Fear that I don’t have acurate ARV and estimated cost of repair numbers is preventing me from making some offers. Determining the ARV and estimated cost of repairs are two critical numbers to have before making an offer.
Unless a person has a solid understanding of their market and experience making repair estimates it’s my understanding that one of the most effective ways to determine the ARV is by getting comps (through a realtor) and determine the repair costs through contractors.
What are the steps I should take in getting the ARV and repair costs once I am interested in a property? At what point should I get an ARV and repair estimate?
One of the first steps is to really study your market. You’ve got to see what people are listing houses at, how long they’re on the market and how much they’re actually selling for. If I had to call my agent every time I wanted to run numbers on a house to get an ARV, I’d be on the phone all day. By knowing the market, I can get a gut feel on ARV in order to run the numbers. If it looks like a potential deal, I’ll get my agent to run comps to verify my gut feel is correct. Pretty much the same thing goes for repairs – learn what things cost, then when you look you just make a list of repairs needed and add them up.
You’re right to be hesitant- you simply cannot determine if a deal is a deal if you don’t know the ARV or the repair costs.
I’ve been lucky- I worked for a summer for an appraiser, and as a favor, he now gives me MLS access so I can get my own comps. I’d recommend finding an agent you like, tell them that you’ll use them if you submit any offers, and get them to tell you accurate comps. It’s easy for them and won’t cost you anything. Ask them for sales on the same block, of similar size, condition, etc. Ask for dates, too- the market has changed a lot over the last few months. Another thing I still do to get offer prices is to look at the tax records for properties on the same block that have recently sold. My reasoning is that most deals aren’t listed, and I want to know what other investors are paying for similar houses.
As for repair estimates, when I started out, I visited a few houses with contractors/handymen to get an idea of what certain things would cost. Everyone knows someone who does construction. Find someone who is willing to look at a few properties with you, and tell them they’ll get the work when you buy it. If they won’t come with you unless you own it, tell them you have it under contract already. I met another investor who was also a GC- by calling on a FSBO sign on a house he rehabbed- and we looked at a ton of properties together.
Basically, these things are tough at first but only get easier.
nice website Dave. hopefully, we’ll get there soon
as for the post - rehab costs i found very frustrating. so what i had my partner do, was go to home depot and price out EVERYTHING that may be used as material for a standard rehab.
we rated everything GOOD BETTER BEST
I also went to library and used RS Means book.
And as for the labor - anything that my partner can’t do - we estimate $1 dollar for every .75 of material.
I also must add, that we have not purchased a rehab yet
i really like what Dave wrote about hooking up with a realtor. Dave - how do you determine what realtor to approach regarding your rei’ing? and, how do you approach them - especially when your company is just starting out?
Thanks for checking out my site.
Going to Home Depot is a good idea. You can even ask them how much they would charge for the installation- it will be ridiculously expensive, but will work pretty well to put together a tentative budget. RS Means can be helpful but it’s tough to use without having specific details from an actual project.
As for finding a good realtor, I’d recommend calling agents that are selling a lot of fixers or shells. Go to their websites and check out their recent sales. If you can find someone who has experience working with investors, they can be of great help. You can also try going to houses that are being rehabbed, ask to speak to the owner, and ask them if they could recommend an agent. You’ll probably find that there are a few major players in your market that have a lock on working with investors.
Finally, the best thing you can do to convince a realtor you’re serious is to have a solid pre-qualification letter. Even if you don’t have a lot of money or experience, it’s really easy to get one. If you can’t get one from a bank, get one from a Hard Money lender- they’ll do it based on credit score alone.
Hope this helps,
what Hard Money lender do recommend?
I’d recommend going with someone local- they’ll have a much better idea about the ARV and getting draw inspections will be easier. If you’re just wholesaling the property, then get a letter from whoever will give you one.