I've been using the BP Rental Calculator to analyze some different deals, but one part of the equation that I always feel as if I'm speculating too heavily on is the ARV and Estimated Repair Costs. I've been examining slightly distressed properties, with the hope of performing a good amount of renovations on the property to get a higher ARV.
However, I'm a college student with little knowledge of the cost of maintenance/repairs on a home. The costs of flooring, roofs, siding, HVAC, etc, are pretty much unknown to me. I know that there are books available on how to accurately estimate this, which I will eventually read when the time is appropriate, but when searching for deals I'm obviously not going to tour each home and do a detailed analysis.
So to summarize, my question is not on how to get a super accurate estimate of ARV/Repair costs, but rather, how to get a good ballpark estimate when I'm only looking at a few pictures and a short description of the property on sites like MLS and Zillow, or when Driving For Dollars.
Thanks in advance!
I'm glad you are leading the spearhead into Passive Income as a college student. I've read about estimating for fixes. One unique way of estimation is to consider one major repair only (Roof or HVAC, which tend to be a high cost when compared to other fixes) that is needed for the property you are looking at. This requires you to do a quick search for brand new (Roof, HVAC.) and get a quote/feel of what is a normal charge for that. Your numbers will be on the conservative side for sure. I also suggest you go to a property to tour/see so you can get in the habit of spotting possible damages. And seeing properties is critical because more repairs needed lead to more negotiations with the seller for a better deal. Remember, repairs are not always a headache. Repairs can increase your cash flow significantly.
If it's a simple 1 or 2 BR property that has been properly maintained I'd pencil in $150/mo.
Bigger, higher-end property, maybe including landscaping - you'll need to do more homework.
Keep in mind that may look like 2 years of $0 expenses, then 6K in one wad
Let me preface this by saying that I haven't done my first flip yet, but I assume this will only get easier for you (and me) as you do more properties and become familiar with the associated costs. If the properties you're looking at are local to you, it may be in your best interest to bring a GC along to help you assess the costs of rehab, when you view the properties.
Thank you all for the useful advice! These are all great ways to get a quick back-of-the-napkin estimate which is just what I was looking for.
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