Question for someone familiar with LeGrand - Posted by Russ,IL

Posted by Stacy (AZ) on May 05, 1999 at 17:36:48:

And I agree with you, Russ. I started-out thinking I would like to do rehabs, and quickly found that the most important part of the whole business was finding reliable, quality handymen at a decent cost. Trouble is, anyone that fits that description is booked for months working with established rehabbers. So, I let the rehabbers do their thing, and I get in and out quick by flipping to them. An arrangement I like very much.

By the way, with the right contingencies in your contract, I agree you really need to lock-up the properties before trying to find the exact numbers for repair costs. The more of them you do, the better you’ll be at estimating repair costs quickly. For now, just add in a fudge-factor. Or, your idea of a repair cost contingency might work out fine.

Good luck…sounds like you’ve got some good prospects.


Question for someone familiar with LeGrand - Posted by Russ,IL

Posted by Russ,IL on May 05, 1999 at 16:13:59:

I have been involved in RE investment for a while, mostly rentals. I recently read Ron LeGrand’s book and I’ve decided to try a wholesale flip. I understand the general concept very well and I can see how it could be very profitable. I have in front of me five properties that are perfect candidates for this and I now need to make the offers. I am really getting hung up on calculating repair costs. Mr. LeGrand gives some indications of what things should cost to repair or replace but I decided I would call around and verify what he says. So far, almost everything I have priced, such as roofs, flooring, siding, have been considerably more exspensive, sometimes double, than what he indicates it should cost. I have made sure that I haven’t been calling the “guys with the big yellow pages ads”. So, I guess my question is, am I missing something, am I just calling the wrong people or are things more expensive because I’m in the Chicago area. Thanks in advance for anyone’s input.


Re: Question for someone familiar with LeGrand - Posted by Bud Branstetter

Posted by Bud Branstetter on May 06, 1999 at 11:36:58:

I am not sure what size house you are estimating for. From rehabing dozens of houses I would be in general agreement with Legrand’s figures. Carpet runs about $9/yd installed here for FHA grade carpet. That’s a dollar a foot. Painting a 1000 square foot house will also run $1 a square foot. This is with some sheetrock prep and minimal outside painting problems. Legrand says $1000 for six foot of cabinets, countertop, and faucets installed. Six foot isn’t much and I try to get more in the kitchen if possible. So I may spend $1500. He says $2500 for HVAC. This is for 2 ton AC with new ducts. Of course with a bigger house it will cost a little more. Yes, these prices are in line. Either you find the trades from something like the Greensheet or from recommendations of other investors. Things like foundations can be 2-5K if it is the typical small house.

Even if I am off and it runs $1300 for carpet it shouldn’t make a difference when you are building a 10-15K profit into the equation. Trying to pin down the figures to a gnats rear is only going to cause you to lose a deal because you didn’t act fast enough and get it under contract. What will cause you more problems is not figuring that you will have to replace the roof or the old AC then have to at the end.

Paralysis of analysis!!! Get Flippin out there!!! - Posted by Jim IL

Posted by Jim IL on May 05, 1999 at 18:33:28:

Ad in a fudge factor, keep a “weasel” clause in your contract and go make offers.
Started with: 8
Down to: 5
If you don’t make offers, your at ZERO!!!
all, because you were unsure!!
Don’t be. Make low offers, and go for it.
Trust me, we’ve all been there!
In fact I sent out TWO rediculously LOW EMBARRASSING offers today!!
Almost cringed when I hit “send” on the fax!!
But, one countered already too high, and the other says, “We call tommorrow” (and agent says, “they are thinking about it”)
So, we shall see!!
But, I guaruntee, IF I had taken time to OVER THINK, or paralyze myself analyzing these offers, SOMEONE ELSE would have gottent them first!!
So, good luck, and give me a call IF you get one to keep and need a cheap “handyman” in our area. I may just have one for ya!
(for a referral fee of course! LOL!)

Jim IL

From Someone Unfamiliar With The Legrand Technique - Posted by JPiper

Posted by JPiper on May 05, 1999 at 17:52:50:

When I get bids they can range all over the map. Last year as an example I got bids to paint the exterior of a property. Low bid was $1000?.I buy the paint. The guy was unlicensed, uninsured and new in town. The high bid was close to $3000?.they supply the paint. Licensed painting contractor, well-established. I accepted a bid for about $2000?.they supply the paint, licensed.

You can get bids with huge swings. It’s going to depend on how large the contractor is, whether he’s licensed, how much work he’s got, and whether he really wants your job. As you move from licensed contractors down to handymen your risk level will go up in terms of their competence and/or ability/willingness to complete a job that they start, along with the cost of the job.

The goal as an investor is to have a clue as to the probable range of bids. You can accomplish this in a couple of ways. Marshall & Swift as an example publishes a book called “Home Repair and Remodel Cost Guide”. It’s under $30. This will give you a high cost for virtually any repair (labor and materials) that you’re involved with. Handymen can ALWAYS beat these estimates?.and so can a lot of licensed contractors. But the Guide will get you in the ballpark on the high side of things.

