Confusion about Repair Estimates Throughout the Deal Funnel

3 Replies

Hello, I was hoping you could help me clear up some confusion about estimating repair costs throughout the deal funnel. I understand that to BRRRR you need a distressed property and often this will be property that needs significant work. It seems like you are getting your initial pool of potential deals from wholesalers and auctions, or maybe a great agent if you can find the right one.


What I don't understand is how you can make any kind of repair estimate based on a couple of bad photos from a wholesaler or an auction website.  I also don't understand at what point in the timeline you involve an inspector and GC bids.   Can someone walk me through a hypothetical scenario of whittling down the deal leads to one you will actually close on?   


For example, I am staring at a handful of wholesale properties. Of course each wholesaler says that something like 'if you put $40k into the property then you can increase the ARV by $80k'. So there you are looking at these leads, but no way can you assume the wholesaler has accurate repair estimates. What do you actually do next?




 

    Hey @Chip Carter !

    So I think you may actually be missing a step here in your deal funnel or simply not shifting enough properties into it: The Pre-Offer Due Diligence Step. If the numbers provided by a wholesaler look good, now you need to check those numbers. You do this by going out to the property and getting your own idea of rehab. Then you check their ARV number by doing your own comp analysis. If your numbers line up with theirs, you got yourself a deal and can move on to the next step. After you make your offer and get it under contract, then you get the official inspection done. You can also GC bids at this time or back when you first checked out the property.

    This is a little trickier with auctions because you typically can't get into the property unless you can get in touch with the owner or get out there during pre-foreclosure.

    Please, feel free to message me anytime if you have other questions or just want to chat!

    @Chip Carter yeah, agree with the above post.  There are two pieces of data that I don't pay any attention to from a wholesaler - their asking price and their repair estimate.  Seriously.  I don't care what they are asking for the property.  I still make an offer though.  It's not my fault their asking price is too high.  If it's within my geographical area that I am targeting, I make an offer.  Nearly all of my properties I own, I have been the only one to offer....because everybody else pays attention to what their asking price is. 

    I also don't pay any attention to what their rehab estimate says. How do they know what I want to do in rehab anyway?  Again, I estimate my own repair bid.  I also will say, nearly all of my offers were from me walking inside the property.  In the rare occasions where I have not been given access I have walked around the property, peered through the windows, etc. and made an even LOWER offer since I didn't know the full story.  You need someone on the ground, that's not related to the wholesaler, to walk the property - in my case, that person is me.  If you are investing out of state, you need someone else.  Maybe the contractor or something like that.  But I would highly recommend for you to gain access to the property especially early in your investing career.

    Hope this helps in some way but feel free to ask anything additional.  Thanks!