How to estimate repairs in under 10 minutes
By: Kris Ontiveros
Real estate investing is a math equation. To come up with the correct outcome you need to have accurate numbers. The two most vital numbers are the ARV (after repair value), this is home much the home is worth once it is remodeled. This is usually going to be a top of the market value. The second of the two vital numbers is repairs, how much it will cost to remodel the property.
In our current real estate landscape, there is a lot of competition and the good deals go quickly. As a Real estate investor you have to make quick decisions when you come across a new deal. It is vital to be able to give a seller or wholesaler a quick yes or no decision when they bring you a deal.
We created a process to be able to quickly and accurately estimate repairs. We use several factors to quickly and safely estimate repairs. With this system we can walk through a property and within 10 minutes have a good idea what it will cost to remodel a property. We can take that information and the ARV (after repair value) to help create your offer.
Be aware, every market is different, these numbers represent single family homes, under $200,000, in the Phoenix, Arizona area in 2016. Markets are constantly changing, you will need to adjust this formula to match your particular market.
The first thing we do is find out how much a basic cosmetic remodel would cost. In an average neighborhood in my market, I estimate $10/sf. So an average 1500sf house would cost around $15,000.
A basic cosmetic remodel can include flooring, paint, lights, fans, faucets, light landscaping, and a few miscellaneous items.
Next we add in all other major items like:
$4,000 for a new kitchen
$3,000 for a new bathroom
$5,000 for new shingles
$3,500 for a new AC unit
Anything on top of the cosmetic items need to be accounted for. Major remodels should be over estimated to make sure you don’t miss anything.
Example property:
1500sf 3 bedroom, 2 bathroom home. Needs a cosmetic remodel plus a kitchen, 2 bathrooms, and a new AC.
1,500sf x $10 = $15,000
Kitchen = $4,000
2 bathrooms = $5,000
HVAC = $3,500
Total estimate = $27,500
This is not going to be your final budget. This will give you a good idea of what the rehab will cost. Once you have this number you can plug it into your formula and make a solid offer on the property. Once you have it locked up you can get your contractor out to give you hard numbers. In this business you have to take calculated risks, estimating repairs should be one of your more reliable and consistent costs. It's important to get very good at estimating repairs so you can take your business to the next level.
Kris Ontiveros - Real Estate Investor - krisonti@gmail.com
Follow me on Twitter: https://twitter.com/azhomerenovatorFollow me on Facebook: https://www.facebook.com/phxcashflow/
Follow me on Instagram: https://www.instagram.com/azhomerenovator/
Visit me on Youtube: https://www.youtube.com/channel/UCaHF4097oEBtelEQHK25WrQ
No comments:
Post a Comment