Repair estimates and surprises

Every dollar figure in this lesson is a made-up example. Every price, fee and offer in real life is per house, built from that house's beds, size, condition and neighborhood; county or market averages are only summaries.

Bottom line first. Repairs are the number new investors miss by the most. The fix is a method: walk the house, price each room and system on its own line, add a contingency (a cushion of extra money for things you cannot see yet), and check the total against a simple dollars-per-square-foot sanity number. Then assume something will still surprise you.

Two ways to estimate, and why you use both

Per square foot. A rough rule says a light cosmetic job costs a certain number of dollars per square foot of living area, a medium job costs more, and a gut job costs the most. It is quick, and good for a first look from photos. But it treats every house the same, and no two houses are the same. A 1,400 square foot ranch with a good roof and bad kitchen is a different job than one with a new kitchen and a failing roof.

Room by room. You list every room and every system (roof, heating and cooling, electrical, plumbing, windows, foundation) and give each a line with a price. It takes longer, but it is tied to what this house actually needs. Use the per-square-foot number as a gut check: if your room-by-room total comes out far below the quick rule, you probably forgot something.

Walk it in the same order every time

1. Outside first. Roof age and condition, gutters, siding or exterior paint, windows, doors, driveway, fences, landscaping, drainage that slopes toward the house.
2. Systems. Furnace and air conditioner age, water heater, the electrical panel, visible plumbing leaks, signs of old wiring.
3. Kitchen and baths. They sell houses and they cost the most per room.
4. Floors, paint, trim, doors. Cheap per item but they add up across a whole house.
5. Basement or crawl space. Water stains, cracks, musty smell.
6. Permits and cleanup. Dumpsters, hauling, permit fees, and any inspections your city requires.

Labor and materials prices differ by town, by season and by contractor, so get at least two written bids for the big items. The prices in this lesson are made up for teaching.

The contingency

A contingency is a percentage added on top of your repair total to cover what you could not see. Walls hide old wiring. Floors hide rot. Many investors add around 10 percent on a house they have walked closely and more on an older house or one they could not fully inspect. There is no single right figure; it depends on how much you do not know about this particular house. Never spend the contingency on upgrades you wish you had planned. It is there for surprises.

The costly surprises

• Roof. A worn roof can leak into the ceilings and insulation below it. Ask how old it is. A roof near the end of its life is a line item, not a hope.
• Foundation. Cracks wider than a hairline, doors that will not close, sloped floors, and gaps at window corners are all signs. Have a structural engineer look before you commit, not after.
• Sewer line. The pipe from the house to the street is buried and old ones fail. A camera inspection of the line is cheap compared to digging up a yard.
• Permits and code. Work done by the last owner without permits may have to be opened up, fixed, or brought up to code. Planned work like a new bathroom or a panel swap may also need permits. Ask the city what applies to this house; do not guess.
• Other classics: old wiring, galvanized or leaking water pipes, mold, and a failed furnace.

Example with real numbers

Back to our made-up 3-bed, 2-bath, 1,400 square foot ranch in Aspen Bend Heights, with a $450,000 example ARV. After walking it, we write the list below. All prices are examples.

Item	How we priced it	Cost
Kitchen	cabinets, counters, appliances, labor	$20,000
Primary bath	full redo	$8,000
Hall bath	refresh	$5,000
Flooring	1,400 sq ft x $4.50	$6,300
Interior paint	1,400 sq ft x $2.50	$3,500
Exterior paint	bid	$6,000
Roof	bid	$12,000
Electrical panel	bid	$3,000
Landscaping	bid	$2,500
Permits and dumpster	estimate	$2,200

Add them: $20,000 + $8,000 + $5,000 = $33,000. Plus $6,300 = $39,300. Plus $3,500 = $42,800. Plus $6,000 = $48,800. Plus $12,000 = $60,800. Plus $3,000 = $63,800. Plus $2,500 = $66,300. Plus $2,200 = $68,500.

Contingency at 10 percent: $68,500 x 0.10 = $6,850. Total repair budget: $68,500 + $6,850 = $75,350. Sanity check per square foot: $75,350 / 1,400 is about $53.82 per square foot. If a quick rule for a medium job in your area gave a very different figure, you would go back and look for what you missed.

Now the surprise. During work, a camera shows the sewer line is cracked, and a bid to replace it comes in at $8,000 (example). The contingency was $6,850, so it is short by $8,000 - $6,850 = $1,150, and nothing is left for the next surprise. That is why careful investors scope the sewer line before they buy, and why they treat the contingency as a floor on risk, not a cushion for fun.

Tips that save money

• Keep a standard scope (the same finishes and layout choices) so your numbers get sharper with each house.
• Repair for the comps you used. If the fixed-up sales have granite-look counters and plain paint, do not price marble.
• Write down your assumptions. When a bid arrives, you can see what changed.
• Time is money. A slow contractor adds holding costs, which the next lesson covers.