How to assess cost of flip in "AS IS" deals?

Question

Hi all, planning on doing my first flip here - exciting times!

So I have identified a property that needs to be renovated but seems to be in decent shape otherwise (no mold or fire damages from the pictures). Given the state of things right now, and that the listing has been on market for couple of months, I'm thinking of making a cash offer way below asking, in exchange for the property to be sold "as is". ("As is" is not currently a condition in the listing).

My question is, how do I assess how much approximately the cost for the rehab will be? Has anyone cold-called general contractors and perhaps showed them the pictures and ask them for a general ballpark figure? I don't need to know down to the hundreds, but I would like to know if it's closer to 50k or 100k.

My biggest concern is that there could be fundamental structural issues or whatever issues not readily apparently that ends up costing tens of thousands more when rehabbing. But in general, what are some ideas to get an idea of cost for a SPECIFIC property? Can you hire someone to view the house with you and check things out before you offer?

Thanks guys!

Greg Dickerson · Answer

The best approach would be to find a couple of contractors that special in working with investors and build a relationship with them. Show them you are serious, have the funds and are ready to strike and are looking for an strategic relationship with a contractor to do all your projects and grow together.You can find contractors through realtors, other investors and looking at the MLS for flip houses that are for sale or sold and find out who did the work.

George W. · Answer

Congrats on deciding to invest. A couple of thoughts from the construction side of things: #1 cold calling random contractors can be hit or miss. One contractor might be a total hack and end up costing you more in the long run because you cannot vet him. The best way to meet contractors is through word of mouth by far. You're better off developing a great relationship with a reliable contractor then the cold calling a bunch of ones who just want to work. #2 You could hire a contractor to come out and consult you what work needs to be done when you view the place. Again though your better off knowing the contractor for that because how can you vet their experience and quaility of work. Also be mindful that you really cant see behind walls. So someone who's got a lot if expeirence in the area of the property is preffered because they know how most neighborhoods there were built and have done projects there in the past. For good existing customers I'll even consult for free.#3 it's way too easy to underestimate the extent of the work needed even a experienced contractor could miss something that's hidden behind a wall. So that's why you need to figure extra over your rehab budget. #4 pictures are okay but dont do a lot of justice. As a plumber I get pictures all the time from potential customers. Honestly in a grainy bad picture of a dark basement you cannot tell difference between a 40 gallon and a 75 gallon water heater. Major price difference. Also pictures are nowhere near as good as me physically coming out to see what's going on. How can I tell if your chimney for that water heater is alright via a picture? Honestly I think alot ot people who really get into flipping have a good understanding and a background in construction or they partner/team up with someone who's got the experience.

Kenneth Garrett · Answer

@Jennifer T.Yes bringing a contractor in is a good idea, but there not going to waste there time looking at many properties without you pulling the trigger. You can’t base things on photographs on the MLS. I walked many properties where photos don’t really reflect the work that needs to be done. The listing photos are a sales tool. Look at each room and decide what you would do to improve it. Find a mentor or a seasoned investor who might be willing to look at a couple of properties with you. Partner on your first couple of projects so you can learn. You might not make much money, but the experience is invaluable. Connect with local BP investors in your area or attend REIA meetings, meetups, property tours, etc. if you need help let me know.

Jennifer D. · Answer

Hi, Jennifer. I'm a noob, so my advice means very little (3 properties, all bought turn-key; about to start my first BRRR). For what it's worth, I've had some good experiences contacting a few contractors from BP and having a talk with them about what they need to make it worth their time to go and inspect my property pre-DD period. I approached it, rather than a one-time transaction, as a start of a relationship. That was really successful. I now have one really great working relationship, and I also know what he needs to make doing pre-DD estimates work for him. I haven't asked him to go and see a property yet, but I think he will be happy to help me when the time comes.