Mold House

[Matt M.]

Hey All,

I'm new at the flipping game and need advice on estimating rehab costs with REOs.  I'm also no expert when it comes to the mechanicals so if they look older, I'll usually just include them in my rehab costs.  However, the problem I'm haven is that 

For you experienced flippers, will you usually plan on replacing all older mechanicals, as a general rule, or do you wait until the inspection and then negotiate with the bank?

I've been including all new mechanicals in most of my offers but I'm finding that I'm just having a hard time making the numbers work since it really drives up my rehab costs.  Do most of you automatically include older mechanicals in your numbers? If not, are there tips you can share on how to judge how much life is left in your furnace/boiler or central air system?

Thanks. 

Matt M.

[J Scott]

I have a personal rule I call the "75% Rule"...

If a large/capital expense is being consider, I'll determine if the item is past 75% of its typical useful life -- if so, I replace it. If not, I keep it.

A typical furnace will last about 20 years, so my cut-off for replacing furnaces is about 15 years old.  If it's older than 15 years, I'll replace it.  Newer than 15 years and I'll keep it.