How to estimate repair cost for rehabs.

[David Walls]

Hey guys, my name is David Walls and I'm new to the REI industry and will begin with wholesaling. I'm a freshman at the University of Illinois Urbana Champaign, and I'm looking to find a mentor in Illinois, partner, or REI friendly agent. Back to the topic, I generate plenty of leads but I have problems with the parts after that. Estimating repair cost, ARV, running comps, and getting it under contract and closed. I've built a buyers list already, so I'm good in that area. I was told that I should find contractors who will do free estimates to figure out thqe repair cost. Any suggestions?

[Anthony Hornbeck]

@David Walls Welcome to BP!

I'm a real estate investor in Champaign as well and recently got my Real Estate License in Illinois in order to delve a little deeper into REI. I'd be glad to sit down and chat sometime to talk about your plan and your missing pieces. I'll address a few of your points, but let me preface by saying that I don't personally work much in the wholesaling realm, and so my comments are towards real estate investing in general. There's also a ton of great information on this site that I'm sure you can find via the search functions above. (Other BP members will drop by with links too I'm guessing.)

I'd suggest that for your ARV calculations, you use comps. You can do this yourself by filtering for recently sold properties on Zillow, realtor.com, trulia, redfin, etc. You can also ask a local realtor to do a CMA for you, which they will often provide as a service at minimal or no cost (CMA stands for comparative market analysis, and used in conversation just like "running comps" or "BPO" - Broker Priced Opinion). We can talk a bit more about how the analysis is figured if you'd like.

Estimating repair costs can be a bit trickier, especially when starting, but everyone has to start somewhere! I would suggest that if and when you decide to use contractors for the estimates, you are clear with them on your plan and that you work out some sort of deal so that they're not wasting their time. This can look many ways, but here are a couple ideas - You may simply offer to provide the quotes and contractor contact info to any future buyer. You may actually prefer to create a long-term relationship with a few contractors and pay them a one time fee for estimates. Whatever you choose, just make sure you create a long-lasting positive relationship, as it's worth it in the long run. You don't want to burn any bridges or abuse a contractor's services. Champaign is large, but small enough that you could run out of good options if you're not doing good business. 

As time moves along you'll be able to do a lot more of the basic estimations yourself. You might want to streamline a bit more, using standard costs and numbers for many of the smaller repairs. J Scott's Books are beneficial in this area, and even if they don't provide a perfect price for your repairs, they offer a lot in terms of systems and processes. You should check them out if you haven't already. Just search for:
The book on flipping houses
The book on estimating rehab costs

Feel free to reach out anytime to talk shop. Best of luck and add me to your buyer's list!

Oh and one last tidbit: Just keep in mind that business professionals provide "free services" in hopes of creating relationships & revenue. You want to make all business interactions win-win! If you're hitting a home run, make sure you're team is feeling the wins too, and they'll be in business with you for the long haul. It's much less stressful, and less time-consuming. When you set the bar high, a strong team will hold it up with you. 
I think I got preachy? Perhaps I'm trying to tell myself something!