Wholesaler looking for renovation quote help
Hello all, I'm new to the renovation game in real estate as I just got out of college. My big question is when quoting a renovation, since I don't have the experience what is the best way to come up with the right ARV so I can make the right offer. Is it just time and experience, knowing what costs what or is there a better way?
Quote from @Alex Ferranti:
Hello all, I'm new to the renovation game in real estate as I just got out of college. My big question is when quoting a renovation, since I don't have the experience what is the best way to come up with the right ARV so I can make the right offer. Is it just time and experience, knowing what costs what or is there a better way?
@Alex Ferranti, do you mean "after-repair value (ARV)" or "repair budget?"
The ARV is determined by sales of nearby comparable homes. If you can get a local agent to pull a list of recent transactions, you should be able to estimate, based on the photos, what your target property will sell for post-renovation.
The repair budget is the list of repairs (with estimated costs) required to make your target property look like the "ARV homes" you found above. An experienced investor could walk a property and work up that list. For now, you'll need to engage an experienced general contractor to help you identify the repairs needed and the associated costs.
@Mitch Messer thank you for your reply, the repair budget is what I'm struggling with, I was thinking about bringing a contractor when I walk a house. Do you have any advice for using the pictures provided? I am a relator so I can do the ARV on comparable homes. Thank you again.
Quote from @Alex Ferranti:
@Mitch Messer thank you for your reply, the repair budget is what I'm struggling with, I was thinking about bringing a contractor when I walk a house. Do you have any advice for using the pictures provided? I am a relator so I can do the ARV on comparable homes. Thank you again.
If you can walk it with the contractor, that would be my #1 recommendation.
As a distant second, you could gather up all the photos and vids you have and just send those to your contractor to get their high-level estimate.
But, you want #1, not just because it's more accurate, but also because you get to ask your contractor questions as they walk the property to better understand what they are looking for!
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Mitch is spot on in terms of getting a realistic repair estimate (and don't forget to add a contingency because no matter how much experience you have there will always be something that comes up unexpected and adds time and cost) is key.
Contractors are stretched nowadays especially the good ones. Very few will walk a property down with you before you have it under contract. You can write the contract that it is contingent on an inspection with a contractor and use his input to make or break the deal but you need to be in the ballpark when you start. I am not talking about a home inspection which usually says "get a professional opinion" which is what you should have gotten to start with.
The other option is to join a local REIG and see if you can walk a few properties with members that are doing them and compare notes. They can show you how to come up with a repair estimate for your area (which can vary from other areas)
Good luck in your journey
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@Alex Ferranti, this is a very nuanced piece of the pie. As noted, having a contractor walk the property is key. Given that you mention "wholesaler" in your post title, are you looking to get deals under contract and then "wholesale" them to the actual investor?
If so, I would also start building your investor database and talking with as many as possible. Hopefully have them tour you through some of their properties and ask them how much they have spent, what they did, etc. You will likely start to get a sense of not only what these investors are looking for, but also what their costs are to execute their vision.
And at the end of the day, I would assume these are the types of investors you want to ultimately service, since they are more likely to be actual buyers and not just dreamers.
Quote from @Alex Ferranti:
@Mitch Messer thank you for your reply, the repair budget is what I'm struggling with, I was thinking about bringing a contractor when I walk a house. Do you have any advice for using the pictures provided? I am a relator so I can do the ARV on comparable homes. Thank you again.
Contractors won't want to walk houses with you that you're not going to buy whether you have them under contract or not. And even if they were, it would be a waste of everyone's time. The reason is your scope of work will not match that of the people who will take your assignment. Each investor who evaluates your deal will have their own plans for it in terms of rehab & contractor pricing. These will vary by thousands of dollars if not tens of thousands. That's kind of good news for you because what it means is you just need rough ballparks that don't have to be super accurate because you're using those ballparks as a means to negotiate a price with the seller. Within a few thousand for a generic rental rehab and again as a generic flip rehab is probably fine.
My advice here is to use your network: find folks who are doing a lot of renovations for flips and/or rentals and ask them if they'd share some numbers for you for recent projects. Get a feel for the big stuff and just pad your numbers.
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i would work with a local realtor to get comps and market analysis . This is easily accessible for them in the MLS system . For the renovation i would call 3 contractors off of google and have them give you estimates for the renovation . You'd take your arv comp less your renovation and then decide what profit you'd like and offer from there
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As a buyer from a wholesaler , first I wont believe what you say is the ARV , second your estimate of repairs would be useless , refer back to " I wont believe you .
As far as getting a contractor to walk the property , yes they will , you just have to open your wallet
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As Matthew said, anyone that buys from a wholesaler without verifying the reno costs and the ARV is asking to be taken . . . . as the saying goes "Trust but verify". I do think that a wholesaler that will do well has to have a feel for both numbers otherwise they are wasting everyone's time tying up the property.
Not sure where you are in terms of getting into the game but while paying a contractor to look at a property is an option, unless you have it locked up it will cost you for him / her to come by and "teach" you what they see and the costs. It would be better to try to connect with someone in the REIG that can walk you through some of their properties . . . even if it costs you a nice dinner it will be a cheap lesson.