Wholesalers: Provide Investors with which ERC: Retail Flip vs Rental?

Question

When calculating an ERC (estimated repair costs) for a given subject property should the wholesaler provide an ERC for both Retail Flip AND rental? Or just one?

It seems to me giving them just retail flip ERC would be an option. That way if they are wanting to do a rent on the subject property, and you provided them with retail ERC, they should have plenty of additional wiggle room with their rent numbers, assuming you estimated retail ERC correctly.

Its the investors job to decide on the exit strategy for the subject property no the wholesalers. The wholesaler may offer their advice, but at the end of the day the investor decides.

Curious as to what others think, thanks everyone!

Will Barnard · Answer

That is one way to do it. Here is another: Get out to Home Depot/Lowes and start pricing out material costs for all items of possible repair on a rehab. You will need a list prepeared so that you can fill in the costs for your area. I uploaded to BP mine for all to use. Go here: http://www.biggerpockets.com/files/user/BarnardINC/file/70-repair-cost-form Simply fill in the costs after spending a great deal of time reseraching prices at the box stores. They also have install prices (although they are much higher than you can get by hiring outside of Lowes/HD). Then go to as many REO properties as you can and practice your skill set. Here is some more info that should help you: Break up the home into sections - Kitchen, baths, flooring, paint, stucco, landscaping, plumbing (including fixtures), electrical (including fixtures), HVAC, interior doors, door casings/baseboards, windows/sliders/front door, roof, foundation, misc., and garage. Once you know what the common costs are for each area for a specific size home, you can see how easy it will become to walk in and walk out 15 minutes later with a rehab figure in your head. For instance, I know that a full gut and remodel including new toilet, new vanity, mirror, sink, glass door enclosure, stone/tile on shower walls, etc will run me $2500 per bathroom. So if I walk into a REO deal with 2 baths, I simply add into my head $5k for the 2 bathrooms and move on to the next section. i also know it costs me around $5k to paint in and out a 1500 sq. ft home. I have these basic figures locked in my head so when I identify sections in each home needing repair, it is simply to calculate in my head. Hope this helps.

Will Barnard · Answer

Thanks Timothy, glad it was useful. make sure you send all your contractors to BP to sign up and register, they can easily download it themeselves at that point! Lets grow BP Nation.

Timothy Rogers · Answer

Will, I still use your form and I have contractors asking me all the time for a copy of your form . Great stuff.

Timothy Rogers · Answer

Chris, Not at all. I don't suggest to an investor that he or she should use him, but I tell the investor that these are the numbers my contractor said it will take to get the property in retail or rental condition. Then I will give my contractor business card to the investor. Remember, the investor will more than likely go with my contractor. We are providing conservative numbers not trying to be greedy. My all in cost will come in at 65% to 70%. That is including purchase, repair, closing & holding cost, rehab period, and post rehab period.

Timothy Rogers · Answer

Chris, Contractor and I agreed to promote one another. I promote him to my end buyers on my wholesale deals to do the rehab and he promotes me to other investors that he does work for.

James Hiddle · Answer

You should provide both retail and rental analysis just to give your buyers options on what exit strategy is more beneficial to them. The more options they have the faster you can sell a property and get paid.

Will Barnard · Answer

Start inviting contractors to BP nation, if they are not already investor friendly, perhaps BP can teach them to be! Thanks again for your kind words Chris!

Chris Feltus · Answer

Thats exactly what I am looking for, a contractor who knows his stuff and wants to keep a great spread for the investor. Keep honest ARV and ERC estimates. Would love to meet some additional likeminded contractors if he himself is aware of any. I am in the Ft Worth / Arlington area.

Timothy Rogers · Answer

Chris, We (contractor and I) are in the same meetup group in Dallas and he emailed me by mistake. We found out we could be beneifical to one other. He wanted to work with a wholesaler that was serious about his business and not inflating ARV's.

Chris Feltus · Answer

Timothy Rogers As far as finding a contractor to work with in the structure you spoke about, how did you go about acquiring one? I have been visiting real estate investment groups and checking out their sponsors, usually there are contractors listed that specialize with working with investors on distressed properties. Or meeting one at an event in person. Is your contractor well known and visits REI meetups etc, or more of the type you would find in the yellow pages? I am also in the DFW area as well, Fort Worth. Thanks Will Barnard thanks again for the in-depth reply, you provide a great service to the community!