one thing I am not sure how to do is find out the after-repaired value and the cost of the repairs of a house when I walk threw. Is it just finding how many walls need painted…new carpet… new this…new that. What about what I can’t see?
This question is very common. The costs for rehab can vary depending on where you are. If you know a good handyman or contractor you can bring them with you in the early stages of wholesaleing until you become familiar with the costs of rehabing a property and how to determine what a property needs.
With that said it is also a good idea to call it your opinion of replacement costs because some investors may use higher or lower grade materials or may have to sub contract for certain jobs and therefore their opinion of the rehab costs could be different than yours.
Your ARV should be looked at through comps in the area - houses that have already sold in as good condition as you will bring yours to. Also, just because you rehab something and make it look nice and new, doesn’t necessarily mean it is worth so much more than any other home in the neighborhood. There are ceilings to value in most neighborhoods. So use comps to figure what you think the repaired value will be. You can do this before you even look at a deal.
When you get a chance to take a look at the property, use a repair list. This helps you in writing down repairs and also may help in reducing the price of the home by pointing out repairs. Cosmetic things aren’t as important as roofs, foundations, plumbing, etc.
Take a real good look around. The homeowners won’t mind. If you are unsure, bring a person who knows construction with you to the meeting. Also, put in your contract that you may bring in a home inspector and if you find something major that you can stop the deal. This will help you avoid any unforseen problems when you first make your deal. Always cover yourself.
Cost of repairs can be figured way before you look at a house. Go check out costs of cabinets, flooring, fixtures, roofing, painting way before you go to a house to try and buy it. This way you’ll have a pretty good idea of what costs will be because you know cabinets may run you $120 a running foot or?? Most newer rehabber under estimate repairs big time - and it then cuts into their final profit.
Good luck and have fun.