Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
13y
Originally posted by Nichole Gabriel:
How can a newbie do this without hiring estimators each time, and making the process cost prohibitive?
You can't which is why newbies should not stat wholesaling until they know how to do this. Just like anything, a bit of education and practice is all it takes.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
13y
Originally posted by Nichole Gabriel:
How can a newbie do this without hiring estimators each time, and making the process cost prohibitive?
You can't which is why newbies should not stat wholesaling until they know how to do this. Just like anything, a bit of education and practice is all it takes.
Investor · Maui, HI · Member since 2009 · 13k+ posts · 3k+ votes
13y
I think Will Barnard's idea is that the best wholesalers are flippers or investors first. Or - you work for flippers/investors.
For example, check out this post from Marty Boardman.
Other than that, yeah - the info above is great from Will's other response. But working for a flipper (even for free) would probably be the best way to learn.
Interior Designer/Home Stager · Dallas, GA · Member since 2013 · 202 posts · 9 votes
13y
Thank you Brandon Turner and Will Barnard!!! And yes, Brandon, this is the exact article I read that got me out there looking for deals today!! LOL! I am working with a few investors who fix and flip, so are rehab costs something I work with them on, maybe walk through with them, until I learn the ropes of this aspect?
Investor · Maui, HI · Member since 2009 · 13k+ posts · 3k+ votes
13y
Yeah Nichole Gabriel - I'd try to get them to teach you that part. It's hard for me to say exactly how to figure it out, cause I use to do all my own work so I know what stuff costs!
Contractor · Anchorage, AK · Member since 2012 · 351 posts · 196 votes
13y
Those are great tips. Knowing the cost of materials is key. But an understanding of what materials are appropriate for a given application is also needed. Every property is different and each will present it own needs and challenges. The ability to readily identify those is a skill learned with much time and experience. The last thing you want is to start out building a negative reputation with potential buyers. The best thing you could do is find yourself a remodeler or contractor who will work with you. Rather than pay them per estimate, offer them a percentage of what you make on deals. Pick his brain and pay attention. Track the costs and over time you will be able to plug numbers in on a walk-thru and have the confidence that the numbers you provide buyers are reasonably accurate.
Based on a properties characteristics, experience will tell you of the hidden potential problems a buyer could run into during a rehab and nothing will cement their trust in you more than when they see your evaluation of the property and the numbers prove out. Only an experienced contractor/remodeler/rehabber will see the unseen and all the "little things" that can add up. The better the information and numbers you give buyers, the more they will want to see your deals and the quicker they will likely move on them. Its worth giving up some of your profits early on to gain the knowledge and build a solid business and reputation for a prosperous future.
Just my opinion... Take what you can use and leave the rest!
Interior Designer/Home Stager · Dallas, GA · Member since 2013 · 202 posts · 9 votes
13y
Ok, so Stephani over at flipthiswholesaler.com says she doesnt do tnem?? o_O anyone know how this is possible? Also, she and some of her commenters make a few good points about rehabbers different "levels" of renovation. One commenter gives a nice way of making a ballpark general estimate, and talks about the validity of the word "estimate", he makes a good point... See her vid on this page... :) would love your thoughts! http://www.flipthiswholesaler.net/2010/07/saturday-night-reader-mail-how-to-estimate-repairs-plus-some-other-stuff/
Goshen, KY · Member since 2009 · 835 posts · 683 votes
13y
Nichole -
I was in the home inspection business for 17 years, so I had a general idea of what things cost. But when I started investing in real estate, I had to do just what the others said. You have to hang out in home improvement stores or at their sites online and get actual prices on things.
I also got estimates for work. After a while I learned a standard sized window installed would cost $xxx. On my inspection sheet I use when I walk through the house one of the things on there is "how many windows". I always count the windows then I can estimate that cost for replacement windows.
I do the same thing for all the other items. After having a couple of furnaces installed, I had an idea of what one would cost. But even better, by going to my local REIA meetings every month, I met several HVAC people. Then I could check my estimates by saying, "Hey Terry. I am going to need a furnace and AC for a 1500 sf ranch style house with a basement. Can you give me a ball-park estimate". He would say sure. It's important to know details like "basement" as opposed to "crawl space" as it has an effect on the costs.
Go to local seminars, your REIA meetings etc and meet these types of people like electricians, plumbers etc. They will be happy to help you.
Once you learn how much it costs per sq foot to paint the interior of a house or install carpet, you just use that figure and multiply. Same thing with vanities, tubs etc. Pick standard things and use those figures. You will learn that you can put in bathrooms and kitchens for approximately $xxx, then you can plug in these figures. Learn what an appliance package costs; not the one you want, but the one that will be acceptable in your flip. Rental's will be different.
Once I am done with my "estimate", I usually add about 10% to that number for "unknowns".
