How do I calculate the repair cost on a wholesale property?

Question

In the process of meeting with a seller, I needed a quick tip on how to calculate the repair cost on a property?  How do I determined  if it need a basic repair  or an extensive repair?

David Robertson · Answer

Hi Brandon,

As others have suggested there is no quick and easy tip.

Here's the process I would recommend to learn how to Estimate Rehab Costs & a few resources that I think will be helpful:

#1 Read the Book on Estimating Rehab Costs

JScott's 'The Book on Estimating Rehab Costs' is a great resource for new rehabbers to learn how to Estimate Repair Costs on 25 common rehab repairs.

https://www.biggerpockets.com/store/the-complete-g...

#2 Explore Lowes and Home Depot to Learn About Material Pricing

Take a tour through Lowes and Home Depot (or their websites) and look at finishes materials and fixtures that you will consider using in your rehab projects. This will help you get a better idea of what tile, hardwood, carpet, plumbing fixtures and light fixtures costs for your rehabs.

#3 Contact Local Contractors for Pricing

Call local Subcontractors and get budget pricing for common repairs on your typical rehab project.

For example, call a roofer and ask what their average cost per Square of Architectural Asphalt Shingle Roofing would be on a 1,500 sf house, with a 6/12 pitch.

Note: Some contractors will be reluctant to share pricing without seeing the property, but tell them you are just looking for a rough budget number you can use on future projects.

#4 Compile Your Prices into a Spreadsheet or Estimating Software

Once you start to get a better understanding of Labor and Material costs you will want to store this data into a spreadsheet or software that you can use to help you streamline the estimating process.

The Book on Estimating Rehab Costs comes with a spreadsheet that you can use to help you populate your own database of labor pricing and material pricing. Or you can download my estimating templates I have in my Biggerpockets fileplace:

Simple Estimate Spreadsheet

Detailed Estimating Spreadsheet

There are other Estimating Softwares available as well which can help you manage the Estimating process as well...

#5 Practice, Practice, Practice

Walkthrough potential rehab properties (or find properties virtually online) and practice creating detailed scopes of work, quantifying repairs and estimating rehab costs for the projects.

If you are not willing to put in the time to learn, then you need to find someone that has construction experience that can help you with this process.

John K. · Answer

@Brandon RayThere is no quick tips on estimating repairs, because it is entirely market specific. However, there is away for you to learn your local market, in a more efficient manner.Home Depot/Lowes, will provide you a great insight into what the going rate is for many of the projects that haunt investors, the big ones. You can utilize one or both companies, to key into costs for the following projects:  a. Roofing  b. Flooring

c. Fencing/Lumber

d. Specialized Plumbing (Water Heaters, Pumps, Tankless Heaters (if your stores offer), I don't believe either offers repipes or replacements, but you can ask.

e. Painting ( not sure if they offer this service, but some might)
f. Drywall

Now, you will need to do some quick math. In general you can reduce most of those costs by a very conservative, 30%. Some of the projects will have less markup, others will have considerably more. For example: I pay $.99 per sq. ft for 3/4" unfinished oak hardwood, the similar item at HD, $2.79 per ft. At some point you will need to start honing in those costs much more, but this will get you started.

The reason for this, is that both HD and Lowe's contract with local distributors of these products to be delivered to their stores, and local contractors to do the work. They of course mark both sides up. They could not afford to distribute these items, themselves. This is the reason you should never buy items like these, at those stores. Find your local distributors, they will save you a ton.

As far as painting, just call a half a dozen "paint only contractors" and give them the scenario and have them ball park it. They will want to come see it, but there are some that will be happy to ballpark it over the phone. Make sure you give them different scenarios, with texture, without texture and removing popcorn...etc. Ask them for labor only costs and then costs with the paint, then compare their paint costs with HD/Lowes or your preferred paint supplier.

You can do this for any task that HD/Lowe's does not offer.

This will not be anywhere near 100% accurate, it is just a method to gather data, quickly. You may consider "partnering" up with a GC in your area for your first few deals. They can walk the properties with you, in exchange for "X" percent of the deal. Consider it very cheap education.

Good Luck!

John

Brandon Ray · Answer

Estimating rehab cost for wholesale deal.

Trenton Miller · Answer

As stated above, there is no quick tip.  Learning how to accurately identify problems & estimate labor, materials and much more takes years for these guys to master.  You need a trained professional.  I would reach out to a general contractor and pay them for their time.

Brian Mitchell · Answer

Hi Brandon,

Like what was said previously, you need someone there who has experience estimating work. Whether that's you or another professional. Without trained eyes you could easily miss things that turn a minor rehab into a major one.

There are a lot of different signs to look for that could indicate major repairs being needed so it isn't very reasonable to try and cover it all here.

That being said, if you can't get someone to the property with you for the first trip, take lots of pictures of everything, take lots of notes, ask lots of questions, and consult the professionals using that information afterwards. After several rounds of visiting different houses and consulting contractors before and after you'll start getting a handle on what to look for.

Charles Carillo · Answer

@Brandon Ray

Who will be doing the repair work if you purchase the property? I would bring them along. If they are hesitant, tell them you will pay them for their time.

How do I calculate the repair cost on a wholesale property?

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