After an appointment has been made to get a contract signed with a seller and you begin viewing the property general rule of thumb for determining your sell price is 65-70% ARV minus repairs.
What is the best practice for determining the amount of repairs that need to be made on the spot? I have heard a $5-$15 per sqft where $5 is just paint and carpet and $15 is a gut job.
Are you going to be wholesaling to a flip investor or buy and hold investor?
Both those numbers seem very low for a flip. If I am flipping a 1,000 sq. ft. I am AT LEAST doing flooring, paint, finish plumbing, finish electric, door knobs, kitchen hardware, appliances, landscaping, final cleaning and those items will add up to around $10k or so. Now I am yet to find a deal where I only need to do these items.
And if it's a gut rehab and I have one of those going on right now, then the number is a lot higher. And once you gut the house, there is almost always you find some more issues to deal with.
Now if you are wholesaling to a buy and hold investor, then those numbers will be a lot less.
Either buyer is fine in my book. I don't necessarily have the experience to disagree with you here however this game is very dynamic. I am assuming you are speaking to the fact that you can look at each item within the house and say "yeah that's going to cost me this much" I, like most new wholesalers have no idea where to even start when it comes to estimating repairs. Is there no general rule of thumb besides knowing the repair costs of flooring, paint, finish plumbing, finish electric, door knobs, kitchen hardware, appliances, landscaping, and final cleaning in your area of operation?
For this scenario lets assume I am selling to fix and flip
As an example of what I was speaking to:
Say you have this house-
If you walk in and everything is functional and all you need is some new paint, new floors, and maybe some minor repairs utilizing the theory I listed above the rehab job would cost an estimated: $10,045.00
Now if the place was trashed and needed to be gutted, it would look more like: $30,135.00
Am I in the ballpark here or way off. I'm curious as to what every other wholesaler is doing to determine these values. I.E. calling folks, just say "hmm, well that doesn't look right" and guessing, bringing out the buyer then renegotiating price with seller if need be? There has to be a formula or some true fire method as to provide at least 80% accurate repair costs to potential buyers.
There are some major cost differences between doing a rental rehab vs retail flip rehab. For example, I am looking at a deal right now which will cost around $35,000 for a rental rehab, but for a retail flip, it will cost $50,000 and ARV will be different in both cases also.
These are some of main things you need to look for:
I can only tell you what I did when I got started. I would call 3 contractors and get detailed bids from them and compare the three. You want the house move in ready with everything functioning properly and looking clean, so build your scope of work around that.
$30k sounds low for a gut rehab. Almost every single time you find something behind the wall that you didn't anticipate in your original budget.
Awesome! I appreciate the feedback. So based off of your feedback and some side research this is the plan of attack. Please correct me if it is to lofty or excessive:
I am going to walk through and dissect my own property piece by piece, annotating every item that could and/or should be replaced/fixed. From there I will contact local contractors and determine expected costs for the repair or replacement of each item as well as the most it could cost. Any item that requires dynamic value i.e. flooring, siding, roofing, paint etc... will be broken down based on price per unit of measurement.
This way when I am walking through an unfamiliar house I can say "hmm carpets need to be replaced... their house is 1,000 sqft, half of which is carpeted. I know carpet in my area runs $3.50 per sqft including labor so that would run $1,750.00 for the property. All of this will be annotated on an excel sheet or something that I bring with me of course as a newbie, it would be incredibly time consuming to try and memorize all of the replaceable items in a property as well as what price each item runs for.
That will be a good way to get started and learn about the pricing.
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