It is a learning process, and it doesn't have to be perfect. I might figure keeping the furnace and replacing the windows on my wholesale deal. But the rehabber that buys the deal will say, "I'm keeping the windows, but I always replace the furnace." That's OK; it just works out in the end if you don't forget something big like a panel box that is too small for the house. It doesn't have to be perfect; just good enough.
Interior Designer/Home Stager · Dallas, GA · Member since 2013 · 202 posts · 9 votes
13y
ahh! Perfect Sharon Vornholt!! Thank you so much! ( I HAVE your that form you speak of, Thank you!!) and that makes perfect sense and gives a solid place to start! Thank you!! :D
Real Estate Consultant · Eugene, OR · Member since 2013 · 178 posts · 39 votes
13y
When you say "hiring estimators", are you talking about paying contractors to give you an estimate? If so, you may find it beneficial to establish a relationship w/ good contractors who will give you repair estimates for free. They may do this if you recommend them to your buyer. This has worked for me.
Make sense?
Investor · Nashville, TN · Member since 2009 · 483 posts · 228 votes
13y
I was passing through and saw this thread a thought I'd give my 2 cent.
Ever Investor/ Rehabber will give you a different number so there is no way you can be truly accurate. All you need to do is be in the ballpark and the way I do it is with ranges. When I estimate rehabs I have 3 criteria: Good, Bad and Ugly based on the condition of the property.
Good = 5k to 10k
Bad = 10k to 15k
Ugly = 20k to 40k
I got these numbers by surveying different rehabbers in my area and nationally. When I did that and this was the average that came out.
Good = 10k
Bad = 15k "average rehab cost"
Ugly = 30k
Beyond 40k the property may be a BER (beyond economical repair or knock down) or need very extensive repairs. Once you talk with a few or your buyers you can determine an estimate pretty quickly. Also you can go back to the seller to negotiate the price further if needed.
Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
13y
Originally posted by Wayne Woodson:
I got these numbers by surveying different rehabbers in my area and nationally. When I did that and this was the average that came out.
Good = 10k
Bad = 15k "average rehab cost"
Ugly = 30k
Beyond 40k the property may be a BER (beyond economical repair or knock down) or need very extensive repairs.
My experience has been different. I rarely complete a basic cosmetic rehab on one of my typical houses for less than $15K (or about $10 per square foot). These are houses that are only 10-12 years old, in move-in-ready condition and only need basic renovations.
Add basic exterior repairs and exterior painting, and we're closer to $20K (about $12-14 per square foot). Add mechanicals, that's another $2-3 per sf, add roof, that's another $2-3 per sf.
Just that stuff, and you could easily be at $20/sf -- on a 2000 sf house, that's $40K, and that's only basic cosmetic and mechanical repairs (knocking down wouldn't even be a remote consideration).
Now, add in finishing a basement, doing some serious landscaping, upgrading plumbing and electrical, etc., and it's easy to spend $60-100K on a rehab. And again, these are houses that aren't anywhere near needing to be knocked down. I just spent $125K on a renovation -- removing the $15K in structural and foundation work, that's $110K just in cosmetic and mechanical upgrades.
Every house, every rehabber and every location will be different. Rules of thumb aren't going to be very useful when it comes to estimating costs -- at some point you'll need to sit down and do some work to determine what things cost in your area and for the types of houses you'll be buying, rehabbing and/or selling.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
13y
Originally posted by Wayne Woodson:
Good = 5k to 10k
Bad = 10k to 15k
Ugly = 20k to 40k
I got these numbers by surveying different rehabbers in my area and nationally. When I did that and this was the average that came out.
Good = 10k
Bad = 15k "average rehab cost"
Ugly = 30k.
if you actually did study this nationally, then you did not have a large enough quantity to return an accurate average. Secondly, taking any national average I'd futile for RE pertaining to your local area. In other words, it is meaningless.
I am with J in that even the easiest of rehabs in my area would run $20k or more. You have to keep in mind the exit values as the rehab costs are affected by the values of the homes.
For instance, on one of my $1.2M exit values, I would consider $100k to be average to light in rehab.
I just did a $50k rehab on a $550k exit and it was a regular, average rehab.
Based on your averages, you would have estimated this as a tear down.
In summary, don't rely on averages and dig into details concerning rehab estimates. Don't guess based on some silly average.
Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
13y
Great point, Will...
I forgot to mention in my post that I'm in one of the cheapest real estate markets in terms of labor...you can double my prices in many areas of the country, and in high priced areas (CA, NYC, etc), you can triple them or more...
Interior Designer/Home Stager · Dallas, GA · Member since 2013 · 202 posts · 9 votes
13y
:) This is so good! i am learning so much! J Scott, did I miss your comment on the file that Andy shared? Looks to be very helpful and I saw you're name on it! ;)