Jimmy is absolutely correct. You learn with experience. Your costs to rehab will alway be different than the next rehabber because of your contacts, and amount of work that you do yourself. Because of that some rehabs will be profitable to you where they wouldn’t be to someone else or maybe the other way around.
There are numbers that are important to estimate fairly accurately. They are, Potential selling price, rehab costs, holding costs, and length of holding period. The largest one is the potential selling price and so an error will have the biggest impact. If you have estimated $150,000 and you are 5% too high you will lower your profit by $7,500. If you have a $15,000 estimate on rehab costs and you are 20% too low you lower your profit be $3,000.
My advice is to read the book, FLIP by Rick Villani and Clay Davis before you do anything. Then find a rehab that doesn’t need a lot of work. Rehab costs will be easier to determine. Remember though, you won’t make as much profit on this one while you are learning.
I always have full home inspections done before I buy. I believe it is money well-spent.
I am seeking to transition into wholesaling from agency and was wondering if anyone had any advice on how o estimate repairs that need to be done for a home. Inspectors? Contractors?
As part of the learning part mentioned by Jimmy and others, RSMeans is a company that publishes a ton of contractor cost estimating books. Some are pricy, some can also be found on Amazon at a discount. Some are very specific, others are more general. Some may be good references to help you learn. Your mileage may vary, but understanding what is involved in any given repair helps considerably.
Ask other real estate investors. Talk about the subject in rei meetings. Bring another investor with you to the house for advice.
Ask real estate agents. Some don’t have a clue but others are pretty savvy.
Talk to your potential rehab investors. Get a feel for what they would do and how much they expect to spend on a bathroom or a kitchen, etc. Learn the difference between a minor or major rehab.
You can learn a lot from inspectors by following them around and asking lots of questions. Many have rehab experience and might give you some good pointers.
You can call in contractors to make bids. You can learn a lot from them by asking a lot of questions. Some however are more forthcoming than others. Don’t do this alot if you are never going to hire them.
Do a project yourself at home. Learn about the basics: Setting your goals, pricing the materials, estimating time necessary, pricing the labor, allowances for special tools/expertise needed, profit margins expected (both for resale and for contractor), dump costs, overhead costs, etc. Write up a “bid” as if you were a contractor before you do the project and then do the project keeping “score” on everything. Afterwards see if your “bid” matches your reality. Actually doing a rehab project will help give you a taste of the rehab business and more of an “insiders” viewpoint.
no books or seminars can teach you this stuff. take your favorite handyman/contractor to your projects and have them look it over.
do enough of these and you will develop a good sense of what things cost.
every job consists of materials and labor. sometimes jobs are labor intensive. some are material intensive. some are both. some labor is cheap. some is not cheap. some materials are fairy inexpensive. some are very expensive.
you just gotta learn by doing deals and paying attention.
example: gutting a bathroom. a $3500 or so job. demo crew can strip it down in a day. that’s $400-500, including dumping/hauling. carpenter crew then rebuilds floor joists and subflooring. that’s a crew day plus some materials. $800. then they set new toilet, sink, tub, enclosure. a day and a half, plus materials. $1500 or so. then they lay flooring, do a little drywall work and paint. a half day,plus materials. $500. voila! your done.
Estimating repairs gets easier with practice. Start with a light rehab—think paint ($1-$6/sq ft) or flooring estimate ($8-$20/sq ft)—and get a home inspection to avoid surprises. Nail the ARV, add 20% to your repair budget for wiggle room, and you’ll be solid. What’s the project look like?