Understanding Gut Rehab Costs
Photo of a gut rehab by Jeremy Levine Designs/Flickr
The price tag of any renovation work comes with two simple rules and a bit of a paradox. Rule Number 1: Costs add up. If you've ever redone a room or even a floor or countertop, you know well how the big things (tile, cabinets, windows…) are just the beginning, and the little things can add a surprising amount to your total bill. Rule Number 2 is a bit more encouraging: There's almost always a cheaper way to do something. Sometimes this involves compromising on the grade of materials, and sometimes it means doing the work yourself. More important, saving money is about thinking creatively, planning well, sticking to a budget and shopping smart. Gut rehab cost follows the same two rules, just on a much larger scale.
How Costs Add Up
Look at one minor aspect of a major project to better appreciate the costs involved for the whole job. Consider bathroom flooring, for example. Say you find a tile you love at a good price. Great. Now add grout, caulk and sealer to give you the rough price of your finished floor, excluding labor. But before you even lay that tile, you have to remove the old flooring (more labor, plus disposal or recycling costs) and possible repairs to the subflooring (very common in bathroom rehabs). Then you need a new layer of cement board, along with mortar, joint tape and fasteners (and more labor, of course). Add up all those costs and tack it onto the price of the finished flooring. This is how a 10'x10' bathroom floor with $2.00-per-square foot tile isn't $200 and change; it could easily be more like $2,000.
Two Views of the Big Picture
In terms of scope, a gut rehab lies somewhere between a major renovation and building a new house. When assessing a property as an investment, some real estate pros and house flippers look at the cost of a new house on the same lot, then subtract what's salvageable from the existing property. They also know well to consider big-ticket items like sewer connections, foundation, electrical and plumbing, roofing and exterior finishes.
If you've been living in the home you're rehabbing, you probably have a sense of what's worth keeping; therefore you might start with a room-by-room approach. In any case, accurate rehab cost estimates must be based on detailed plans for the work to be done. This includes big stuff like new utilities and reconfiguring floor plans as well as detailed specs on appliances, fixtures and finishes (where a lot of those little costs come in).
Help With Estimating Gut Rehab Costs
Considering that often a gut rehab costs 50% to 100% of a home's value before renovation, it's easy to see why most people don't, and shouldn't, go it alone. Hiring an architect or qualified interior designer is a good early step. These pros are creative problem solvers who combine a client's vision, preferences, and budget with the house itself to establish goals and parameters for the project. A designer can also help you determine the rehab costs involved to give you a sense of what's realistic.
A little later in the process, a designer may help you create detailed project specifications, which you can use to obtain accurate bids from contractors. When you hire a remodeling contractor, these project specs can be incorporated into the work contract to eliminate any gray areas regarding the work, materials, methods, and other goods and services you're paying for.
The Energy Question
These days, it's silly to think about a gut rehab without a thoughtful plan for the renovated home's energy performance. In simple economic terms, look at the upfront costs (purchase and installation) vs. the operating costs (how much a more efficient system, material or appliance will save you in the long run). This requires expertise—either from an architect, designer, or builder with special training in home energy performance ... or from an energy consultant, a pro who knows the many options and tradeoffs of energy-efficiency improvements and can crunch the numbers for you. An energy consultant works with your designer and/or contractor to facilitate planning and implementation of energy performance elements, from insulation and air sealing to renewable energy systems.
Philip Schmidt writes for Networx.com.
Updated December 24, 2017.
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