When you're Analyzing the Property for Repairs

Question

I've been through quite a few properties thus far and have gotten pretty good on my estimates but there's still this gray area that continues to make me ever so slightly doubtful.

What do you consider something that may need attention?

For instance, some properties may have walls with decent paint still (albeit uniquely chosing colors and not your simple whites) that may need a cleaning but could arguably need an entire top to bottom job. Do I estimate paint in the repair costs or keep it as a small cosmetic fix/cleaning and the current paint/color remains? Or maybe the property has a good kitchen that is completely functional and liveable, but a little out of date? Do you consider this a remodel, or still ok- use it?

I suppose it's like the saying, if it's not broke, don't fix it. I feel like some aspects of a property I may or may not add into repair estimates, may or may not need included and I could have much more solid prices/offers. X could say it needs a kitchen remodel, W could say nah, doesn't need it (but it's apparent it's out-dated by the naked eye). Maybe W says it doesn't, so that remodel estimate isn't included in their repair list. Now they have a buyer but they're on the contrary about the kitchen remodel and insists the price may be skewed.

Did I lose you yet or you still with me? Haha. I hope I explained it for you guys to understand my current conundrum. Thanks ahead of time for any and all of your input! Much appreciated.

Regards,

Ryan Andexler

Jake Thomas · Answer

Account Closed Good question with many possible answers.

When I estimate rehab costs it's sometimes best to estimate on the high side to cover all your bases. Your example regarding painting a wall vs cleaning it, I would add painting it into your costs. The kitchen example is a difficult one to answer. Sometimes you can get away with painting cabinets and changing counter tops etc. for a lower priced home. But if it is a higher end home ($200K+ in my market) I suggest new cabinets as that is what the competition has done.

The process of estimating rehab costs is always that variable a end buyer takes into account when buying from a wholesaler. Just get as close as possible and be honest to the buyers what you feel the home needs but in the end they will make the final decision.

Good luck.

Michael Woodward · Answer

Account Closed,  That's the million dollar question.  The broad answer is that there's no way to know for sure what will be important to your eventual buyer.  I spent an extra $1500 on a house a few years ago putting drywall on the ceiling of the basement to make it look cleaner.  At the closing table, the buyer told me that he wished I hadn't done that because he wanted to wanted to change some things.  Ouch!

One important parameter to keep in mind though is that you need to be able to keep your final price in line with the neighborhood.  Do all of the repairs and cosmetics that fit in the budget and then stop.  If you out-price the neighborhood, you could end up sitting on it for a long time.

You're right to say that the answer will come with time and experience.

Account Closed · Answer

Wholesaling, fix and holds.

Scott Schultz · Answer

I tend to freshen a property up, I do my paint colors so it easy to touch up later, I replace fans with lights, less chance to break, i put in LED Bulbs (maybe overkill) in many cases faucets, and replace shower mixer cartridges, and any obvious damages, Smoke and CO detectors, check furnace and Water heater,  and my standard flooring. Im working towards consistency so if i have a problem, it can be easily resolved. a total rehab is not needed, and dated is ok if its in good condition,  now Pink sinks and toilets maybe need to go though.

Scott Schultz · Answer

Account Closed FYI i did not buy that house, it sold for over asking, and well above my valuation, besides, i wasnt looking for that big of a project, but i couldn't resist a photo.

Account Closed · Answer

@Jake Thomas And that's one of the things too, is I stay on the higher side just as you said, to cover most or all bases. But this is when I start thinking... If I'm on the high side, this essentially is bringing my offer to the seller lower, potentially affecting the chance of making a deal. Where as if it wasn't on the high side, I could be closer to offering what the seller wants, giving me a better chance at making a deal, and having less 'work' needed for the buyer to invest in the property.

I suppose it's just one of those things that comes with time and experience. The more various conditioned properties I see, the better of an idea I'll have to say yeah this needs paint or no it doesn't need a kitchen remodel but just a cleaning.

@Scott Schultz, yikes! One thing came to mind when I seen that photo...

Martin Chavez · Answer

Hello Ryan,

What are your intentions with the property as far as exit strategy?

When you're Analyzing the Property for Repairs

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