How to Estimate Your Renovation
Well it's May in Chicago here which means that one day it's late winter and the next it's the middle of the summer as far as the weather is concerned. I'm destined to die of pneumonia one day. We are in the throes of construction on one project and ramping up for two others this summer. All of these projects are investment properties and during the real estate process of purchasing, the inevitable construction question came up:
How much will it cost?
The real answer is "I don't know"; however, we all know that answer is not sufficient because the real meaning of "I don't know" is "I can't commit." The reason I can't commit to a construction cost on a gut rehab is because we don't know what we're really looking at until we open up the walls - and there has been some amazing (used in the correct context here) findings once we can see the interior structure. You'll find out what I'm talking about next spring...I digress. Also, "amazing = expensive" in the construction world. Despite this reality, there is a way to hedge your bets on a site visit for a potential investment property. Here are some items for reference to help give a ballpark estimate of construction costs:
1. Renovation is not Restoration. I renovate century old buildings because I love them. I bring them back to life by making them functional and respecting their original aesthetics. I am NOT restoring. A renovation project includes taking the plaster down, reinforcing the structure, updating the mechanical/electrical/plumbing systems, installing drywall, and installing finishes. A restoration project includes patching plaster, reinforcing the structure, updating the mechanical/electrical/plumbing systems, and re-using existing finishes (e.g. refinishing wood floors, stripping woodwork, hanging original doors). Restoration takes much more time and research. Restoration costs more.
2. MEP is king. I'm just going to say it: In Chicago, to replace MEP systems in a 2,000-3,000SF residential building is $75-85k. So, anything else that you'd like to do needs to be added on to $75-85k. I know the renovation shows have these low numbers for these on-the-spot quotes, I'm happy for them. That's not the deal here. So, look at the systems - go in the basement. Does it look old? You don't even need the exact specs - just look at it, does it look old? Then it probably is old. Do you have radiators? Are they all there - does it look like any are missing? Look at the plumbing pipes - are they copper? If you see anything other than copper, assume it's bad. Even better, just walk in assuming you're replacing MEP and have a pleasant surprise later if that's not the case.
3. Demolition. It's about $6.00 per square foot to remove plaster walls and pull up floors. Demolition is cheapest when they don't have to be careful.
4. Floors. I love old floors - if they are there, by all means try to refinish them. If you are replacing MEP, this might be tricky because you'll be removing plumbing stacks and cutting holes for HVAC vents so you will need to patch it in - many times, these old houses have basketball court size hardwood pieces that's not very thick. This makes it precarious to sand down and difficult to replace pieces. Don't see hardwood floors in a century old home? They're probably under what's currently there - and there is probably a lot of layers under what's currently there. If you have layers and layers of glue and tile to get through in order to get to the original floors, you are moving into Restoration scope (see Item 1). Start increasing your demolition budget by $2-3 per square foot and beyond.
5. Concrete is not charismatic. If you need to do concrete work - as in something needs reinforced concrete posts, the basement needs to be dug out and re-poured - then pause. Concrete labor is expensive because the work is arduous. Calculate up to $15-20 per square foot. Concrete structural posts are more.
6. Code compliant decks. If you are in Chicago and need to rebuild a rear deck to accommodate Chicago code, add on $20-30k.
7. Roofs. Roofs are expensive, assume anyone who says "The roof is only 8 years old!" is lying. Assume you need to rip off the roof, not just re-shingle.
8. Gut rehab. Gut rehabs are easier to estimate than selective renovation. If you're doing a gut rehab, assume around $250 per square foot. This is for basic finishes - obviously, the price goes up if you want more. The price can also be less although you'll be hard-pressed for any GC to admit that without drawings in front of them.
9. Uh oh. You need an "Uh oh" budget contingency. Even after receiving final bids, assume you will spend another 25% once the house has revealed itself in true form after demolition.
It's better to over budget than under budget. Assume everything that can go wrong will go wrong.
Happy hunting!