Posted by Matt B on March 28, 1999 at 09:46:15:
Do yourself a HUGE favor and buy Ron LeGrand’s Quick Turn course from this website. It will answer all your questions and tell you how to get going.
Good luck and don’t be afraid to post here to ask for help.
Flipping/Inspection? - Posted by Tamika
Posted by Tamika on March 28, 1999 at 07:36:50:
When doing flips, how do you determine what work needs to be completed on the property and the cost of the work that needs to be done? I’m a newbie and have no idea how to assess repairs.
I’d be comfortable getting a minimum of $1500-$3,000 from deals. I understand that rehab investors, generally, want to make a minimum of $10,000, is that correct?
Do I get an inspection, at a cost of about $180, to determine what problems exist with the property? Do I use a contractor or an inspector to give me an estimate of repairs? Or do I tie the property up with a contract (of course, using an escape clause), and then take my perspective buyer over to estimate what the repairs might be?
Any help with this would be greatly appreciated, I’ve located a couple of inexpensive properties and would like to go look at them within the next day or two.
Tamika
Estimating Repairs - Posted by Baltimore BirdDog
Posted by Baltimore BirdDog on March 30, 1999 at 16:43:15:
Dear Tamika,
Like Matt B said, purchase LeGrand’s materials which fill in a lot of the details of the wholesale biz, including estimating repairs by yourself and determining market value. The short answer to your question, though, is…
When making an offer, do your best to estimate costs and then pay a retired contractor a set fee (c. $50) or a percentage of your profit to help you estimate costs once you have the property under contract subject to an inspection of the interior. If you’ve underestimated the costs, either renegotiate or back out of the contract. Even if you didn’t have the “subject to inspection” contingency, you’d only lose your earnest money deposit as long as your contract limits your liability to your EMD.
BUT, educate yourself on how to estimate repairs so you can eliminate the added hassle of having someone else do it for you. While building the list of buyers that you can flip to, you will find an experienced rehabber or two. Ask one of them if you can tag along on a house or two to watch him estimate costs so you can do it yourself. In return, you might offer to find him a rehab property without charging any assignment fee. At the very least, go down a list of potential repairs with a handyman, retired contractor, or rehabber and have them give you ballpark estimates for an average, 1200 SF house.
In the final analysis, estimating repairs is not hard and only takes about 5-10 minutes per house. The estimates don’t have to be very exact because a) you build in a repair cost contingency of 10-15% in your repair budget and b) you build into your offer a profit for your rehabber of at least $15,000. In fact, in terms of minimum profit, 20% of the after-repared retail value with a minimum of $20,000 seems to be the norm.
Good luck, and once again, I highly recommend the LeGrand materials. I’ve got his Wholesale/Retail Cash Flow System, and it’s fantastic. You can order it through his website (www.success-di.com) or order his Quick Turn, Fast Cash Real Estate Course through CREOnline. I’m not sure of the differences, but I suspect that the latter focuses more on the flipping and not the rehabbing part of the biz. Sounds like you’re on the right track. Keep it up!
-Jeremy