Considering offering on 1st property. Help with rehab estimates.

[Patrick Cruse]

I am considering offering on a property that is being offered by a wholesaler. This property would be a buy and hold rental. 

Some numbers that I have come up with that I think will make it meet my criteria for being a possible deal are as follows:

Asking price: 37,500

ARV: 68,000

Rent: $800

Cash flow: $378/month

If I can keep the rehab costs under $15,000 I think it will make my all-in price at enough of a discount that I can make the deal work. 

All of these number are conservative estimates and it gives me a 22.79% discount on a buy and hold property. I plan on doing the BRRRR method and I know that doesn't reach the 30% threshold, but I am comfortable with it.

What I am not comfortable with is estimating the cost of rehab. I would like to fix it up nice enough that it will last a long time, because I plan on holding it possibly forever. It is a small house (952 sq ft) with 3 bedrooms and 1 bathroom. I would like to do wood/laminate flooring throughout and granite counter tops as I think those would last the longest and not have to be changed every time a tenant changes. I think it would also give me a leg up on the competition to keep this house rented consistently. Is this crazy to do in a house that only has an ARV of 68,000?

I am very much a novice when it comes to estimating rehab (I just got J. Scott's book in the mail yesterday, but won't have time to master it before this deal). 

I'd like any and all help with pointing out stuff I don't realize will need rehabbed and help with estimating how much this house will take to get in great shape.

I have included a dropbox link of the pictures I took today. I took lots of pictures, because I wasn't even sure what was important to have pictures of.  If you want more detail check out the pics too. 

Can this house be rehabbed for < $15,000??

Thanks in advance for any help,

Patrick Cruse

Fwiw, I am willing to help with work, but wouldn't be much help with anything other than standard appliance installation and demolition. Most if not all of this work I plan on contracting out. This property is in Indianapolis, IN if that helps with rehab estimates. 

https://www.dropbox.com/sh/i69tvjcr50m5vq8/AACrysr...

[Ben G.]

@Patrick Cruse it all depends on your contractors and whether or not they treat you fairly.  If you're planning on holding onto this forever then it may make sense to go ahead and invest more than $15,000 into it because your returns are going to increase exponentially over time.  

In the midwest turnkey companies typically pay $15 per square foot for heavy rehab. I wouldn't call this a heavy rehab. The kicker here is turnkey companies have access to contractors and materials cheaper than you and I do.

However, it may take you a little more time, but if you ask around for contractor recommendations in your network, and then hire each job individually I think you'll save the most money that way rather than hiring a GC. That is what I did for my flip in Brownsburg. If time is an issue then spend the extra money and hire a GC. It really all depends on the time you have to commit to managing the contractors and the work. For some investors it makes more sense for them to spend the extra money and hire a project manager and GC, for others they manage everything themselves.

You don't need granite in this type of home. There are other materials that are extremely durable just like granite, but at a much lower cost.  

Some people will say yes this can be done for less than $15,000, while others will say no. The best thing to do is to come up with worse case scenario. Say something blows up and now it's $20,000 in repairs. You're still not losing money, and you've learned a lot along the way, you have a cash flowing investment, and you've built relationships that you can leverage on future deals.