Wholesaling - Can you help me analyze this?

Question

Hey BiggerPockets Community,

First post here. I want to get started in wholesaling. I have no investing experience. I have been doing a bunch of research but still confused on a couple things, mainly determining the cost of repairs to find out if you have a deal or not?

My questions are:

How does one figure out the cost of repairs if you have no experience in determining what certain things cost?

What is the best way to find someone locally to assist in determining repair costs and ARV?

This is some basic info on a property I found. Can you help determine if this is a deal based off this info? If I missed anything please ask. I’d appreciate any tips. Thank you :-)

3 bdrm

1.5 bath

1,300 sq ft

Built 1925

Selling as is. Needs complete plumbing, HVAC Electrical, bathrooms, kitchen, dining area, floors need to be sanded, paint, new windows, and roof

Estimated at 67k

Last sold for 69k

I believe similar homes are between $130k-145

Brendan H. · Answer

@Stephanie Smith  Check out J Scott’s “The Book on Estimating Rehab Costs.”  Super helpful for my rehabs in Tacoma WA.  Gives some basic breakdowns to get ballpark figures.  Then recommend going to meetups in your area (local REIA or BP meetups or start your own).  Then you can have a starting point for asking questions after meeting some contractors.  You could also connect with some other investors.

Agree with the above recommendations as well.  Pick a bunch of similar sized properties in that same area and track what they’ve been selling for. Once you establish the ARV, then you can work backwards time figure out how much room is left for rehab costs.

Keep in mind, if you’re wholesaling, most investors want to be done with their rehabs at 70% of the ARV. So you’ll need to work backwards some more from there, in order to figure out what cut you would like. Then backwards once more to figure out how much you can pay the seller.

Even in today’s market with increased prices for labor and supplies, J Scott’s book will get you close enough to be able to drill down some more, and make a plan for specific costs which may have increased recently due to supply chain issues, etc.

Jonathan Greene · Answer

You can't become a wholesaler and also do the job well with no investing experience. Wholesaling is not a way to get experience because you have to know ARV and repair costs to do that job to get the property assigned. With no investing experience, why would you choose to try to wholesale? Most wholesalers fail because their numbers are wrong. How are you going to get off-market sellers under contract with no experience? Do you have funding to close the deals if you can't assign it or backup funding? How are you going to build a buyer's list if you can't do ARV or repair costs. Contractors are so busy now they aren't going to come out to give free estimates on a job they won't get because the seller will have his or her own team.

James Guillot · Answer

The best way to determine repairs is to have a rehab contractor go through the home and give you an estimate. That will cost you money and most won't do it unless there is some sort of agreement that they will be doing the work.

The only good, cheap, and reliable way to determine repair costs is to learn how to determine repair costs. Do it yourself. There are a few good books on the subject. You won't become a property inspector, but it will definitely be more reliable than not knowing anything. My advice would be to estimate on the high end of your assessment if you aren't absolutely sure. If you are wholesaling, determining the deal depends on how much profit the buyer gains after repairs. If you estimate a bit high, it just makes the property cheaper for the buyer.

Estimating ARV is on you. The basic idea is that you are using comparable houses sold nearby to determine the value of the subject property after all repairs have been completed. You can learn how to do this in threads on BP, youtube, and various other free sources. You could have a licensed Agent who understands REI run the numbers for you, but you should know how to do that yourself. Besides, I'm sure they would eventually get tired of doing your work for you.

The information you have there won't help determine if it is a deal or not. You absolutely must have the ARV and repair estimates. Without those, anything could or could not be a deal. Those are the PB&J in your PB&J sandwich.

Now that I have answered your questions, you need to do more research. This is information that you should already have before you decide to pull the trigger on any REI strategy. I recommend drowning yourself in BP podcasts, threads, and books. Watch some videos. Just get as much info as you can.

Also I want to warn you about posting questions on wholesaling. Make sure it is information you absolutely cannot find by reading other threads. There is a Coke vs Pepsi verbal war on wholesaling here. They will hijack your thread to argue about wholesaling legality and equitable interest.

Stephanie Smith · Answer

@Jonathan Greene I am sure I can learn, as with everything else I’ve done in life. I’m not asking to fly to the moon here. Everyone has to start somewhere. Perhaps I should ask what is the best way to gain knowledge. I learn best by doing. I thought here would be a good place to start. Thanks for the feedback.

Wholesaling - Can you help me analyze this?

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