How to practice analyzing deals?

[Heather Carrow]

Hey guys!

I am trying to practice analyzing deals for house flipping with my calculator tools on BP, but I don't know how to estimate repair costs on a home without walking through the property with a contractor. Brandon always says to analyze a ton of deals before you do your first deal, but how do I analyze them when I can't come up with a rough repair cost? Does anyone have any tips on doing this?

Thanks!

[Jeff Joachim]

Hi @Heather Carrow. Learning to analyze properties remotely is definitely a valuable skill set. It is a big part of why our team is able to analyze and acquire properties anywhere in the country, and I suspect will take you far in the future as well. 

I learned to refine this skill, while buying properties from the public auctions here in Florida, and by selling and buying many properties sight unseen. 

You have definitely been directed to some great resources on here, and I hope to meaningfully add to the convo.

Keep in mind this is what has worked for me, and is a way to estimate, not an exact science. Nothing can replace physically walking the property.

With that being said, this is how I have been able to remotely calculate rehab numbers with the smallest margin of error:

First I determine the condition of the property using one or a combination of the methods below:

•  Most obvious: Get pictures  of the current condition of the property  (listing, google street view, zillow, etc), if available.
• Get information from the seller on the condition of the property- Talk to the seller or get a sellers disclosure if it is listed on the MLS.
• Look at the permit history- Some county code enforcement and permitting departments display a history of permitted work that can be easily accessible online. Do the research to see how long ago permitted work has been completed on the property. For example, if you  see the last time the roof was replaced was 30 years ago based on public records, you can make an assumption that the property will need a new roof. 

Next, calculate the appropriate level of rehab required for the neighborhood you plan to flip in.

• Is this a neighborhood with low end, moderate or high end homes?  Putting low end finishes in a high end neighborhood could affect your ability to take an exit, and over rehabbing a property will cause you to lose money.
• What are the kinds of repairs that the homes seeming to sell for top dollar have?  Do people in that neighborhood prefer modern finishes, is this this a historic community that prefers older more classic finishes, etc?

Now that you have determined the kind of updates needed to sell for your desired ARV, start determining how much it will cost local contractors to do the repairs. After getting enough quotes, repetition, and doing enough research you will eventually be able to estimate on your own.

Hope this has been helpful!