Rehab calculations

[Chanelle Lavigne]

Hello BP family!

Hope everyone is enjoying their weekend.  I am new at wholesaling and I understand how calculating the rehab cost is one of the primary number to figure out if a deal has potential or not.  I need your help because when it comes to HVAC, heating, water pump and electricity I am having a hard time figuring out what to look for and how much to allocate to these.  Thank you to anyone who is taking your time to read about my question!!

[Evan Wiesner]

Chanelle,

When in doubt, plan on the worst case scenario. That sounds almost morbid but from someone who buys from wholesalers, if your rehab number is always light we stop talking to you. I would rather you err on the side of caution than give me a "pipe dream" remodel budget.

Work to eliminate variables, and be honest when you can't. If you can see the A/C and it looks to be in great shape, budget $350 for "servicing" and say HVAC looks ok visually. If you can't see it, budget $4,000 and say that you can't or didn't inspect so this is a "safe" assumption.

Same goes for the furnace, and other systems. Learn some of the expenses for local servicing and give an estimate as well as a replacement if you can't see. There's a lot that goes into it I know but having a framework to explain to an out of town buyer is a must.

As for electrical and plumbing, call local experts and get quotes for redoing an entire house. Typically both will run between $3,000 and $5,000 depending on market and age of the home. Learn some of the warning signs like exposed wiring and galvanized pipes. If you see them, explain to your buyers what you see and point out that they may be of concern and your budget does, or does not, include these line items based on what you can see.

Hope that helps. I can only speak for myself but as a buyer you'll get a lot further with me with honesty and allowing me to pass on bad deals than shorting these numbers. If you're honest I'll keep coming back until I buy one. If you're not, I'll go away a lot faster.