Estimating Repairs For A Rehab Project
One of the most important aspects when evaluating whether a property is a potential good deal for your business is generating accurate repair estimates. While no one is expecting you to necessarily be as knowledgeable as a licensed contractor right away, if you want your rehab project to make money and your business to have sustained success, you’re going to need to consider your own repair estimates to be one of the most critical pieces of your deal puzzle.
Prior to putting in an offer on a property and prior to even bringing in a contractor for repair quotes, you should tour the property yourself to determine if it’s even worth your time to continue with the property. Once you’ve had some practice, it should take you no more than 20-30 minutes to completely analyze the property from top to bottom, and with a little bit of repetition you’ll be nailing down accurate estimates in no time.
You should always have a digital camera with you and ensure you take multiple pictures of everything and anything on the property. This way when you get home after a long day of property previews you can review your photos to remind yourself of the different features of each of the properties you were just looking at! Be sure to take close-ups of any damage you find, cupped shingles, broken windows, cracks in the foundation, warped floors, etc. so that you have a real picture of what kind of repairs need to be done.
While you’re evaluating a property, another key item to have with you is an UP TO DATE property inspection sheet. This standard checklist of items to evaluate and the approximate cost to repair/replace them is something that you should bring with you to every property. Is that roof going to cost you $3,500 or $6,000? How many windows need to be replaced at $200 a pop? Will it cost you $2,000 or $4,000 to get the interior of the house painted? The answers to all of these questions can be quickly estimated if your property inspection sheet is up to date with current prices from your contractors. And don’t be afraid to update them with accurate prices on items you will purchase from your local big box home repair store. That way you’ll REALLY know how much your bathtubs, sinks, and tile are going to cost you!
It doesn’t matter whether you start your repair estimates from the outside and work your way in or vice versa. After you go around the exterior and interior of the property and derive an estimate of the repair costs, don’t forget to include extra items like dumpster and porto pottie rentals, which could add $1000 or more to your project costs, and always give yourself a “fudge factor” of about 5-10% of your total repair estimate. And when in doubt, ALWAYS estimate high…it could be the difference between a successful project and a money pit!
Very nice article. Informative and to the point.
Comment by Shaun :: August 20, 2010