This post demonstrates various estimations when analyzing remodel To sell costs. To begin with, using a rule of thumb provides a quick rough estimate. Although the accuracy of this type of estimate is relatively poor compared to having a contractor inspect the property and provide a bid, it is useful when you need to make an offer quickly.

We have employed these estimates for numerous flips. Initially, these costs were derived from the book “FLIP,” which was published in 2007. Since then, inflation has increased costs across all aspects of construction. Assuming an annual inflation rate of 4%, current costs in 2024 have risen roughly 53%. For example, something that cost $100 in 2007 now costs approximately $153.

Furthermore, no two remodel to sell projects are identical. Each project entails different scopes of work and varying levels of completion style. Consequently, the project scopes are categorized into four distinct categories and three style levels.

Make Habitable

• Description: Typically involves only surface-level cosmetic updates like painting, new flooring, updating light fixtures, and minor repairs. Kitchens and bathrooms may only need minor updates like new countertops, cabinet refacing, or new fixtures. Windows, doors, plumbing, and HVAC systems are generally in good working condition. I would not do this renovation level for a home to sell. The simple reason is that homes in the San Francisco Bay Area are expensive and buyers will treat a home with this level of renovation unappealing. This level of renovation would be used for a rental property.
• Suitability: Suitable for homes that are already in decent shape but need a refresh to appeal to buyers or renters. This is the lowest level of investment required, making it ideal for investors building up their rental portfolio.
• Basic: ( $6/sqft ) This level involves minor cosmetic improvements that are inexpensive and quick to complete. Examples include painting walls, replacing outdated fixtures, and making minor repairs.
• Standard: ( $10/sqft )Slightly more extensive than basic, this may involve new flooring, updating kitchen appliances, and improving landscaping.
• Designer: ( $14/sqft )This involves higher-quality materials and finishes, like designer light fixtures, custom paint jobs, and other details that enhance the aesthetic appeal of the home.

Rehab

• Description: Requires more extensive work beyond just cosmetic updates. Kitchens and bathrooms often need remodeling with new cabinets, countertops, appliances, and fixtures. This may involve replacing windows, doors, siding, or other major components. Plumbing and HVAC systems may need some repairs or replacements.
• Suitability: Suitable for homes with more significant wear and tear or outdated components. This level requires a moderate investment for materials and labor.
• Basic: ( $23/sqft ) Basic rehabs involve fixing any major issues that make the home livable and up to code. This might include repairing or replacing the roof, plumbing, and electrical systems.
• Standard: ( $29/sqft ) Standard rehabs address both functional and cosmetic improvements. This can include updating kitchens and bathrooms, installing new flooring, and making structural repairs.
• Designer: ( $35/sqft ) High-end rehabs use premium materials and finishes. This could include custom cabinetry, high-end countertops, and luxury bathroom fixtures.

Remodel

• Description: Involves stripping the property down to the studs and completely rebuilding the interior. This requires replacing all major systems like plumbing, electrical, HVAC, and potentially the roof. It may involve addressing structural issues, foundation problems, or other major repairs.
• Suitability: Suitable for severely distressed properties or homes that have been poorly maintained for decades. This is the highest level of investment required due to the extensive nature of the work, and may be necessary for very old homes that need to be brought up to modern standards.
• Basic: ( $39/sqft ) Basic remodeling involves more significant changes, such as reconfiguring spaces, adding new rooms, or making substantial improvements to existing structures. This level might include updating the kitchen and bathrooms completely.
• Standard: ( $49/sqft ) At this level, remodels might involve major layout changes, installing high-quality finishes, and adding features like new windows or doors to improve the home’s functionality and appearance.
• Designer: ( $58/sqft ) This involves the highest quality materials and extensive redesign. It may include custom built-ins, high-end appliances, and luxury materials throughout.

Restructure

• Description: In some cases, the existing structure may be in such poor condition that it needs to be completely demolished. This involves tearing down the existing home and building an entirely new structure on the lot.
• Suitability: This is the highest level of investment and risk, as it requires purchasing a lot and constructing a new home from the ground up. It may be necessary for homes that are structurally unsound, have major issues like mold or asbestos, or are simply too outdated to renovate cost-effectively.
• Basic: ( $68/sqft ) Basic restructuring involves significant structural changes, such as fixing foundation issues, adding or removing walls, or changing the roofline. These are necessary improvements to ensure the safety and integrity of the home.
• Standard: ( $78/sqft ) Standard restructuring includes major changes to the home’s layout, extensive structural modifications, and significant updates to all major systems (electrical, plumbing, HVAC).
• Designer: ( $88/sqft ) Designer restructuring is the most comprehensive and includes complete overhauls of the home’s design, structure, and systems. This level uses the highest quality materials and finishes to create a fully customized and luxurious home.

Rehab Risk

This component is specifically tied to the complexity of the improvements needed for the project. As the complexity increases, so does the unpredictability of the project.

The book recommends adding an additional 1% of the ESP for every $5 per square foot in construction costs. For instance, if the construction costs are $20 per square foot, you would add 4% of the ESP to the base profit .

• Base Formula: The Rehab Risk Profit is calculated as 1% of the eventual selling price (ESP) for every $5 per square foot in construction costs.
• Assumption: For the purpose of this calculation, we assume the ESP to be $1,000 for simplicity.
• Determine the construction cost per square foot: Each renovation level has a specific cost per square foot.
• Calculate the profit addition: Divide the cost per square foot by $5 and multiply by 1% of the ESP.
• Adjust for ESP: If the actual ESP is different, scale the profit addition accordingly.