Analyzing Repairs and

Wholesaling
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Analyzing Repairs and

Alex Harris
Investor · Richmond, VA · Member since 2013 · 195 posts · 27 votes
Hi BP, I am getting a property under contract and I am trying to figure out a repair/rehab estimate. The property is more or less a shell. It has the brick but no walls on the inside and basically no interior except flooring and space. It this situation, how does one go about estimating what needs to be done? I am asking because it seems like the end buyer would just be more or less building another house completely (atleast on the inside). I normally would just do a general estimate based on sq footage, work needed to be done (ex. kitchen needs tiling), and basic knowledge but this is different. This is more common than I think I'm sure but I am new to wholesaling and def. know even less about rehabbing. Property is about 900 sq ft. and comps suggest ARV around $85k and I have already gotten the sellers down to $15k before inspecting it closer. I know this is a possible error but I haven't made an official offer or anything like that. Property is in Newport News, VA and tomorrow I will check it out and will have more information. Thanks all and appreciate your input.
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  • Doss Mann
    Houston, TX · Member since 2013 · 51 posts · 22 votes
    13y

    So it's a masonry building wih brick load bearing walls or wood frame with a brick facade? It's an open loft floorplan or somebody had a an all campus rage and removed the walls for PFunk to play? No mention of garage.

    ... You can go by what the avg cost of new construction for that market and level but those avgs are from the contractors who are full service and do it every day with their own crews and discounts and fees factored in. Break it down by trade and it can fluctuate immensely by the sub, their skill level and the relationship in regards to labor and material discounts.

    Depending on the local gov and permit regs a seemingly easy job can get way off course with timelines, inspections, new laws, codes , materials, designing the layout fit functionaly within the foundation footprint ,etc.

    Your basiclally selling a construction project and not rental propery requiring rehab. Paint , carpet, roof and hvac is different than load bearing walls, plumbing , floorplans and electrical systemss. Don't get me wrong this will perfect for some investors but I think the majority are more inclined for the rehabs and not build outs.

    Every market is specific and independent to itself. Be an expert of your markets. Everything else is just ideas and options.

    So lets say $5k for closing a cash buyer and this includes your fee. $65k to build out 900 sqft is $72 a sq. That's cheaper than Houston for new construction but if you already have the roof and foundation that helps. I don't want to pay full price or use all of my cash so need financing. If i could get 80% of the ARV financed that's $68k - $25( total of $10k cc with financing) leaves $43k to build out 900 sqft..... If the 900 sqft and shell is normal for the neighborhood I would take the deal. If the neighborhood is 3/2/2s at 1500 sqft no deal, I don't want a big garage project.
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  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    13y

    BiggerPockets has published a book that details how to go about estimating rehab costs. I wrote the book, so obviously I'd love for everyone to buy it, but if you're looking to not spend money (I learned without spending any money, so it's certainly possible), here are two free resources:

    1. My BP thread on building new construction:

    Diary of a New Construction Project

    2. On my blog, I detail all my projects -- including all the financial and budget breakdowns. If you take a look at my posts from November 26, 2010 (House #19, Budget Recap) and September 27, 2012 (House #35, Budget Recap), those will give you a decent idea of how I broke down the budget on two properties that started as shells (you can look at the pictures for those houses to see what they looked like before and after to see the amount of work and finish level).

    Please don't rely on any of my pricing -- costs will vary by location, type of house, contractors, time of year, level of finish, and a thousand other variables -- but those two resources above can give you an idea of how to approach a big rehab and how to break down the renovation into components. If you then get estimates for each of those components, you can start to build a formal budget for your project.

    Podcast Guest on Show The Truth About Real Estate Investing in 2024 (What Investors NEED to Know)
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