how do i find repair value when wholesaling

22 Replies

in nh is there a way to find repair value? some people from cali say to just add on 3% repair value.

is there anything in NH?

do i send in a contractor to find repair value? at which point do i do that?

Do you mean "after repaired value" or "rehab cost"?

You determine ARV using comps. Find similar properties in the same neighborhood. Make adjustments based on differences and come up with an average. Its a tricky process and requires good data.

If you mean rehab cost then the best way is to get bids. Since you're not really going to have the work done you'll probably need to pay contractors for bids.

As a wholesaler, these are two very key skills. Unfortuantely both are difficult to get right. Really, there's nothing but experience to learn to do them well. Sorry.

@Jon Holdman

rehab costs.

how do i get bids? what does that even mean?

Derek, a lot of people have given you a lot of good advice over the past few weeks. Most of which amounted to telling you to get more experience, some money and a job.

Anyone telling you to just add a fixed percentage for rehab costs is an idiot. Period.

Work on a habitat house. Read articles with titles like, "What you need to know to buy your first home," and not titles like, "How to make it in real estate with no money down!!!"

@Richard C.

i wouldnt call them idiots i just dont think you understand. please stop posting on my forums, you've posted nothing but useless information time and time again.

im making a deal over this summer whether you want to believe it or not. the only thing you've posted on my forums over the past month is telling me that i cant do it.

I pointed you to several extremely useful sources of information. Suggestedthat working on a habitat house would teach you something about construction and allow you to meet tradesmen. Pointed you to an inexpensive RE linlicensing class and explained that that was the best way to learn the business and get access to good comps. Pointed you to entirely FREE seminars at the NH Housing Finance Authority that would explain the basics of real estate and financing to you. Explained you to improve your credit score so that you could qualify for financing. Other people have explained basic real estate and business concepts, patiently and repeatedly.

Tell me what was wrong about any of that?

Your problem seems to be that you want to be told the magic shortcut to success in real estate, without having to learn the basics or put in any work. That magic shortcut does not exist.

And yes, anyone telling you to just automatically add 3% as a rehab cost is an idiot.

"in nh is there a way to find repair value?" There is no different way to find ARV - After Repair Value, in any state. You need to compare the sale price of comparable properties in comparable areas of town - Comps.

"some people from cali say to just add on 3% repair value" You know California, land of the fruits and nuts.

"is there anything in NH?" Yes comps. And contractor Bids. Depending what this question is asking.

"do i send in a contractor to find repair value? at which point do i do that?" If you do not have the skills to come up with a somewhat accurate estimate yourself then you will need to have a contractor tell you how much they are willing to do the job for - a Bid. You will do that when you feel pretty confident that you have a good deal and want to market it to your buyers with a fairly accurate cost of rehab estimate. With no experience doing this yourself there will be a large gray area where you are not sure if it is a good deal or not. You don't want to waste the contractors time bidding on deals which will never work out because they will stop working with you.

Derek, @Richard C. is right, you have been given lots of good advice over the last few weeks. You have asked the same questions different ways, and your questions show you need more education before you jump in to investing.

Bigger Pockets has tons of information if you take the time to read and dig. I think you expect easy answers handed to you in 140 characters or less, and that's just not possible. Here is a glossary of terms:

http://www.biggerpockets.com/glossary.html

While it doesn't have the word "bid", that word is somewhat generic and not related specifically to real estate so you could have that definition in 10 seconds by simply googling it. I think maybe you might spend a few months reading blogs and forums, and listening to podcasts, before you try to do a deal.

I think it's not that anyone thinks you won't do a deal this summer, it is more that without information and education, you could do a deal and lose your shirt. or your credibility. Or hurt someone that you contract with and fail to deliver. There is no shortcut to information in this business. It is time intensive. Many of the questions you are asking have been discussed over and over again on BP, and if you took time to dig a little instead of asking you'd already have your answers and be more knowledgeable. BP and Google are your best friends.

