Am I shooting myself in the foot with my repairs? (long) - Posted by Terao
Posted by Terao on June 20, 1999 at 12:48:53:
I feel like I have the world at my fingertips…
I have been trying to develop a cookie-cutter approach to investing using several different approaches…
One area where I haven’t been successful yet is with retailing/wholesaling homes… The two deals that I had lined up I backed out on because I underestimated my costs - I lost a lot of the little capital I had. Ug. But better than losing a lot by going through with the deal.
I feel like a moron because I have access to the MLS (I am not a realtor) so I can search myself and find properties with motivated sellers, handyperson specials, etc… I can even run my own comps, etc…
I have been looking at a lot of properties (all in need of repair with motivated sellers)and trying to estimate repair costs - I rarely go inside in the property (don’t want to drag my Realtor all over town) so if I can’t see someting, I assume it needs to be fixed - within reason of course - if a property says in the remarks that the electric was upgraded, I wouldn’t figure that in.
So for example on a recent 2 story, 1650 sf brick home, I figured:
roof (shingles ripped off and replaced) -1500
exterior paint(minor prep)-1200
interior paint(new sheetrock to replace panelling then painted)-1000
new wood (sheetrock & moldings)-1000
upgraded electric - 1200
new windows (23) - 3350
new bath - 1000
landscaping - 500
miscellaneous - 1500
Now I realize that no one can accurately estimate repairs without looking at the property, but are these estimates in the ballpark that CRE investors use when you determine your offers? Do you think they are too low (I am in the NE)? I always determine the FMV, take 70%, and then subtract the repairs, then whatever I feel I can wholesale the property for. I have put in about 16 offers so far, but am still waiting for my first taste of success. I just wanted to know if I am playing the game right. I will put out another 20 or so offers in the nest week. Thank you to everyone who posts on this board - not only has it changed my life, but I feel like I am playing Monopoly every day(my favorite game as a kid)!