I'm new to real estate entrepreneurship and haven't yet closed on my first deal. But, I'm using direct mail as one of my sources for Deal Flow. My focus is on building my buy and hold portfolio.
My Situation: I live in CA, but I'm focusing on out of state properties. I sent out about 300 direct mail pieces last week and have received a few calls since. A lead that called yesterday seemed promising, but the owner is stating the house doesn't need much rehab outside of painting the second bathroom (which I need to validate before submitting an offer).
My Question: Since I live out of state, how do I determine an estimate of the rehab cost for an off-market deal, so I can then decide how much I can actually offer on the property?
I have a realtor I've been using for properties listed on the MLS, but with this one coming off-market, I'm not sure the seller will want to get an agent involved.
I have a PM, but he said no one on his team has the skillset to really provide a rehab estimate. And I have a contractor who's agreed to work with me, but I've already sent him to one property I was looking at to provide an estimate, but my offer wasn't accepted. So I'm hesitant to keep going back to my contractor for estimates on deals that might not come together.
How have the rest of you been able to get rehab estimates, on off-market deals, when you live out of state?
Thanks in advance for any help!
You're going to have to have someone walk the property and pay them.
It could be your realtor but only if you figure out a deal with them that they will only get the listing on the back end. Just give them some money for an hour of their time.
It could be your contractor, just pay them for their time and an estimate. You should expect around $300 for an estimate.
My normal process is:
1) Have my boots on the ground (typically my remote realtor) walk the property with this spreadsheet in hand: https://www.biggerpockets.com/files/user/kubaf/file/rehab-walkthrough-estimation-checklist
while at the same time recording the walkthrough with their smartphone. I'm on the call on my computer during that walkthrough, and the whole thing is recorded using a piece of software called Call Recorder.
2) Then I roughly estimate my costs based on what needs to be done in the spreadsheet as well as using the tips from this blog post I wrote: https://www.biggerpockets.com/member-blogs/8814/72452-how-to-estimate-construction-costs-for-these-29-common-rehab-projects
(@J Scott's book on estimating rehab costs is another excellent resource)
3) I put all of that into a deal analysis machine to then spit out an offer number.
4) I put an offer contingent on due diligence of the above estimate
5) Then only once the property is under contract that is when I employ the services of a contractor to come up with the estimate.
Hope that helps!
@Kuba F. Thank you for the detailed response! I was assuming that it’d be an answer like “find someone you can pay”.
Thank you so much for sharing the spreadsheet that you use. I haven’t read that book yet, but just added it to my list.