From Someone Unfamiliar With The Legrand Technique - Posted by JPiper
Posted by JPiper on May 05, 1999 at 17:52:50:
When I get bids they can range all over the map. Last year as an example I got bids to paint the exterior of a property. Low bid was $1000?.I buy the paint. The guy was unlicensed, uninsured and new in town. The high bid was close to $3000?.they supply the paint. Licensed painting contractor, well-established. I accepted a bid for about $2000?.they supply the paint, licensed.
You can get bids with huge swings. It’s going to depend on how large the contractor is, whether he’s licensed, how much work he’s got, and whether he really wants your job. As you move from licensed contractors down to handymen your risk level will go up in terms of their competence and/or ability/willingness to complete a job that they start, along with the cost of the job.
The goal as an investor is to have a clue as to the probable range of bids. You can accomplish this in a couple of ways. Marshall & Swift as an example publishes a book called “Home Repair and Remodel Cost Guide”. It’s under $30. This will give you a high cost for virtually any repair (labor and materials) that you’re involved with. Handymen can ALWAYS beat these estimates?.and so can a lot of licensed contractors. But the Guide will get you in the ballpark on the high side of things.
The other thing you can do is delve into it more deeply. You can get the measurements for a roof as an example, and then call Home Depot. They can give you costs for a bundle of shingles, and tell you how many bundles make up a “square”. You can get the costs of waferboard or plywood sheeting, felt, nails, etc. You can get the cost of a dumpster. Once you’ve done this you will have a relatively accurate material cost. Call a few roofers (ask Home Depot for some references) and ask them what their labor costs are for a roof of a certain size (roughly), and how long it will take roughly. This should start to build a picture for you of hourly costs for jobs of a certain size. I’d call a wide range of contractors of different size so that you get an effective feel.
Unless you’re doing the rehab yourself, it’s primarily important to get in the ballpark generally?..not estimate it down to the final nail. You tie the property up on a contract using this number, with a contingency. Then the REAL key is to market the property, find out what rehabbers are willing to pay. In the end, the important criteria is what people are willing to pay, NOT what you think the repairs will cost. Real estate investors will all end up with different estimates of what a property is worth to THEM. This will vary depending on what the cost of their capital is, whether they do repairs themselves, whether they count labor costs, whether they will rent the property versus resell it, whether they have a built in buyer, whether they will resell through a realtor, and whether they have plenty of properties or not at that particular instant. We recently had a post regarding a property where estimates of what it would be worth to various responders ranged between $54K and $80K.
Bottom line is that the purpose of your estimate as a flipper is to get generally in the range?..tie the property up and then market the property like crazy. If you happen to find a buyer who does his own repairs, his bid may be significantly higher than a buyer who uses licensed contractors to do his work.