@Brant Richardson

how do i know if i have a good deal if i dont know repair costs? i need to make an offer on the house so i need to make my max offer based on repair value.

basically.

i call him and see what the house is all about.

than i set up a meeting to see him in person. and throw an offer at him?

at which point in these steps do i set up contractor bids

@Ann Bellamy

yes i have been given lots of good advice. and most of that good advice didnt say "just go read 10 more blogs and books before you even begin to make a deal". obviously i need more education or i wouldnt be asking.

i've been reading books, blogs and taking classes for the past 6 months. i expect obstacles to come in the way for my first deal and many deals after which is why i am asking on bp.

right now the only two problems i have are comps and repair cost which nobody can give me the answer that i am looking for. which is at which point do i send in the contractor to find an estimate.

when i bid on something its highest or lowest price, i just didnt know how/why someone would bid on a contractors rather than just finding one that works for me. i didnt know if bidding on contractors meant i am supposed to advertise that i have a property and am looking for a price estimate?

but now i have a new question as well which is how do i do this "bidding". am i supposed to go on craigslist or something? my plan before bidding was to just call a few contractors and see what they would charge for an estimate, but is there a better way of doing this?

@Account Closed

@Richard C. has given you good advice. You should embrace it and not become combative.

Use your common sense bud, how could there be an automatic % of rehab cost needed on ALL houses?

That is probably the most backwords advice I have read on this site.

This is how you figure out what the rehab cost is. You walk into a house and look at all the things that are wrong with it then you add up the amount of money it will cost to fix them.

Obviously, at this point in your "career" you do not have the knowledge or skill set to walk into a home and do this. Might be why others are telling you to learn more books and help fix a habitat house or pay for contractors to give you bids.

Paying for a bid means you call up a contractor and ask him to come to the home for a rehab bid. You tell him everything you want done to the home and then he gives you the price he is going to charge you to do it.

You will have to pay the contractor to come and do this for you because you do not have any money nor do you own the home in question and would likely be a waste of the contractors time as the odds of him getting the job to do the repair are very low.

Real Estate is a lucrative business but theres no magic secret that someone on this site is going to give you to make you rich. There are no short cuts.

To make any money in real estate you need to have at least 1, preferably all 3 of the following things.

1. Money

2. Good Credit

3. Knowledge

you can all come to richards defense, but posting on someones forum time and time again saying "you cant do a deal, you dont know what you are doing. go read 15 more books first than come back to BP" isnt helpful at all.

@James Wise

as to the california thing, he said to just add a few % as a start. once i have the contract i can figure out the exact pricing and begin negotiating. istill dont understand it completely but thats what he said. i will just ignore that part.

if people gave answers like you just did i wouldnt need to ask a question 10 times. im not looking for a magic answer, what you just wrote is the answer i am looking for (almost).

what i want to know, is when i have the contractor come in?

after i call him on the phone to learn about the house, i set up a meeting.

do i set up two meeetings? one for me and one for the contractor? do we go at the same time? this is what i am confused about

seeing as the contractor is going to want a few hundred dollars up front I'd say the best time to bring him in is when you feel confident enough to know that you are not throwing $300-$400 down the toilet.

@James Wise

so basically negotiate it to around a price i would want and then after we have a price, bring in the contractor? would that work?

so in reality it would be once the deal is almost certain, and the contractor would be one of the final steps.

i think this is what the cali dude was saying. most properties in cali cost about 5%, once he has the deal almost complete he would figure out a more accurate repair cost

Think about it. If one house needs paint and carpet and another one needs a full gut rehab for the kitchens and baths how can a fixed percentage for rehab cost have any basis is reality?

What's a bid? You start by defining a scope of work. That is a detailed list of what you want done. Then you have contractors look at the property and your scope of work. They give you an estimate of what it will cost to do. It's a lot of work. If you're the owner and you're going to really give someone the job contractors will usually do the bid for free. It's a step that's required to get jobs.

When do you get contractor bids as a wholesaler? You don't. There's not enough margin in your business to pay for bids. You might get one or two free ones but it won't take long for contractors to figure out you're not serious about giving them any work. If you're paying a few hundred for each property you're thinking about bidding on you will spend a lot of money.

