How do you determined the fix up cost? Thanks
I’ve heard that using $8-$12 per square foot is a general rule of thumb.
If it needs minor cosmetic touch ups (carpet, paint, etc) then probably closer to $5/square foot, and if it’s absolutely trashed then it may need $15 per square foot.
In the end, if you’re wholesaling, then it all depends on what the end buyers determine the repair costs are. So use the general rule of thumb, and if you under priced repair costs a ton, then go back and re-negotiate with the seller. Just don’t let your buyer over-price your repair costs in order to get a lower price (for example, repairs are 10k but he says they are 20k just to get the house at a better price when he fully well knows it is 10k).
Hope that helps a little.
Thank you for the information.
This is a very open ended question. It depends on what type of fix-up costs you are looking at.
I am assuming that either a contract or a licensed home inspector has looked at the property and given you a list of the problem area.
As costs vary between areas, my best recommendation is to have a couple of contractors/repairmen bid the jobs. This will help you know what is the going price per square foot in the area. After a couple of rounds of bids for different jobs, you will have built up a database of costs and it will be easier to figure it out yourself.
Basically variable costs vary with the output while fixed costs remain constant no matter what the level of production is. So look at the cost of production when the output is zero. This will be your fixed cost because if you produce nothing then you’ll have no variable costs. Once you have the fixed cost you can simply subtract this from all the other costs of production to find the variable cost at each level of production.
Ask a rehabber. As wholesalers, we have tons of “rules of thumb,” but I’m not sure any of them are accurate. For example, my old rule of thumb is $5-$10k for cosmetics and $20-$40k for major projects. Now, we all know this is vague and just ballparks it.
But, you can do yourself a huge favor by knowing the major things, like what a roof will cost. If the roof is good, the flooring and the kitchen, then it probably doesn’t need a ton.
I normally used $30,000 as a figure but if it’s a bigger property, I adjust it. I also use the square foot method.