Doing Due Diligence During Deal Discovery

[John Sherron]

Hey BPer's! Quick rookie question! When evaluating a property for the first time to figure the approximate rehab cost, should I, 

A: Find and pay a contractor (which I don't have yet) to walk thru with me or 

B: Should I just try and figure it out myself? 

Don't get me wrong I have a little knowledge on (guesstimating) but this being my first flip I want to get the best and closest estimate I can. 

If I should bring a contractor, how much should I offer to pay him/her?

Any advice would be helpful! Thanks, y'all!!!

John S. (The HoustoNvestor)

[Hattie Dizmond]

There are some great tools in FileSpace for helping with rehab estimates. Also, if you haven't gotten. Both of J Scott's books - The Book on Flipping Houses & The Book on Estimating Rehab Costs - do not pass go or collect $200, until you do!!

Seriously, I do my own estimate ROM's (Rough Order of Magnitude) for the initial analysis and offer. With the ROM, you're trying to be within +/- 50%.  Then I use the time I buy under the TREC Section 23 Cancellation Option to get an inspection done. I use my list from my walk thru, plus anything the inspector finds to complete the SOW for my contractor. Then I have my contractor walk through the property and estimate the cost against the SOW, which should bring me in at not more than +/- 5%. I then apply a 10% contingency to arrive at my final cost for the deal. 

My initial estimates are pretty good now. On our last project, I was only off by $2500 on a $28k contractor bid, so I was pretty happy with myself!