IMHO wholesaling is a very difficult job. The folks who are successful at it have strong experience in doing fix and flips. Doing that gives them experience in determining values and in estimating repairs. In fact it seems successful wholesalers are fix and flippers who wholesale the deals they find but don't want to do themselves. They spend a lot of money on marketing. I was recently at a seminar and two different ones said they spend $10k a month on marketing. They keep the best deals and wholesale the marginal ones.

You can get angry with those of us who aren't all Ra Ra telling you this is easy and you should just go for it. But we have nothing to gain by bs-ing you.

idk why you guys say im angry. i told one person to stop commenting on my posts, the rest of you i have said thanks

@Account Closed

Clearly you want to break into this industry.

Right now I assure you that instead of trying to do what your doing 2 better uses of your time are

1. Get a RE license

2. Get a job as a day laborer on a rehab crew

both of these options will put some money in your pocket and teach you some skills that you NEED to be successful in this industry.

@Account Closed - I wish the best for you toward your goal of doing a deal this summer. But the cold-hard fact is that there is a LOT to learn in this biz. I worked this biz for almost 2 years before I got my first deal. And then it was another 2 years before I had any real success. And before I started in this biz, I already had the advantage of having personally owned 3 different houses (one of which was an REO fixer), had helped my dad build a house when I was younger, had taken "shop" classes in HS, had a BS and Master's in engineering plus over 10 years of engineering and project management experience. I say all of that just to say that there is a LOT to learn and it may take some time.

@Derek LeBlanc estimating repairs is one of the toughest things for new investors. I know of now easy way to learn it. Some things you can learn by going to a Home Depot or Lowes and pricing out items. Some you can learn by networking and asking questions. Some you will lear from getting a bid from a contractor.

In my area I figure $3K for a bathroom remodel and $4k for a kitchen not including appliances. But that number will vary by the quality of the upgrade, vinyl floors or expensive travertine tile, Formica counter tops or granite. I figure about $200 per window. They really cost about $225 installed but $200 is easier to add in my head. The point is over time you will start to know what some of those numbers are.

one thing that can speed up the process is J Scott's eBook here on the site about estimating costs. J is very thorough and gives a great analysis of how to estimate costs. Go to resources then BP store, that should find it.

Originally posted by @Richard C. :
Anyone telling you to just add a fixed percentage for rehab costs is an idiot. Period.

While not exactly tactfully stated the principal is true. Anyone who told me that would have little credibility in my book.

I don't like to push the BiggerPockets flipping books (i wrote them and it doesn't feel appropriate), but in this particular case I think they'd be very helpful. The flipping book talks specifically about the order in which you do things working up to an offer (including when to bring in a contractor for estimates), and the rehab estimating book will give you a methodology for estimating rehab costs.

I'll let @Jon Holdman determine if this is appropriate for me to recommend these books, or delete my response...

Yes, I would highly recommend both the Ultimate Beginner's Guide and the Book On Flipping Houses.

Using material prices is one way to come up with an idea of rehab costs. There are three things to watch for, though:

1) The completeness of your list. Its easy to measure a room and figure out how much paint or how many sheets of rock. No so easy to you'll need plastic sheeting, brushes, rollers and primer for the paint. And screws, tape, mud, shims, and corners for the drywall. And new baseboards and casing. Need a vanity? You also need a mirror or medicine cabinet, faucet, drain, p-trap, supply lines, new shutoff valves and who knows what other fittings. All the little stuff adds up.

2) The quality. A $500K house (in Denver anyway, I know that's a shack in some places) gets a better grade of everything than a $100K house.

3) Labor. This is the biggie. A very very rough idea is to double the cost of materials. Triple might be safer. But some stuff, like plumbing has a much higher factor.

I was about to suggest reading the J. Scott flipping book..he also sends you a 200 or so page book on estimating rehab costs. It's a great value and FULL of great info.

I think that, like others here have said, you could definately use more knowledge on everything. I would start going to real estate networking meetings and get a mentor or someone to coach you through this.

Sure you can do a deal and you might do ok. But, I think that it's more likely that you could get hurt.

I'm thinking I figured out your Cali guy's %. He probably wanted you to figure out an actual estimate for the repairs and then add on several percent as a safety margin.

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