How do I determine estimated repair costs?

Question

I just got into real estate investing 2 mos ago. I'm meeting my 1st seller this week but I don't know how to determine the repair estimate. There is fire damage & the seller doesn't know what the cost is either. He said that he doesn't have insurance on the property so no property adjusters have been out there.

Jon A. · Answer

I had a fire in one of my rentals and it was small but it cost a lot to repair.

They basically stripped it down to the studs and this was just a small arc in a junction box in the attic that burned a ceiling rafter. I had no idea the amount of damage and repairs that came up in the insurance process. Most of it is due to smoke damage that you cannot see. In the end, I got all new drywall, paint and refinished floors. The whole attic was sealed with some sort of sealer on all the wood and a new tile floor was put in the kitchen along with a whole lot of new wiring. Total cost was 21k$ for this tiny little bit of damage to a ceiling. I am surprised this person is allowed to live in the house at all because they basically shut the power off to mine and said no one could live in it until it was fixed. I guess my point is that I would call a fire restoration company and they should have their own GC in house that can help you assess the damage because I don't think anyone but an expert can give you solid answers for that question.

Grant Rothenburger · Answer

Account Closed

The answer to your question: learn what repairs and rehabs cost in your area and go look at the house.

Now, it's likely with fire damage that you really can't tell what all needs repaired until you tear into the walls/ceiling/floor/ etc a bit.

As you've mentioned, you can pay a GC for an estimate, but even then you're likely getting a really rough estimate. My guess is whoever your end buyer would be, is aware of this as well, and it would be tough to move, unless you had a killer deal.

Either way, if you want to be a wholesaler, I'd work on learning how to estimate repairs. Start on easier houses than a fire damage house, as that could range from $5k for new drywall and paint to $30k+ to rebuild part of the house.

Darren Lenick · Answer

Hi Account Closed,

Without seeing the property it’s hard to determine costs. Based on it being fire damage and the section of the home is blocked off, you might be better off having a structural engineer or architect take a look at it before a GC to determine if there is structural damage. If you need to replace any framing, you’ll require drawings from an architect or engineer to submit to either Ft. Lauderdale or Broward County if the house is in an unincorporated part of Ft. Lauderdale.

They are more likely to come out for a fee if they know there is a potential job for them for drawings. I’ve paid about $250 in the past for such an inspection and got it credited towards drawings when I went forward.

That being said, I don’t know if taking on such a project is a good idea if you’re so new to the industry. There are many things that can and will be missed prior to starting actual work and those can kill a budget quickly if you don’t have a contingency set aside.

If you want to connect and send me pictures, I don’t mind giving you my opinion.

Darren

Jeremy VanDelinder · Answer

Account Closed I'm curious what part of the country you are in--your bio doesn't say. Also, are you looking to wholesale it or flip it yourself?

I flip fire-damaged properties and own a fire damage restoration company. It can be a big undertaking. Unless you are rather experienced with this type of damage, it may be hard for your to tell the extent of damage. Normally the place to start is by asking them what the insurance company decision is--but it sounds like that might not help in this case.

Beyond that, I would suggest getting an experienced restoration company/contractor to look at it and give you a run-down on what it will need. There are many things that could be overlooked as part of the renovation on fire-damaged properties.

As with any investment the numbers have to be right and you have to do a lot of homework to know what you are getting into. The challenge with fire damaged properties if you have never done one is that there is more than meets the eye. For example, often fire damage is water damage (they put the red stuff out with wet stuff). Furthermore, there is the potential of extensive smoke damage in the same airspace.

Find a fire restoration company/contractor to walk the property with you and give you a good understanding as to what needs to be done.

I’d be happy to help if I can. Let me know.

Account Closed · Answer

@Darren Lenick Thanks for sharing this value information. I won't be repairing this house.  I would like to wholesale it. However, I would like to have a proper inspection done so I have an estimate of repairs for negotiation purposes. Locating a GC to do this for me has been a challenge. I'm more than happy to pay for the assessment. If you are able to recommend a GC that would be most appreciated. If not, no worries.

Account Closed · Answer

@Jeremy VanDelinder Thanks for your response. I'm in Fort Lauderdale. I'm looking to wholesale the property. The property is uninsured so unfortunately there isn't an estimate from the insurance company. The seller lives in part of the home and blocked off the other part that's has damage.

I'm struggling to find a local contractor to assess the damage. I suppose because I just need an assessment and I don't need them to do the work they aren't interested in working with me. I've even offered to pay for the assessment. Maybe I should reach out to Angie's List or Home Advisor.

How do I determine estimated repair costs?

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