. If you’ve got foundation issues, these might need replacement.
Foundation
If you’ve got some movement in parts of the foundation, budget about $3,000. More extensive issues might need $6,000 or more. Get an estimate for significant foundation problems.
HVAC
To check the HVAC system, use an infrared thermometer. If the air coming out of the registers is 15-20 degrees cooler than the room, it’s likely okay. If not, a new system might cost around $3,500 to $5,000.
Conclusion
In conclusion, estimating your construction budget as a real estate investor requires careful consideration of multiple factors. Start with obtaining quotes for cosmetic renovations from local contractors to get a general idea of costs. Don’t forget to account for additional expenses like windows and roofs, as well as the five major systems: roof, foundation, electrical, plumbing, and HVAC.
By thoroughly evaluating these elements and consulting professionals, you can create a more accurate and comprehensive budget, reducing stress and increasing the likelihood of a successful investment. Remember, a well-planned budget is crucial for managing your investment effectively and ensuring a profitable return.
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