When I was just getting started as a wholesaler, one of my greatest fears was that I was not going to be able to estimate repair costs accurately for my end buyers. I had no prior rehab experience, and the thought of learning the costs involved in rehabbing an entire house was extremely intimidating to me.
What I soon found out was that rehab estimates can vary greatly from investor to investor, depending on what their exit strategy is.
For example…some buyers prefer to rehab properties from top to bottom and sell to retail buyers, while others will only do the minimal amount of repairs necessary to get the property ready for a renter. The rehab estimate for the rehabber is obviously going to be quite a bit more than what it would be for the landlord.
For this reason, when I am presenting a deal to my end buyers, I do not usually include an exact number for a rehab estimate. Instead, I give them a general idea of the condition that the house is in, and let them come up with their own rehab estimate when they go out to inspect the property. Most seasoned investors prefer to do their own due diligence, anyway, and will not be relying on my numbers to make their final decision.
While it is always a good idea to learn as much as you can about the costs involved in a rehab, just keep in mind that as a wholesaler, it is not an absolute necessity to have every single cost nailed down to the penny.
Photo Credit: juhansonin
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Article Author: Stephani DavisStephani has written 47 articles for us.
Visit Stephani's Website: http://www.flipthiswholesaler.net/
Formerly a bartender, Steph Davis is now a full time wholesaler in Tampa, FL. If you'd like to get an idea of what it's really like out there in the trenches, head on over to her blog: FlipThisWholesaler.net!
Joshua Dorkin
{ 8 comments… read them below or add one }
Great advice, Steph. As you said, any rehabber is going to want to get their own estimates (or at least figure it out themselves), and so as long as you, as a wholesaler, can give enough info to get some interest, what more do you need to do?
Excellent point Steph. The reality is that for the investor, the issue isn’t the estimate. It’s the scope of work. When I am looking at a rehab for rental purposes, the largest any estimate has gotten is 3k. When it is for resale, 20k.
What Steph said, I alway thought it should be. I just take a lot of pictures and videos so the potential buyers can have a fairly good virtual tour, which will tell them more than I can put in numbers.
Great advice Steph! Great timing too. I just walked through a disaster this morning that had me a little intimidated, so this makes me feel a bit better! Keep putting out those great articles and blogs!
Thanks for the advice. I’m slowly learning the real world costs for rehab projects, but the thing about wholesaling is that you can leave all the estimates for your end buyers to figure out while you make money selling them great deals.
Thank you for the article Steph, great stuff!
Question:
Knowing that a buyer will eventually come up with his/her own rehab estimate, how can I factor the numbers from my initial general repair costs estimate when making the first offer to the seller? I just want to avoid making an offer that could have been lower.
You mentioned you do not include an exact number for a rehab estimate, so when you make the first offer to the seller, what kind of numbers did you use and how (for the rehab estimate)? Or do you make an offer without a rehab estimate, wait for the buyer to do his inspection, buyer gives you a counter offer with his rehab estimate included, and then you update the offer to the seller?
Hey Steph,
Great point as usual. I really appreciate you and for what ur doing ;x
could u answer the reader’s post of december 24th, 2009 at 10:46am
name: Michael De La Nuez.
I have my question exeactly along those same lines.
Thanks, Ikem.
Hi Ikem,
After working in the same neighborhoods for awhile and getting to know them really well, I can usually come up with a correct offer amount in about 5 minutes after walking through the property. I don’t use a formula or have any extensive knowledge of repair estimates, I just know what makes a deal a deal to my buyers.
I know that probably doesn’t give you much direction, but that’s how I do it.
Just to give an example, I just wholesaled a duplex to a lady that was in almost move-in condition, it just needed paint and carpet. She bought it for 32k and is looking for more in the same neighborhood. So now I know her price for a duplex in that neighborhood in great condition. If I find one that is in worse condition, I will adjust my price down and go from there…
Not sure if that makes sense…
Steph