Real Estate Investing Tips- Estimating Repair Costs!
Posted in Real Estate Investing, Wholesaling Houses, Wholesaling Real Estate on 07. May, 2012
Becoming an expert at estimating repair costs takes time, but one of the most valuable skills you can learn as a real estate investor when wholesaling property. In wholesaling homes you won’t have to be as accurate as when you’re rehabbing houses. Either way you’ll need to estimate the repair costs of the property to calculate your offer. By taking the repairs cost minus the after repair value of the property you will determine your offer.
When you first go to look at the house don’t get overly obsessed with estimating the repairs. It’s much more important to build your relationship with the seller then to count how many lights need replaced in the house. You don’t need to be an expert at estimating repairs when wholesaling homes, although you’ll get better at it over time. At first a rough estimate is entirely acceptable. By using a rehab estimation check list you can come fairly close. Also find an experienced contractor in your area to go with you for a handful of times and teach you what to look for. Often times these contractors are happy to do this in exchange for the shot at getting some work.
Estimating repairs of the house helps you to determine what you should offer. The less work the house needs, the more you can offer. Most houses we look at in the Midwest need an average of $30-40,000 in work. Houses always need more then you expect. A first time buyer will want to have brand new mechanics, kitchen and bath, and much more.
In estimating repairs as a beginner first look at the major systems of the house. The most important systems to consider are the roof, furnace, windows, electrical, and plumbing. Also decide if the kitchen and bath need to be updated (they almost always do) and make sure there are no foundation issues. We typically spend $3-$5,000 to update a bathroom and $10-$20,000 for a kitchen. This will vary according to what area you’re in and what price point the house will sell for.
You can also propose the deal to your buyers and not offer a repair estimate, instead just tell them to run their own estimates, assuming your wholesaling the home. If you are starting out and know the deal is a great deal you can wing it at first by putting the deal out there to your buyers. Always do your best to make sure it is a good deal before getting it under contract. When wholesaling property learning how to estimate repair costs is vital.
