Estimating Repair Costs

Bird Dogs, Wholesaling
1

Hey guys,

I’m brand spanking new when it comes to the business of wholesaling, but I have learned a lot coming to these forums, as well as reading pretty much all the articles this site has to offer.

I have one simple question, and that is, how do YOU estimate repair costs? Do you have a contractor look at the site for you, or do you just run the costs based on your own personal estimates based on experience? I want my offers to be very precise so I can get good deals for my rehabbers that I sell to, and of course repair costs are a big part of how I come up with my offers.

Any help is appreciated, thanks!

2

I suggest that if your only going to wholesale that you try:

  1. Get estimating software (xatmate)
  2. Find a contractor that is ok with bidding jobs you will
    never hire him for. (he might be ok with it I use a guy in
    Houston, But he knows that I include a line item estimate and a card to every investor who inquires about one of my properties)
    Good Luck!
3

In Houston I use jbcontractors.org
They do good work with little problems.

4

Most rehab lender will do 65 to 80 ARV( After Repair Value)

Here is the calculation:

Offer= (ARV x 72%) - ( Repairs + Holding + Closing cost )
Note: if you want low closing or no closing cost will require higher rate.

530,000( ARV) X 72%= 381,600 is enough to buy $380,000 short sale but not enough to do repair of 38,000. ( see below) That 38,000 down is your repair.

10,000+18,000( example: 386,000@ 10% = 38,600 divide by 12 months. Hold for 6 months $3216 IO X 6 months =$ 19,299) +Closing cost $10,000 = 38,0000

What if the property sit longer. Where is your reserve to cover your ass.

381,600 - 38,000 (10,000+18,000+ 10,000) = 343,600 Offer

Some lender max at 80% due to borrower cash. If you had gotten a higher % of ARV, you would not have to put the cash.That is leverage. the 38,000 I would keep just as emergency to cover my ass if the property will not move. Pad the repair alittle.You pull the wall, sudddenly you have water damage behind the wall.

530,000 -418,000( 380,000 to buy short sale + 38,000- Repairs ) = $112,000 profit

Do a cost approach analysis. Hook up with a contractor. Tell them you are an investor . Need to fix house that you are going to buy. Ask can I call you and descibe the situation. Takes pictures. Get 3 estimates. You get ballpark. In SS this is what you call structure bid.