I am a new wholesaler that began Driving for Dollar this past week and had good success getting leads. Im not calling these leads because I dont know how to estimate rehab costs. I am reading J scotts book but I need local costs of my area so i can start calling and negotiating on a price with sellers.
At a meetup last week I met a local flipper that was super cool and found out he is a cash buyer. He gave me his card and even bought my beer! I really think I can benefit him since he is #1 on my cash buyer list but is it too much to ask for a rundown on contractors and avg rehab costs in the area? What is the nest way to go about this?
@Cody Evans nice work, the way I learned was with the contractors, try to call them and meet him in one of the properties, if you can not get access just try to estimate from outside and you will get a better estimate when you get the house under contract and you will do the inspections,
1. The best way to learn is to take notes so make sure that you are actually learning/studying instead of just reading the book.
2. To get local costs, you'd need to talk to local contractors. The only way that'll happen regularly is if you compensate them for their time when doing walkthroughs once you have a property under contract. Probably in the realm of $100 for an hour of their time. Do this about 2 or 3 times to give yourself a baseline of the rough costs of repairs if you cannot figure them out on your own.
3. It's really hard to get "average rehab costs" in the area as every contractor will charge a different price, different people will choose different finishes and designs, and pretty much no two properties are the same. Most people will just say to use the average cost per square foot as a way to estimate rehabs, and this may be good enough of for you.
4. If I were you, I'd use the J Scott book as a primer and take a few stabs at what you think the costs will be on a property, then go and get a contractor bid and see how close/far off you are.
Is this flipper very active? If so and he just got a house closed but hasn't stared work yet, why not ask him to go there and take a shot at estimating repair costs? Go through the house and try and make a list of everything you think it needs. Then go research what items cost. Finally add in what you anticipate labor to be. After you have done this, bring it back to the flipper and he would probably look it over and let you know if you are close on your costs or way off. It isn't the best way to do it, but in my opinion it is a good way for you to learn researching materials, and scopes of work.
Also, this time offer to buy him lunch/dinner if he agrees to let you do this!
This is very helpful information from you guys but the main issue I have right now is putting all this info in chronological order. I've been spinning my wheels for 3 whole days now trying to figure out what I need to do next and after that and then after that.
How am I supposed to negotiate a max sale price if I don't know that repair cost ahead of time? I could seriously underestimate costs and then end up signing the purchase to sale agreement on the property somewhere north of 65% ARV and I am screwed when I discover all these extra repairs. Is it possible to make an offer on the property over the phone and then go look around it during a scheduled meet up with the seller and then have to drop my offer 50k since repairs need to be factored in?
If I submit offers over the phone to sellers is it bad business to take a look around the property with a general contractor before signing and then drop my max allowable offer down by up to 30-50k for repairs with these Crazy Cali prices? I was considering using the contractors to do a walk-through.
Could prices be drastically different in a neighborhood just 10 miles away and I'd have to start this walk through process all over again?
There is good information in the book but I have hesitation with using his price ranges since I live in Crazy Cali and J Scott himself said this is an area where prices could be way more than the highest range for cost offered in the book.
He sounded pretty legit and his website doesn't disappoint http://www.psbuyshouses.com
So just call him up and ask if I can view his property? That sounds like a great plan. Is there a certain floor and ceiling on the type of place I should take him for lunch/dinner or am I way overthinking this? I tend to do that a lot!
Thank you guys for the advice
@Cody Evans I would just let him know that you need to hone your skills on renovation costs, so you can make sure you are bringing good profitable deals to him. Ask if you can run your own test numbers on one of his flips and if gen can review it with you over lunch/dinner. I would think bringing him to a nice sit down place (not a chain, something a bit nicer, figure spending $100 or so for the two of you) would be a nice gesture.
@Cody Evans , i do wholesale a lot but do not see the properties inside until there are under contract, on the inspection period I will get the estimates and negotiate the price, and Yes, we have been able to bring the price down, my best one was 90k price reduction
@Carlos Zapata how do you make an offer to the seller not knowing much/anything about the property? Do you make an offer based on a rule (like the 70% rule, etc) and then work from there? Do you make a close to retail offer, knowing you are going to reduce the price after inspection? Do you always reduce the price and how do the sellers take to that? I couldn't imagine someone knocking a house I was willing to sell them down by $90,000, but I guess each deal is different.
@Brian Pulaski We do comps and from the lowest, we send at 70% value, this is a numbers game, I got one every 50 to 70 offers, and sometimes We got nice price reduction, Do not take personal if the seller gets mad, price reductions are easier to get when you have a full inspection report with a General Contractor Estimate, In some cases We had spend the money on the inspection and we did not get the reductions but is its part of the business,
¨We do comps and from the lowest, we send at 70% value¨
How can you afford the time to run the comps on 50-70 properties before you call the seller? I have a driving for dollars app that gives me ARV of a property but I am not sure if it is reliable enough to use. What is your method?
@Cody Evans we use RPR, MLS, Trulia, Zillow, and County info, Also I am not doing that anymore, I have great virtual assistants
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Join the Largest Real Estate Investing Community
Basic membership is free, forever.