What tool/strategy you use to quickly estimate repair cost?

Question

To all flippers, wholesalers, fixer-upper in particular and investors in general. As I finally started my RE investment journey (BRRRR), I quickly stumbled upon to this very issue: how to quickly estimate repair cost without using a contractor and gage an ARV. I watched multiple videos, listened to several podcasts but for my first deal I had to rely on a couple of contractors to provide some repair estimate. This process was not free as I excepted but it was time consuming to schedule appointments. So my question is primarily to know which tool/strategy you use and how accurate do you think that method is? As for the ARV, I used redfin as it provides some nice features to help one select down properties based upon similarity, size, location, and many other options. However, this process is more of art than a precise technique. Hence, I wanted also to know what tool/strategy do you use to estimate ARV.

Andy Eakes · Answer

@Michael Ndjondo makadi I use excel and have been updating numbers as I do different rehabs so I can plug in numbers when things come up later on. Also, I had an agent one time give me a list with items and costs from a rehab she was involved with that she described as a "gut rehab". This is what I initially based my spreadsheet on and I have since expanded. Its a good overview of some of the more common rehab items for most investors. If you would like to see it, send me a PM and I'll email it over! We live in the same city so our numbers should be pretty similar. Obviously some of costs for the items listed are going vary based on the quality of products you choose to go with. But that's up to you ultimately.

As far as ARV goes, that's a tough one. I am currently under contract on a property in San Diego that was appraised $40k more than we had estimated... Woohoo right?! Unfortunately, the same thing can happen only in the opposite direction. My worry with my situation was that I feel that the appraiser took a number that the agent gave her and based her report on that. It even said in the report that the agent gave the appraiser a figure of so much before the report was finished. And at the time they had an offer that was exactly what the appraisal came out to be, but that person backed out, we stepped in, and then negotiated the price down to what we got it for. So determining the ARV can be so tough, and I would say a good agent is going to be your best tool. They know the market trends and what's going for how much.

I hope that helps!

Whitney Hutten · Answer

@Michael Ndjondo makadi I'd for sure use an agent for ARV after you have gotten a good sense from digital sources (everyone's time is valuable).  As far as construction (the title of your post), I have a spreadsheet of average pricing in my local area.  I'll send my PM (who is really good at rehabs) out initially, then firm numbers up during due diligence after the inspection.  The initial walk through probably costs ~$100.

Sarah Brown · Answer

Get a good agent on your team to help with ARV.  You need to know what houses sold for, not what they are listed for.  If you are in a disclosure state, then it should be public record and you can do it on your own, but that can be time consuming.

Marcus Geiser · Answer

RS Means Guide to Residential Remodeling Cost is a good book that can give every price per Sq Ft, Lin Ft etc if you want to take time to really crunch numbers. When I did a great deal of work I used the book to ensure good bids and show customers pricing. The numbers you can be adjusted down somewhat but licensed, ensured, workmans comp, contractors have higher cost than pick up truck operators. The book also tells you what labor rates are for all tradesman.

I was a contractor in a long time. I did a good number of in depth estimates at an hourly rate for investors. Bid estimates with material lists on file at Home Depot or Lowes in their quote system. Maybe you could find someone to do the same. Offer a flat fee for the bid. Offer first right of refusal if he wants the work if you close and allow him too match lowest qualified bid. I call it a Rehab Plan and include Pics, Bid Break Downs of jobs, Total Cost, Drawings when permits are needed, After Pics from Fiverr if needed like on TV, structural engineer recommendations, if needed for the bad ones, and before they close a sewer cam. I do the for every wholesale deal to some degree I put together.

At the end of the day it may make you money when they prove your profit. It will definitely save you money when the find the nightmare hidden from no contracting eyes.

Michael Ndjondo makadi · Answer

@Andy Eakes, thanks for you reply. I will definitely PM you. I tend to think that with more experience, investors develop a solid understanding of the rehab cost which gets more accurate over time. As for the ARV, I might be wrong but property appraisal seems to be very subjective to me.

@Sarah Brown, a great real estate agent will be a great asset for sure, however as I mentioned property appraisal doesn't fit as an exact science to me. Maybe that's the way it should be since at the end of the day, price is defined by buyers' willingness to pay.

@Whitney Hutten, thanks for your perspective.

Michael Ndjondo makadi · Answer

@Marcus Geiser Thanks for your input. I’ll definitely get that book as well. I’m working with a contractor at the moment and hopefully we can build a long term relationship for future deals.

What tool/strategy you use to quickly estimate repair cost?

Most Popular Reply