A new colleague of mine here on BP has asked me some questions via PM and I thought it was best to present his questions and my answers in the public forum for all to benefit from. This will also give him and others the opportunity to ask follow-up questions right here.

Question:
I am in the midst of getting my foot in the door. As it stands I stand alone in this world and am working with the very limited resources I have with my day job. I have educated myself on wholesaling strictly through BP and Google as my only mentors as I don't expect anyone to mentor me in a cutthroat industry where duplicating your efforts only breeds competition. What I have done is formed my own LLC and am working on a wide variety of marketing strategies. I have my own 800#, website (being designed), and blog for both building buyers list and marketing sellers. I've studied wholesaling as extensively as possible as well as all of the contracts I will need. So I'm pushing hard for my dreams.

My pricing knowledge on rehabbing costs is pretty non-existant though. Since my capital is very limited I know I will not be able to afford inspections initially for every house I feel might be a deal I was planning on planning on finding a good contractor who might run through the house for say $50 and quote me a price for both rental pricing and flipping pricing.

When I read your thread I noticed your upgrades were pretty fine tuned. You had an eye such as an interior decorator for what you knew would bring in the good profits. What I don't want to do is get a contractor and he quotes me a price on rehabbing with a different eye (you mentioned granite and he might just see regular countertops etc) then the average investor would see. I don't want to lose people on my buyers list because I quote a price that is very different from the price an investor such as yourself would see. Does that make sense? My question is do most contractors have your kind of eye for rehabbing a house because I want an accurate rehab cost to keep my buyers list happy.

Thank you for your time and advice.

Answer:
Building your team is an important aspect to becoming a successful RE investor. As a wholesaler, you stand at a disadvantage for using contractors because you are not keeping the home to give them the work. That being the case, you need to become an expert on analizing the costs yourself.

Here is what I would suggest: Spend many hours at Home Depot and/or Lowes to familiarize yourself with costs on typical rehab items such as flooring (carpet, tile, travertine, etc), toilets, bathroom vanities, sliding mirror doors, interior doors, baseboards, door casings, light fixtures (celing fans, etc) paint costs + paint supplies (tarps, brishes, rollers, etc), windows, sliding glass doors, kitchen cabinets and countertops, sod, trees, plants, bushes, ground cover, etc. Most of the items will also have a tag for installation costs. These costs are typically much higher than you should pay, but having the figures as a high start point will be helpfull to you. Just know you should never pay more than that and should really never pay that much for each item.
I then suggest you look right here on BP for some of us rehab pros who have posted spreadsheets about costs. These spreadsheets give average per sq. ft costs for tile installs, carpet installs, kitchen remodels, etc.
Then you should attend your local RE investment clubs and speak with other rehab investors. Some will give you valuable insight to costs, contractor contacts, etc.
Another option is to find a contractor who could be willing to take you with them to properties they are estimating rehab costs at. Use any and all of this new found knowledge and go practice. Just like anything else, practice makes perfect!
Go to many REO listings and have the listing agent show you the property. Bring your notepad, pen and tape measure.
Walk the home and identify what is in need of repairs. Typically, you will be painting both in and out, replacing flat panel doors with the new 6-panel doors, new carpet, new tile in wet areas, sometimes kitchen remodels, door casings, baseboards, etc.
Using your tape measure, get an approx. sq. ft. number for carpet area, tile area, etc. Count how many doors need replacing, ceiling fans, and closet mirror doors. Once you have an item list of repairs with approx. measurements, go back to your office and calculate costs. Many investors have cost spreadsheets which has all possible repair items on them with average costs. They plug in the areas needing repairs for the subject property and then add it all up.
I have been doing this for so long and so many times, I can walk in to a home and get a rehab budget right there on the spot and in my head because I know the costs. At some point in time after you have done this long enough, you will be able to do it too.

As to granite or no granite, contractors eye or your eye, don't worry so much about that right now. Concentrate on the basics first, then as you advance in your education/experience levels, you can fine tune with the smallest of details.

Inspections - Never pay for an inspection upfront, Here is what I do and what I have taught previous students - Evaluate your expenses on your own and base your offer on that and your analysis of the ARV, make your offer based on that. The second you get an offer accepted, you THEN bring in your contractor to give an actual written bid, hire an inspector and get the report. Only after you are under contract do you spend this money and effort with thrid parties.

As a wholesaler, you have a bit less to do in that you will not be having a contractor come out or hire an inspector. Only if you keep and rehab the home yourself. Give your wholesale buyer an itemized list of repairs you have seen in need of repair for the subject property with your price estimation. A good rehab buyer can then see your itemized list and decide from that if their cost would be higher or lower than your number. Providing this is taking your efforts a step further than most others setting you apart from the wannabies and your investor buyers will appreciate the added service. YOu also need to determine if the investment will be a buy and hold or a flip. What you fix for each will vary. On buy and holds, an investor will spend much less and just usually place the lipstick items, with a flip, they usually want to dial in the home perfect for easy and quick re-sell and at top dollar at exit.

Remember, you are not entering the RE business, you are entering the people business and it requires great service and creating great relationships. You should also build a large database of buyers and get specific criteria for each of them. You also want to verify that they have the capital to close as to not waste either of your time.

If you have any other questions feel free to ask.