Thursday, October 13, 2016

Lipstick on a House: The Art of the Cosmetic Rehab


When looking at buy-fix-sell (flip) deals, we often hear the term “cosmetic” rehab when being pitched by a wholesaler, agent, or anyone else looking to wash their hands of a property. “Cosmetic this, cosmetic that..”.
"Hey Mr. Wholesaler, I hear you loud and clear, but what do you mean by this? Is this just a way for you to underestimate the amount of repairs needed? How can this 'cosmetic' repair job come out to $30,000!?"

What Cosmetics Really Are

Cosmetics are usually referring to the lower cost, miscellaneous upgrades that a house needs. Kitchen upgrades, bathroom upgrades, flooring, paint, lighting, doors, windows, landscaping and minor demolition can all be focal points on a cosmetic rehab.
What we have to first realize is that everyone has a different idea of what cosmetics should look like in a house. It's similar to dressing yourself. We all have different styles to get the job done. A high end flip house would require entirely different and more expensive material than a low end rental. And a low end rental would be entirely different than a mid level flip. Many people can come up with different numbers (in different areas), and that’s ok. It’s usually good to stay within $4-5k give or take of the original estimate.

Pricing Cosmetics:

A quick visit to your local Home Depot should give you all that you would need to get a rough estimate on cosmetic repairs. (Understand, however, that Home Depot is what some call “The Retail of the Retail”, so you may be able to get some materials cheaper if you decide to go with a more localized home improvement store). When you get there take a look at some of the prices for the standard items you will need. Most prices are region specific, so it is important that you visit a local home improvement store. Below are some prices I have for my area (Dallas/Ft.Worth) that would work well in a mid level flip with an after repair value of $150-250k:

Bathroom

Toilet-$100
Sink vanity- $250-500
Bath Tub- $200
Shower Surround (Tile)- $800

Kitchen

Granite countertop installation- $25-30/sq. ft
Drop in Stainless Steel Stove- $500/ea.
Stainless Steel Dishwasher/Microwave- $200-250
Cabinets (Replace)- $100-150/door
Cabinets (Refinish)- $500-1000 total

Flooring

Average total $2/sf
Carpet (fully installed with old carpet removal)- $1.09/sf
Vinyl Hardwood- $2.19/sf
Engineered Hardwood- $2.50/sf
Wood Floor- $4-6/sf
Resurfacing- $4/sf
12"x12" Porcelain Tile- $2-2.50/sf

Lighting & Paint

Ceiling Fans- $70/ea.
Paint- $1.30/sf
Fencing, Doors, and Windows:
Average fence- $2,500
Front Door- $200-300 (wood doors up to $900)
Interior Doors- $500
French Doors- $350-400
Windows- $250-300
Garage Door (with motor)- $500/car

HVAC

Condensor- $500+ ($1x sq. footage)
Handler- $500+ ($1x sq. footage)
Now, once you know and understand the rough cost of materials in your market, you can go look at a house and have a somewhat accurate understanding of how much cosmetic work this house needs.
Cosmetics are the cheap items, however. You need to make sure you are taking into account the other things, the big things, that can really make or break your project. Stay tuned for my later posts to get the inside scoop on the BIG THINGS.
For more information on investing in real estate and a free list of property, please contact me 

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