Wholesaling Tips: Estimating Repair Costs
Estimating repair costs is one of the biggest challenges facing all real estate investors, and brings some of the biggest pitfalls which can either make or break them.
Issues with accurately assessing repair costs are often associated mainly with those buying homes to rehab and flip them, but can equally be a veritable minefield for buy and hold investors. In fact, many may be surprised that help with estimating property repairs is one of the most commonly requested wholesaling tips too.
Getting this part of the equation right is just as important for wholesalers if not more so, and remains critical whether properties are kept of not.
Unfortunately many new real estate investors and even some experienced ones turn this into an immensely complex, costly and time consuming part of their business. If they aren’t careful this won’t just slow them down and cause them to lose endless deals but will drain net profits too.
So don’t make it too complicated. Yes, accuracy is important, at least in terms of a total figure but taking days to figure out the cost of every screw and hammer strike that someone else (your end buyer) might spend will be self-defeating. Of course once you get into the swing of it you’ll be able to pinpoint most jobs with laser-like accuracy from a relatively brief walk-through in most cases but in the meantime most will find the easy solution in professional inspections and contractor bids. Some have gone to ridiculous lengths like breaking it down to the minutest line items and hiring and paying their own project managers to complete inspections on an hourly basis. This can often be accomplished far more efficiently and effectively by just getting a home inspection done and putting work out for bid.
Still wholesalers shouldn’t or can’t afford to underestimate the importance of their due diligence and getting repair estimates and scope of work right, even if they’ll never get their hands dirty themselves. Sure, you could pawn off the most problem ridden property on someone else with a low estimate and ‘forgetting’ to disclose hidden defects but that fast dollar will certainly come back to bite you.
Even if the buyer doesn’t sue you, you will certainly lose them as a customer and your reputation in the industry. Of all wholesaling tips know that your future success and volume relies on being viewed as a trusted source of wholesale deals and cultivating a pool of repeat buyers that will instantly snap up whatever you have to offer because they know they can rely on your numbers.
This doesn’t mean you should build in too much padding and make your deals unattractive to serious buyers but you will find far more profit in doing good business and providing good repair estimates.
Remember, you want you investor buyers to be profitable. The more profitable and successful they are the more they can afford to buy from you.
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