So you've started looking at properties with an eye toward flipping them to rehabbers or other investors$%: Now you need to know how you can estimate the repair costs, and you don't have a background in construction$%: This article is for you.
The steps you need to follow are simple. If you do these things you will become good at estimating repairs very quickly.
One- Look at a lot of property. There is no substitute for this. The more properties you look at, the better you will become at SEEING what you're looking at. The detail that escape you when you first start looking will soon become second nature to you. Things will pop out at you, and you will become accustomed to the problems that houses have and the things that commonly go wrong with them.
Two- Get to know a contractor. If you're not in the building trades, you simply aren't going to know what things cost, and how difficult they are to repair. Get a contractor on your team (See ). Hire one if you must to walk through several properties with you and tell you how much various repairs cost.
Three- Keep a log book. Write down what your contractor tells you about how much things cost, and keep a record of what you learn as you estimate costs and make offers. Check back with rehabbers you wholesale properties to and find out what the repairs REALLY cost them. Determine how close you came in your estimates.
Four- Visit home centers and building supply stores often. You should have a pretty good idea of what material costs are, and whether they are moving up or down. Know the costs for a sheet of drywall, lumber and plywood, roofing material, kitchen cupboards, flooring, and plumbing fixtures.
Five- Learn average "major systems" costs. What does it cost to replace a major room or system in an average home in your area$%: For instance, can you update an average size kitchen for $3,000, or would it take $4500$%: Does an average size bathroom cost $2,000, or is $2,800 closer$%: If a house needs a whole heating system, will it run $1,800, or $2,500, or $5,000$%: You should be able to virtually memorize things like driveways, roofs, kitchens, baths, heating and cooling, plumbing, and electrical. It's not difficult, once you're looking at a lot of houses. Write everything down in your log book.
In short, do your homework. After about three to six months of diligent study and comparing, you should gain a high level of competence in estimating repair costs. Soon, people will be coming to you to find out about these things.
When you walk through a house, you will be able to confidently size up what it needs and estimate the repairs in about ten minutes. Formulating your offers will become a snap. Once you have the knowledge, it will be yours forever.
If you combine this skill with a thorough knowledge of market values (see ) you will be a virtually unstoppable real estate investing force in your local market.
Now, go make more offers!
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