How can you estimate a rehab budget when you have zero construction experience?
Let’s say you’re brand new to real estate investing. You take a couple guru courses in Las Vegas and decide that wholesaling is the best way for you to build up cash and experience without taking on too much risk. Even though you’ve never estimated rehab before, the courses came with some rehab checklists and general pricing guides (which are not necessarily New England prices). Confidence is running high–until you visit your first deal.
We’ve been there, so here’s what you can do
It’s your job as a wholesaler to make sure the estimates are reasonable. (“But, shouldn’t my buyers know their numbers?”) Yes, which is exactly why you will lose credibility when you try to tell them the abandoned crack house will only cost $35k to fix up. Experienced buyers have no problem passing on your deals if the number aren’t right. So, save yourself from some embarrassment, losing your deposit money, and damaging your reputation.
Our biggest tip: Pay a local contractor who is experienced in investor pricing to take you through really rundown houses for a couple hours. Make sure he points out everything that needs to be fixed, what to look for, and exactly how much it costs. Ask a ton of questions, no matter how basic. The key is to use a contractor local to where you are investing, and to write all the pricing down.
Want more tips on analyzing a deal? Here’s a compilation of articles to point you in the right direction
- Ask Nick – How do I learn how to estimate rehab costs?
- How to Estimate Rehab in under 10 Minutes
- The #1 Reason why Wholesale Deals are Rejected
- How to do Detailed Rehab Estimate a Contractor Can Work With
- Ask Nick: How does the rehab cost add up?