How do you decide what “needs” to be replaced vs repaired

9 Replies

Hey all, when you first go out and do a walkthrough of a property how do you determine what actually needs to be replaced versus what can be fixed or modified or even left alone to keep construction costs low enough to get the property and make a good profit but still ensure there’s enough in the budget so your putting out a quality product and a desirable home

@Kevin Silva . For me it would be the class of the neighborhood anything below a B. It’s repair rinse and repeat it it’s B and above replace depends on the people who are going to be living there..

You have to match or exceed your competition in order to reach the ARV that was determined from the recent sales comps you analyzed.

@Jermell Shavers thanks, I always find myself going though houses and seeing something that I don’t like and automatically budgeting for a replacement assuming that because I don’t like it most other people won’t either but then my rehab estimate quickly skyrockets

Originally posted by @Kevin Silva :

@Max T. The issue I’m having is I feel I’m adding repairs that at the end of the day may not get the roi needed to make it worth while

Then your purchase price is too high or you are over improving the home for the market. The level of finishes in the homes of your competition is what you should pay closest attention to. Meeting or slightly exceeding those competitor finishes is where you want to be. That said, if the subject property needs a new roof, that is a necessity and not a “finish item” and while it does not necessarily add value to the eyes of a buyer, it is expected to be in good working order and not at the end of its life cycle so those decisions are easy.

To reface or replace kitchen cabinets is an example of where you are having trouble and like I said, what your competition has should guide you the most. Price points also play a large factor too as well as the end game. If you are rehabbing to sell to end user, the. The finish level should be higher than one rehabbed to rent out. 

@Kevin Silva

Consider how long you plan to hold a house when planning the extent of your rehab. You want to use products that last a long time before needing replacement. A nice totally Rehabber property will eventually need new furnace, water heater, roof, flooring etc.

There are many components of a property where it makes sense to go with a more expensive option that will last longer or have a better warranty period. If the labor dispute a the same to install crap as it is quality materials then get the best value you can.

Tenants stay longer in a property that is just a little better than the “Average” apartment. There are many ways to provide a high end look on a value budget.