Hello! So I’m learning to wholesale. I’m stuck on this one part of the process, when do you get the repair cost? As in what point of the process do you get a reasonable estimate on repairs? It seems risky to do only after you get the property under contract. I assume then you always get a chance to walk through a property thoroughly before making an offer to get it under contract. Is that how it goes? Nothing I’ve read or researched really talks about this part.
Hi,
If your going to wholesale your going to need to learn to assess deferred maintenance, repairs and rehab / remodel costs. Generally speaking I am evaluating the property and applying a cost to bring the property up to modern standards.
If you make contract offers blind you need a inspection contingency to insure you get to walk the property and make assessments after the fact of contract acceptance. Remember labor costs are subjective and the cost of labor has to be calculated with burden, burden is the additional cost of liability insurance, workers comp, employer contributions and misc. costs of employment.
Remember to pay attention to the properties age as anything built before 1978 could contain asbestos, lead based paint, leaded waste and drain fittings and lead solder or galvanized piping. Electrical systems can have old style screw in breakers, knob and tube wiring, ungrounded circuits, etc.
Be aware of wood rot, area’s of infestation and termite damage as there potentially expensive to repair.
Take a trip through Home Depot, Lowes and Ace Hardware to get familiar with material costs. Labor can be calculated by purchasing construction cost data books by RS Means, this allows you to figure labor costs based on linear or square footage.
Good luck,
GR
I will bet there are a lot of wholesalers that never got far and gave up because of not being able to calculate repair costs.
I have found that to be the least of my concerns. I get the property on contract for the lowest possible price. I then add a fee that I want and send out the address and price to my buyers.
My buyers know how to do their own due diligence. They visit the property, they calculate repairs and profit margin and let me know if it’s something they want to buy.
A few times when I cudnt sell the property I was able to negotiate a lower purchase price from seller or to simply cancel my contract and walk away. One thing that’s important is to have an idea of what the Fair Market Value will be if it was in great shape.
There is NO risk wholesaling, a few times I lost a $5 or $10 earnest deposit.
A few times a potential buyer wud ask me what I thought it needed, if the house was really bad, I wud say $20-$30,000 If it wasn’t to bad, I wud say $10-$15,000
If an investor tells me a house needs $30,000 in rehab I wud immediately think, that means $40,000
Nobody is going to hold you liable for telling a buyer a price and then it costing more. Buyers know the risks, they know everything takes longer than you think and costs more than you think.
Don’t worry about the blankity blank repair costs, I personally luv houses that need extensive repairs or the seller says they think it’s a tear down. That’s where I get my best deals.
Now, get out there and do some deals, make some money and stop over analyzing this simple process. .
Rando