Welcome back to the blog! If you are in California I hope you are reading this from your boat, as most of the homes are under water. This El Nino has been crazy, and we are on day TWO! Well, I am a little behind on my posts for you guys, business has been crazy. 2 roof leaks, flooded basement, break in with a squatter, and I am closing on another deal at the same time! Yep I have been busy, but I am very thankful, and I am happy to be here putting down some knowledge for you.
First things first, why is an estimate of repairs crucial going into your flip project?
- The marketplace is very competitive, because it is such a great business, and you need to be able compete when you find your project numbers.
- If you go in blind you may miss some HUGE problems. If you budget runs over you don’t get paid and even worse could lose money, and that is something you DON’T want to do!
- When working with investors they want to know what the plan is and how much it is going to cost. Doesn’t seem like much to ask if you are borrowing there money…
Now we are aware of why it is important so lets go over how it can be done. The Estimate of Repairs sheet I use is located in my book with the attachments, here is a link to your FREE COPY. Grab that and lets continue. On the sheet you will see that everything is broken in to corresponding sections based on where it is located and the associated items. Each Item has an associate cost as well. Here is a video on how it works
If you don’t watch the video, you should but if you don’t, here are some tips for you to get through the sheet and get a good estimate.
- The process starts as you walk up. Start with your sheet on the outside of the home. You will notice most of the observations in the beginning are done from the outside this is on purpose!
- PRO TIP- Count windows before you go inside. Make tally marks on side of sheet to ensure accuracy
- Take note of any cracking that is noticeable on the outside. Then check on the inside for matching signs of damage. If you are concerned or have doubt bring in a licensed contractor who works on foundations to inspect
- If you have a working relationship or are building one with a GC have them join you on the walk
- If the home is on septic locate the tank and get any information you can on it. Such as;
- Last pumping
- Last inspection
- How old it is
- Where the leech field is located
- How often it is pumped
- Refer back to Executive Summary of property when walking. Make sure you are adding costs for those items NEEDED to sell at the price you are comping for.
- Margin of error- Verify your costs vs the sheets costs. Prices vary in different states and areas. Lastly add your 5% for error and omissions that you have made on the sheet.
Now, one of the most important aspects to knowing your repairs is getting the bid that matches by a contractor. At this point you have walked through the house, you have made your estimate of repairs, and you are able to write your offer. The next crucial step to take on is the contractor bid portion of this process. This is outlined in “Contractors Suck… the money out of your deal” attachment in my Book. Here are some steps though;
- Put together Scope of Work based on findings in your Estimate of Repairs
- Schedule AT LEAST 3 contractors to walk the property with your Scope of Work
- Have each one provide you a bid for all of the items, and any other items they see that will need addressing.
- Require the contractors to give you a thorough Scope of Work back with line items for each part of the Scope of Work so you can make Apples to Apples comparisons between bids.
- Vet contracts, negotiate and finalize your number
This is how you can get your estimate for repairs in a nutshell for your project. If you are looking for more in depth knowledge on Real Estate Investing check out the Better Tomorrow Group Mentorship site. We offer in depth interviews, forums and access to more knowledge right from you computer! Until Next Time
Andrew T Greer
CEO Better Tomorrow Group
Andrew is an active investor, speaker, Realtor, serial entrepreneur, and educator in all that is Residential Real Estate. If you would like a FREE copy of his book follow this LINK. If you would like to follow him on Social media you can find him on Instagram @beastmoderealestate and @bettertomorrowgroup on Twitter/Periscope @TheBTGRoup and Facebook at Better Tomorrow Group.