Posted by JC on November 08, 2001 at 20:16:38:

I’ll take a stab at your question since no one else has. I have been in the homebuilding business half my life and have remodeled and sold a few houses on the side. Without experience doing construction or remodels, estimating all the costs correctly on the first one may seem overwhelming. You may also even underestimate the construction costs so much that you make no profit. The upside is that you will gain experience and know what to look for on the next house and hopefully you will keep extremely detailed records for use estimating futures houses. I will give this general advice:

  1. When getting bids for work to be done, get as many as possible. Some subs will try to rip you off - especially if you seem inexperienced. The more bids you get the more likely you will get a few that are the “correct” amount.

  2. Try to identify all of the possible problems. Does the roof need to be replaced? I have seen people budget the cost of just shingles in the roofing budget. You will also need felt, nails, drip edge, flashing, vents, etc. Don’t forget sales tax. How long has the roof been in bad shape? Will some of the decking need to be replaced?


Posted by Kevin on November 08, 2001 at 11:27:25:

Is it NECESSARY for a potential flip property to have a lot of equity in order to make a deal work and if so what is absolutely the LOWEST percentage of equity a property can have? Also how do you flipping pros out there determine the value of a run down property and what amount you are going to offer(in other words how can a newbie like me assess dollar amounts on various repairs I observe the property needs)?

Re: CONTRACT FLIPPING - repair values - Posted by Kent

Posted by Kent on November 09, 2001 at 02:05:21:

Rule #1 is to assess materials and labor will be about the same amount or more. You will develope better ballpark figuers with time.

Usually $1000 in lumber (aka carpentry) = $1000 in labor. $1000 in “finish” carpentry material is much more though.

$1000 in shingles is about $1000 in labor unless its a tear off. Then it can be $5000.

For carpet, I figure $15/yd material AND labor but usually find it for $10 matl AND labor.

When you get a house, have as many bidders bid as possible when you are a newbie and learn what you can by talking with them. The cheapest isnt always the best value. But the cheapest may be too. Dont commit to any immediately. You may be swayed and not know it. Think about it for awhile and wait for all bids to come in (within a reasonable time).

This week I am replacing all the old wood windows in a house with vynal replacements. When I bought this house, I estimated $150 per window and $150 labor per window, $300 ttl. (the sills were good)

I found a top line double hung, double insulated vynal for $120. I went down my computerized list of contractors and called perhaps 12. I got hold of 8 who said they would go by and bid. Of the 8, 2 returned bids withing 24 hrs. A 3rd within 48 hrs. I closed the bidding down and moved all names who did not keep their word within 48 hrs, down a notch on my list. One guy bid $120/win, another $85/win and one $30/win.

There were 20 windows. The deal was to remove the old wood ones, set and caulk new ones, no woodwork needed. I hired the $30/window guy. I just wanted to see what a $30 window job looked like. He finished in 12 hours. $30/win sounded cheap to me but he and his helper worked 12 hours for $600. It was enough for them and they did a great job! I had to wonder why he was so cheap though. There is ALWAYS a reason. You should ask yourself this BEFORE hiring. If he looked the same as the others, I would have probably gone with the $85/win guy. I would have assumed cheap price because inferior work. But I played a hunch. The others were very professional looking. This guy was not. This guy had a card, business name, truck, tools, hands, but looked scary. He looked like a mean biker dude and probably scared off most during the bidding process. This estimate proved true. Of course, I could have been missing my knee caps also but hey…play 'em like ya see 'em.

To estimate what the repairs will cost you need a list of ballpark figures. Bill Bronchick has a book he sells on flipping that has a nice list of such things. Steve Cook sells a book on this site that is helpful in setting value also.

Assessing what they will sell for or appraise for after repairs is a matter of experience. Concentrate on one area and find a realtor you can just “drop-in” on. One that is very casual. Find the houses selling at fixed up prices that are the same kind you wish to rent. This will set the fixed up value you will be comparing against. Steves book goes into the “right kind to rent” pretty well. I bought Steve’s AND Bills book. And I am experienced. If you get just “one more” trick from a resource, it is worth it. In your case the books would be invaluable. I like both books for different reasons. I recommend you read both.I do NOT recommend $4000 courses and boot camps. That level of money should be spent on attaining property.


Re: CONTRACT FLIPPING QUESTION -Purch price - Posted by Kent

Posted by Kent on November 09, 2001 at 01:25:17:

Regarding flipping, I have never flipped. But I buy investment property. So, I am who you are selling to. The very top, absolute positively, wont-go-over MOST, I will give for a property would have to be 80% of a “Real” appraisal value. Now for me to give this much, this property would have to be ready to rent, need NO repairs, have taxes caught up, have no problem tenants inside and the owner would have to carry a 20% 2nd on the place.

But that assumes I just want a zero down rental property. I NEVER do zero down. I want to be paid for taking the property. Late night TV talk aside, I’m talking NET. As in after a month or so of remodeling and I refinance it.

A real aim for me would be to buy it at no more than 50% of its fixed up value. I sometimes get 'em cheaper at more like 30% though.