RESEARCH MATERIAL AND LABOR COSTS With the scope of the rehab project defined, gather accurate information about material and
labor costs. Doing so will allow you to create a realistic budget that aligns with your financial goals to deliver your profit for the investment. Start by researching local suppliers and vendors to get an idea of the cost of materials needed for the project. Obtain multiple quotes to ensure you get the best prices without compromising quality. Also, contact your area’s contractors or professionals to understand the average labor costs of similar rehab projects. If you have the knowledge and skill to do the work yourself, it can save you money. But remember, lenders will require true market cost; this means materials and labor. When choosing the DIY route, you must create a budget that outlines the costs associated with hiring a contractor for the labor. Doing so ensures your lender gets a realistic view of the costs of your project. That means your budget—the road map for the draws you will receive from your loan throughout the project—will be accurately managed during the entire process. CREATE A COMPREHENSIVE LIST OF NECESSARY REPAIRS AND UPGRADES Compiling a comprehensive list of all the necessary repairs and upgrades is crucial to creating a line-item rehab budget. This list will be the foundation for estimating costs, managing expenses, and drawing with the lender throughout the project. Categorize the repairs and upgrades into different sections, including interior, exterior, plumbing, electrical, and landscaping. Be as specific as possible when describing each item. For example,
instead of simply “flooring,” specify the cost breakdown by the number of rooms and each room so you do not have to wait until all flooring is complete before receiving a draw. Never forget, the more detail you provide, the cleaner the draw process. That means that as you progress through your project and complete construction
or renovation costs. However, you can create accurate estimates with thorough research and professional input. Refer to the quotes you obtained from suppliers and contractors earlier in the process. Break down the costs for each item, including materials, labor, and any additional fees or permits required. For accuracy, labor must be broken down by line items, and the budget should show the material and labor for each. It’s best to overestimate the costs slightly to account for unexpected price fluctuations or changes in the scope of work. FACTOR IN ADDITIONAL EXPENSES In addition to the costs associated with repairs and upgrades, it’s essential
milestones, you can access funds based on the budget you created.
ESTIMATE COSTS FOR EACH ITEM ON THE REHAB LIST Once you have a detailed list of repairs and upgrades, it’s time to estimate the costs for each item. This can be challenging, especially if you need to become more familiar with construction
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