I'm just starting my real estate wholesaling business and curious about knowing what's the best approach when doing estimates on the repairs? Considering its a big deal when negotiating and trying to find a end buyer this knowledge is crucial to the business.
@Tyler Shoaf and therein lies the problem! It's not easy and it's never exact. The repair estimate will be different for a buy/hold investor and a house flipper. And it changes for different neighborhoods and property price points. Like I said, it's not easy. The best thing you can do is find a local wholesaler or other investor who is good at estimating repairs, who you can work with to learn how to estimate repairs.
A lot of wholesalers don't bother to learn this part of the business, but if you want to make yourself an outstanding wholesaler, you will learn it. If you don't know it and you throw around numbers, you will only ruin your own credibility and limit your own ability to recognize a good wholesale deal when you see one.
I have also heard that estimating repairs as a wholesaler isn't that easy unless you have a background in flipping homes or rehabbing homes already. I myself don't have either so my plan is to go to my local home depot seminars on how to renovate a home so I can have a better idea of the process. I was given this advice from a fellow member and I feel like it was good advice.
Best way to learn what things cost is to experience as many situations as possible.
Ways to gain experience.
1. Work as a laborer for a G.C.
2. Pay for quotes from G.C's
3. Find a local investor willing to mentor you.
4. Price out materials @ stores,
ex: measure a rooms floor size. See what the flooring materials will costs, price out vanities & door hardware. etc.
@Robert Leonard In my opinion your correct Because what end buyer wants to deal with a wholesaler that don't know his numbers?
@Brandon Proctor Thats good advice thanks Brandon I'll definitely be attending some. Do you know of any upcoming events in the Indianapolis area?
@James Wise Good idea on pricing out the materials thanks for the info much appreciated!
@Account Closed estimating repairs is the most challenging aspect of the business. Network with other investors in your area, and offer them something in return for helping you estimate repairs.
What should I offer in return for them? @Ben G.
@Account Closed only you can decide what you have to offer in return for their time.
One example would be, to give your cash buyer first look and the first right of refusal on buying the house from you in exchange for him helping you estimate repairs. Just a thought. You have to decide what makes most sense for you in your situation.
Maybe you pay a GC for an estimate? Again, this may or may not make sense based on your current financial situation.
I think the best way to learn estimating is to start going through houses and taking pictures of the things you would need repaired. Then figuring out what it costs to repair those items. There are always going to be some items that are complete unknowns (i.e plumbing).
But there are so many things that you can figure out:
1) Replace an A/C for a 1,000 sq ft house. 2,000 sq ft house>
2) Replace a furnace for different size.
3) Replace countertops - laminate, granite (here's where you start seeing different numbers for flip vs buy and hold).
4) Replace light fixtures
5) Install laminate flooring - per square foot
6) Install tile flooring - per square foot
7) Replace water heater
8) Replace faucet fixtures (material and labor)
9) Replace vanity top. Replace vanity.
10) Replace garage door.
11) Replace roof (tear off vs second layer) per square.
12) Replace window(s)
13) Replace cabinets
17) New Drywall for an entire bedroom (or drywall per sheet, roughly)
18) Replace outlets and switches (per device)
19) Install trim - per linear foot
20) Replace/install gutters
If you can get these items above plus probably another handful more that I'm sure I'm leaving out because I'm too lazy to do more, you should be able to come up with a pretty reasonable estimate on most jobs. And, based on what you'll have above, you should be able to derive a few more numbers as well.
There are always going to be more things than you can come up with a list for. But having a main list like this should get you to that 80/20 rule and the rest should be minor enough that you should be able to come with a reasonable number for those on your own so your estimate is at least respectable.
Things like foundations and the like are very difficult to do though. That would be one where you probably need to leave it blank and tell the investor it has foundation problems and put a question mark next to the item. Same with plumbing repairs.
Here in the midwest, you can almost guarantee that every house is going to need plumbing repairs. How much is a complete unknown. I usually budget for 750 to 1000 unless I can see that something was actually stolen. But there are almost always a handful of leaks that have to be repaired in every house I buy.... Just don't know whether its closer to 1000 or 750. :-)
Connect with a local contractor and have them give you an estimate, you can use around 3 contractors to get the best estimate!
Your post is very helpful @Mike H. thanks for sharing your information!
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