Ballpark to Budget: The 4 Stages of Renovation Due Diligence

[Image from Gemini]

Developing the renovation list is a process, not a one-time event. It starts with an initial list and gets refined through additional steps. Here’s the typical sequence we follow:

Initial Estimate

The initial estimate, or “rehab ballpark,” is based on MLS photos and/or an on-site visual evaluation by our team. It reflects renovation items observed at the time of review—no testing or validation has been performed. A sizable miscellaneous cost pad is included to account for unknowns likely discovered later. This estimate provides a high-level renovation cost ballpark to support a go/no-go decision on a property.

Second Estimate

The second estimate is an updated approximation provided after the property manager reviews footage captured by our team and identifies recommended items for both minimal and full renovation scopes. This evaluation is based purely on visual inspection, with no testing conducted, and replaces the initial estimate in the report.

Once your offer is accepted, due diligence begins. During this period, all inspections are performed and a final go/no-go decision is made. You can cancel for any reason during due diligence, and your earnest money will be returned.

There are two primary inspections during due diligence:

• Systems review: A licensed inspector conducts a visual, non-invasive review of readily accessible areas to assess major systems. The inspection focuses on system functionality—not cosmetic issues, tenant preferences, or finish selections. You’ll receive the inspector’s report along with supplemental summary notes from our team. Based on findings, we may recommend additional specialty inspections.
• Cosmetics review: Selena from our team, the property manager, and a renovation company representative conduct the cosmetic review. This review focuses exclusively on cosmetic conditions—system-related items are not included. The goal is to create a comprehensive list of recommended cosmetic items for both minimal and full renovation scopes that align the property with target tenant expectations.

Third Estimate

The renovation company receives comprehensive lists from both the systems review and cosmetic review for pricing. The resulting estimate incorporates items identified in the systems inspection, cosmetic review, and any seller-agreed repairs, as applicable.

Final Estimate

The Fernwood team, property manager, and you meet on Zoom to review the third estimate line by line and finalize the renovation budget. This meeting allows you to ask questions about recommended items, renovation scope, and typical material selections. Final material selections, specifications, and pricing depend on contractor availability and execution.

Note

Licensed inspections are typically conducted at the client’s expense, while our initial rehab ballpark estimates and cosmetic evaluations are provided at no additional cost.