Am I shooting myself in the foot with my repairs? (long) - Posted by Terao

Posted by TERAO on June 21, 1999 at 11:37:55:


Are you doing the repairs yourself? Also, are you selling the properties retail, or are you holding them to rent. I actually thought my numbers were on the LOW end - and I really did try to price everything tout by going to Hoem Depot and contacting small-ad contractors.



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 kitchen-1500

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)!


Re: Am I shooting myself in the foot with my repairs? (long) - Posted by Irwin

Posted by Irwin on June 21, 1999 at 20:24:47:

What you’re doing looks more like restoration than repairs. While I might use these estimates to make a point with the seller, I think you can cut costs a lot.
You’ve got $5350 allocated to landscaping, windows and miscellaneous, which are things you should do only as a last resort to try to sell it. There are all kinds of lower priced windows on the market.
You don’t say how much the repaired house will be worth vs how much it cost you, so it’s hard to tell how much to spend on repairs.
I try to relate my repairs directly to resale value, i.e. If I spend $2,500 on some cosmetic repairs, can I double my money in resale value? Sometimes not, but sometimes a small expenditure comes back to you four or five fold.

Re: Am I shooting myself in the foot with my repairs? (long) - Posted by Glenn-PA

Posted by Glenn-PA on June 21, 1999 at 06:33:31:

I too am in the northeast. I’m currently working on my third rehab. Your numbers look ok. I try to keep my potential buyer in mind. For instance, my first project was in the lower price range for my area and new windows wouldn’ t have provided much of a return so I repaired and dressed up the existing - just an example. Keep your buyer in mind. Maybe put an inspection clause in your offer - if it’s accepted then go in and get accurate repair estimates.

Re: Am I shooting myself in the foot with my repairs? (long) - Posted by Dick Schmidt

Posted by Dick Schmidt on June 21, 1999 at 02:40:28:

Wow, you’re spending a LOT of money on a rehab. I buy houses that are so bad that most investors won’t even touch them (Cealings fallen in, open to the sky, all wiring ripped out with a pick up truck etc.) and still try to limit what I spend to under $10,000. Unless you’re buying $250K houses for $150, you need to cut back a bit. Try fixing what’s actually broke and forget the rest.

Re: I’m no expert so… - Posted by chris (FL)

Posted by chris (FL) on June 20, 1999 at 20:10:00:

take what I say for what it’s worth. … You’re #'s seem in the right ballpark… Make sure you’re comps are in line too… The 1/10, buy/offer ratio that we’ve been told doesn’t work in this hot market. You’re in competition with lots of people that are discovering that a heartbeat is all that’s needed for financing. & let’s not forget all those investors out there as well. Perhaps 1/25,30 is more realistic now. Of course it all depends on where you are. Good luck.

Re: Am I shooting myself in the foot with my repairs? (long) - Posted by Brad

Posted by Brad on June 20, 1999 at 14:03:44:

Terao, of course, as you stated, all houses have little quirks and you cannot always tell what something is going to cost. But I have estimated the repairs VERY closely to yours, and because I second guessed myself, I had my handy man go out with me before, just to make me feel better. I was right. Don;t be afraid to take the plunge. If you are, try flipping to investors first. I am glad to see that you are taking steps (Don’t get me wrong, I am pretty new myself) to get going and just do it. You may lose a game once or twice, but I have met several millionaires, and all of them have failed at least once. Many, many more times. I don’t fear the mistakes that I know that I am going to make any more. I look forward to learning from them, but do everything that is reasonable to avoid them. But paralysis by analysis does not affect me any more. Wish you the best of luck,