when doing a whole deal how do you figure out the costs

[Account Closed]

I would like to know how do wholesalers when they are trying to make deals how do they find how muc the fixed costs and rehad cost on a house?

[David Robertson]

If you are going to be wholesaling deals to rehabbers you need to think like a rehabber and analyze the deal like rehabbers in your market.

Talk to local rehabbers in your area to determine what % of ARV they shoot for when buying the property. The standard 70% Rule is 70% of the ARV - Repairs, but rehabbers may be willing to pay 75% or more.

The 70% of ARV essentially discounts the property 30% to account for your fixed costs & rehabber's profit. Generally, the 30% breaks down to 15% for fixed costs & 15% for the profit. So on a $200k ARV property, that would be $30k in Fixed Costs & $30k in Profit for the Rehabber.

As far as estimating rehab costs it really takes experience to accurately estimate costs. Here is the process I generally recommend for learning how to estimate rehab costs:

#1 Read the Book on Estimating Rehab Costs

JScott's 'The Book on Estimating Rehab Costs' is a great resource for new rehabbers to learn how to Estimate Repair Costs on 25 common rehab repairs.

https://www.biggerpockets.com/store/the-complete-g...

#2 Explore Lowes and Home Depot to Learn About Material Pricing

Take a tour through Lowes and Home Depot (or their websites) and look at finishes materials and fixtures that you will consider using in your rehab projects. This will help you get a better idea of what tile, hardwood, carpet, plumbing fixtures and light fixtures costs for your rehabs.

#3 Contact Local Contractors for Pricing

Call local Subcontractors and get budget pricing for common repairs on your typical rehab project.

For example, call a roofer and ask what their average cost per Square of Architectural Asphalt Shingle Roofing would be on a 1,500 sf house, with a 6/12 pitch.

Note: Some contractors will be reluctant to share pricing without seeing the property, but tell them you are just looking for a rough budget number you can use on future projects.

#4 Compile Your Prices into a Spreadsheet or Estimating Software

Once you start to get a better understanding of Labor and Material costs you will want to store this data into a spreadsheet or software that you can use to help you streamline the estimating process.

The Book on Estimating Rehab Costs comes with a spreadsheet that you can use to help you populate your own database of labor pricing and material pricing. Or you can download my estimating templates I have in my Biggerpockets fileplace:

Simple Estimate Spreadsheet

Detailed Estimating Spreadsheet

There are other Estimating Softwares available as well which can help you manage the Estimating process as well...

#5 Practice, Practice, Practice

Walkthrough potential rehab properties (or find properties virtually online) and practice creating detailed scopes of work, quantifying repairs and estimating rehab costs for the projects.

If you are not willing to put in the time to learn, then you need to find someone that has construction experience that can help you with this process.