Estimating repair costs

[Tyler Child]

Hello,

I am closing in on purchasing my first rental property. I must say its been an interesting but nerve wracking experience. I've done my due diligence and pulled all of the information I could regarding taxes, utilities, and even went to the city planners office to pull the property file and look through to make sure no hidden surprises. I will only purchase on a discount as I want to make money going in, however I am trying to determine how big that discount should be taking in to account repair costs.

I haven't had an inspection yet, however my Dad who has been renting property for 30+ years came with me for our first showing. First off they don't have the utilities broken out per unit, so that would be something I would want to change. For the most part the interior looks in good condition, nothing major needs to be done, we may run a better electric line to one of the units so we can add a stackable washer/dryer. The exterior has some wood rot where the roof meets the siding, the door sills also have some wood rot and on the corners of the building. The big issue I forsee is the age of the Sceptic system which looks to be 24 years old. I've done a little research and a well constructed sceptic system will last 20 years. The local sceptic company estimated a $15k-$20k expense to replace one with a double tank for a building of this size.

So if none of these repair costs are a deal breaker, then how should I construct my discount.

The property is listed at 260,000. With no repairs I would go no higher than 240,000 so that I make my money going in. Tacking on the expenses of the wood rot repairs (maybe $5k), plus another $20k for a sceptic system, then I am looking at a $45,000 discount off the list price. Does that sound right to you all? Should I calculate the discount a little different?

I love this community.

Best Regards,

Tyler