Best way to estimate repairs before purchasing?

Question

So, I think this the best place to post this, as it's a starting out question...

Here's the situation: I'm just getting started on the BRRRR route (I've done turnkey in the past, but I want to see if I can get higher returns through BRRRR), and I've reached out to a bunch of wholesalers, am on all kinds of mailing lists, have bookmarked all kinds of websites, and am working with a realtor to help me scour the MLS.

So far so good. I've identified a couple opportunities, and they seem interesting. Whether or not they're good depends entirely, however, on how much in repairs are needed. And that's where I've run into the problem: how do I get a reliable or semi-reliable estimate of the repairs needed?

I've thought through a couple ways below, and have identified the issues I see with each:

1. I go and see the property myself, and I estimate the repairs. There are two problems with this approach:

First: I know more or less nothing about repairs. I'll learn over time, of course, but right now I'm no better than randomly guessing the repair amount.

Second: I'm investing out of state :/. Combined with #1; this is the deal breaker. The ROI on flying me down to the area to just guess randomly at repairs is awful. This option's out.

2. My realtor takes a look, and estimates the repairs. Two problems with this approach:

First: My realtor does have a sense of how repairs cost, but he's still not an expert. So we've reduced the margin of error, but it's still decent.

Second: it's really not clear that my realtor will want to do this; what's in it for them? Some of these properties are wholesale deals; we're talking 10K upfront. I'm probably going to have to throw in some money on an inspection by inspection basis to make it interesting for them. Or do something, I don't know.

3. My contractor takes a look, and estimates the repairs. This has the advantage of going to the expert directly, but:

First: It's really not clear to me that my contractor will want to do this on a speculative basis. If I have a real deal for them, yes, of course. But if I need them to look at a bunch of houses, they won't want to do it unless they're somehow getting paid for their time. Which...as I type this, I'd probably be willing to do.

Second: if they're available. They're pretty busy, and probably not available to swing by properties all the time (and properties move fast, where I'm looking).

4. I hire an inspector do an 'inspection lite'. I don't need a full written report at this point; I just need someone to kick the tires and give me a rough estimate of repairs. This has the advantage of using an expert, but has the slight disadvantage that these are estimates, not quotes. Still, I can be fairly confident that they didn't miss any major issues.

Having typed this out, I'm leaning toward 3 and 4: having a conversation with my contractor and seeing if they'd be willing to give me estimates for a small fee, and if they're not available, talking with a few inspectors and seeing if they'd be willing to do the same.

What do others think of this approach? How do you do it?

Sean Ridlon · Answer

Anybody saying, "Pay the GC for their time" will get an up-vote form me! Another option: see if a GC wants to go in as partner with you: you provide the acquisition capital, he provides the labor and materials, you sell and split the profits.

Johnson Lo · Answer

Hi Justin, I’d say option 2 is a valid option. The agent can narrow down the list of potential properties so that the contractor only has to view a handful instead of a dozen. The benefit for the real estate agent is that he/she can make commission for the sale of the property if the agent finds the right property that matches your criteria. You can pay the contractor to do the estimates to make it worth his while. Eventually down the line, if you keep bringing business to him, he might do the estimate for free since there’s a level of trust built. I’d say another good resource is David Greene’s book on Long Distance Real Estate Investing. He’s a big advocate on the BRRRR method.

Christopher S. · Answer

I read J Scott's book on Estimating Cost. It does give some good advice on how to get a good estimate. You can try getting a realtor in the area to take pics of property or virtual tour in order to see what stands out that will need to be fixed. Once you see if the numbers make since, you can put offer in with contingency based on a gc or inspector giving you a more accurate idea.

John Leavelle · Answer

Howdy @Justin V.Since you invest out of state you definitely will need other to do the walk-thru/estimating. You can use both the Realtor and a General Contractor to do this. They can vouch for each others observations. You will need to pay the GC for their time. Get an inspection if the deal looks good to reconfirm the first estimate and address an issues missed. You can also develop you own skill by getting J Scott's book "The Book on Estimating Rehab Costs" sold here on BP.

Brian Pulaski · Answer

No matter who goes and looks at the property for you, whether it is the realtor, inspector or contractor, I imagine at some point they will not be doing this for free. Maybe they do a few for free, but if you have them going to 20 houses, and they are spending 1-2 hours doing this each, no one in their right mind will do this for $0, or the "future business" they might receive. At the end of the day you are relying on them to give you good accurate info. Not something I would do (other than the contractor and I would have to trust him prior).

Carol Zeroual · Answer

I agree with Johnson Lo.

Cody Evans · Answer

Since you are the one buying the house I would lean towards getting inspections however I would factor this into your calculations for expenses the first year which would affect the ROI. Definitely get other opinions but my thought is talk to the realtor about estimating repairs and add some conservative change onto it. See if they can take pictures. Then see if BP can help you estimate the costs based off pictures.