The other thing you can do is delve into it more deeply. You can get the measurements for a roof as an example, and then call Home Depot. They can give you costs for a bundle of shingles, and tell you how many bundles make up a “square”. You can get the costs of waferboard or plywood sheeting, felt, nails, etc. You can get the cost of a dumpster. Once you’ve done this you will have a relatively accurate material cost. Call a few roofers (ask Home Depot for some references) and ask them what their labor costs are for a roof of a certain size (roughly), and how long it will take roughly. This should start to build a picture for you of hourly costs for jobs of a certain size. I’d call a wide range of contractors of different size so that you get an effective feel.

Unless you’re doing the rehab yourself, it’s primarily important to get in the ballpark generally?..not estimate it down to the final nail. You tie the property up on a contract using this number, with a contingency. Then the REAL key is to market the property, find out what rehabbers are willing to pay. In the end, the important criteria is what people are willing to pay, NOT what you think the repairs will cost. Real estate investors will all end up with different estimates of what a property is worth to THEM. This will vary depending on what the cost of their capital is, whether they do repairs themselves, whether they count labor costs, whether they will rent the property versus resell it, whether they have a built in buyer, whether they will resell through a realtor, and whether they have plenty of properties or not at that particular instant. We recently had a post regarding a property where estimates of what it would be worth to various responders ranged between $54K and $80K.

Bottom line is that the purpose of your estimate as a flipper is to get generally in the range?..tie the property up and then market the property like crazy. If you happen to find a buyer who does his own repairs, his bid may be significantly higher than a buyer who uses licensed contractors to do his work.


Re: Labor & Profit - Posted by Stacy (AZ)

Posted by Stacy (AZ) on May 05, 1999 at 16:54:38:

I believe LeGrand’s estimates are for materials only. That’s the only way the spreadsheet makes sense to me. If you were going to flip to a handyman/investor, he would be doing the work himself. His out-of-pocket repair cost would be for only the materials.

However, for those rehabbers that hire-out the work, it seems LeGrand’s examples would be too low. The rehabber/investor probably will have a handyman or two that work for relatively cheap labor costs, but there would be an additional labor expense beyond the cost of materials. About the most expensive way to rehab is to hire a contracting firm to do the work, due to their need for more margin to cover business expenses. I get the impression you’ve been calling contractors for estimates, which would tend to be on the high side.

Would this explain the discrepancies you are seeing?


Re: Question for someone familiar with LeGrand - Posted by David Alexander

Posted by David Alexander on May 05, 1999 at 16:44:18:

I’ll be honest, I have never done one flip, at least in the sense of wholesale. I would probably suggest that your not talking to wholeesale type people and companies. With that said, maybe put an extra fudge factor in there for your own satisfaction, and a good subject to clause. But, if you have 5 real candidates for flipping then I would get them under contract, find some Investors ask them what they would pay. If you don’t and it is anything like Dallas, You snooze you lose.

Pull the trigger,

David Alexander

Re: Question for someone familiar with LeGrand - Posted by Warren

Posted by Warren on May 05, 1999 at 16:33:48:

Having the same problem Russ. Legrand also says in the book that you should not waste time getting bids on repairs for the property in question until you have it under contract. How in the world do you know what to offer if you don’t know what it’s going to cost to bring it up. The only thing I have come up with is to make my purchase contract contingent upon the fix up cost.

For example the deal I am working on now is estimated by the seller to need only $7,000 in repairs so I plan on making my offer contingent on this estimate. (another weasel clause) This way if that doesn’t hold you can back out. I still have concerns about bringing contractors and handy people to a property I don’t have under contract but it seems to be the only thing to do. The draw back of course is you have wasted time if you don’t buy the property. I also just approach some handy people on the street, told them what I was trying to do, asked if they invested in real estate and told them I would need their services. I feel like these are the people to deal with because it’s side thing and they want your business. They also work with someone that has a license (electrical) so I think we can work something out. If you get anymore ideas please drop me an email and I will do the same!

Happy Flipping

Re: Paralysis of analysis!!! Get Flippin out there!!! - Posted by Maurice (ca)

Posted by Maurice (ca) on May 07, 1999 at 14:46:38:

Hey Jim:

As a newbie, I was wondering if you could explain “fudge factor” to me…I assume it means a quick calculation of cost…How do you determine it?

And I was wondering what do you use for a “weasel” clause.

Although I’m new at this, I’m already putting in offers & had a deal fall apart in my face due to lack of experience…but it’s not gonna phase me.

Thanks for the help.
Maurice (ca)

Re: Labor & Profit - Posted by Russ, IL

Posted by Russ, IL on May 05, 1999 at 17:21:42:

Thanks for your post Stacy. I agree completely with your logic there. The strange thing is that LeGrand insists that you always job the work out. I can really only see that working once you’ve established your self with a usual crew that you can keep working.

Thanks again,

Re: Question for someone familiar with LeGrand - Posted by Russ, IL

Posted by Russ, IL on May 05, 1999 at 17:18:10:

Thanks for the response David. You’re exactly right about snoozing. Two days ago I had eight properties.