Question regarding contractors and rehab estimates on an REO?
Heres a made up scenario:
My agent just sent me information on a foreclosure that could potentially be a great deal that I should put an offer on. I look at the property's pictures, information, and neighborhood all online, as well as go inside the property and have a really good initial walk through...
The next part is where I get a little confused. At this point in time in the example scenario its time to create a rough SOW so I can get a fairly accurate rehab estimate to plug into my flip formula (MPP = Sales Price – Fixed Costs – Desired Profit – Rehab Costs). This being my first fix and flip, how do I create an accurate initial SOW so that I don't get screwed over come due diligence period and my rehab estimate I did myself is way off causing me to back out of the deal? I have read both J Scott books, watched many podcasts, and have spent much time learning in the forums, but still don't feel comfortable enough putting together my SOW before I offer. I know this is supposed to be a rough estimate, but I feel since this would be my first time I could be way off.
The biggest fear I have is that I make my estimate based on things I can easily see like carpet, paint, kitchens, bathrooms, etc, but there ends up being tons of other work that needs to be done elsewhere; things such as pipes, electrical, etc. I don't want to have offers accepted and constantly keep backing out because I have not been accurate enough with my rehab numbers.
Whats some good advice on going about this?