How do newbie wholesalers accurately assess rehab costs?

Question

Hey guys,

I have a lead on a property to wholesale (I'm brand new to wholesaling) I think I can get it at 70% of ARV but am worried that the work needed -- I don't know if it's ever been remodeled and has some water stains in the ceiling  -- will be too much for a flipper to take on for the profit margin. How do wholesalers accurately assess rehab costs?

Steve Babiak · Answer

They usually don't at first :)

James Wise · Answer

Pay a few contractors to come out & give bids. Pic their brains while they are there. It's not something that can be learned overnight.

Jim Viens · Answer

Mostly experience, talking to other investors and/or talking to contractors. Maybe even get in good with a contractor or rehabber that's willing to walk through a few properties with you. Also...just got J Scott's book on estimating rehab costs. Has great info in it.

Paul Timmins · Answer

@Kim Handelman

Welcome. Fill in the foundation below.

Locate and attend 3 different local REIA club meetings great place to meet people gather resources and info. Here you will meet wholesalers who provide deals find out what they estimate for repairs and check with the rehabbers.

Two Great reads, I bought both J. Scott The Book on Flipping Houses,  The Book on Estimating ReHab Costs  http://www.biggerpockets.com/flippingbook

Download BP’s newest book here some good due diligence in Chapter 10. Real Estate Rewind Starting over

http://www.biggerpockets.com/files/user/brandonatbp/file/real-estate-rewind-a-biggerpockets-community-book

Good Luck

Paul

Bill Gulley · Answer

You can read all you like, what you'll find will be methods, not answers as to costs. Get bids! Go to the box store with a material list, shop, add the costs of what is needed, look at the bids, pick one. You'll be much closer on your costs than trying to figure it out, as you won't the first few times. After you get your feet wet with a contractor you can start taking on more of a job yourself, at that point the materials you can get will have more meaning and usefulness. I look at material costs, labor, time, contractors fee and carrying costs. Good luck!

Kim Handelman · Answer

@Darrell Shepherd  THanks so much. Yes, I get the smelling my newbieness a mile away. I also live in a chic area so things here are pretty inflated. I'm hoping my REIA meeting will help as they'll know the market. This is all very sound advice and really appreciated! Cheers!

Kim Handelman · Answer

Thanks so much guys, looks like to be effective I have to learn the flipping world even though I'm not going to flip which is fine. I'm going to my REIA meeting on Monday and have already networked with some local flippers so hopefully one will take me under his wing and let me pick his brain. I'll get J Scotts book as well.

Bill S. · Answer

One way that I learn prices that didn't take much of anyone else's time was to find flips that were underway and quiz the contractors and owner about costs for the various parts of the rehab. Ask rehabers for a range of costs for various items like kitchens and baths. Some have figures they carry around in their head that they use to gauge their interest in a property. The other important thing is to learn what to look for and what is important in the resale of a flip.

Ashton Astillero · Answer

@Kim Handelman

2nd on the books by J. Scott. It'll give you a variety of things and rough prices, but it doesn't tell you what to look for and what signs mean what. Water stains might mean a leak in the roof and/or bad flashing.

It'll probably be best if you find a contractor in your area, tell him what you want to do and ask for his help. Best case scenario is that you have him put together a line-by-line quote of what needs to be done. You can then use that quote to show end-buyers what's the profits would be like.

Sell the property by saying the quote is fully executable and the contractor has already seen the property. And that's all that's left is to close on the house and coordinate with the contractor.

And if you do find a contractor that would do that, please pay him for the quote whether the end-buyer buys or not. Consider it a due diligence expenditure.

How do newbie wholesalers accurately assess rehab costs?

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