Repair Cost Summary

Scott Costello All, Blog, Probate Investing 9 Comments

img_0200_0This weekend was a productive weekend as I went out to visit the Tall Timber house with Lance (a fellow student of Jon Zorrer’s).  Lance is pretty good with spotting what needs to be repaired and together we came up with a repair cost for this house.  With our estimates, it turned out it was going to cost more then my initial guesstimate of 50,000 k.  Here is the break down of the figures…

Repair Item Cost Estimate
Paint 9 Rooms and Strip Wall Paper $5,000
Trim Trees and Cut Down a Few $5,000
Upgrade Kitchen (higher end with Granite) $15,000
Redo Bathroom Full 1 $5,000
Redo Bathroom Full 2 $5,000
Redo Bathroom Half $2,000
Siding (two story 60’x36′) $14,000
Driveway (redo) $4,000
AC Compressor $5,000
Furnace Maintenance $300
Duct Clean out $300
Chimney Cleaning $600
New Deck $2,000
Brick and Masonry Repairs For Steps $500
New Front Door $500
Yard Clean Up and Land Scaping $2,500
New Roof $8,000
$74,000

That is 50% more then my estimate so It is good that I went back. I’m sure some of these numbers might be over estimated but I wanted to error on the side of caution. Going with three scenarios, based on the % Mark Down of the standard wholesaling formula I came up with these possible offers…

  • Offer #1:  550,000k  (arv) * 70% (md) – 74,000 (repairs) – 20,000 (my fee) = $290,300
  • Offer #2:  550,000k   *  80% – 74,000  – 20,000  = $345,300
  • Offer #3:  550,000k   *  75% – 74,000  – 20,000  = $317,800
  • Offer #4: 550,000k   *  65% – 74,000  – 20,000  = $262,800

My normal percentage for figuring out my offer is 70%, but I wonder if with higher priced homes I can confidently use a lower mark down.  I’ve got a call into Jon to see if I can for this particular area.  If I don’t hear from him by tomorrow I’m going to go with 70%  and make that offer to the seller.

I would have made the offer today, but when I got home from work I found that the power was out in the entire town so I had no access to my computer for the numbers or the guys phone number.  I also had to get my dog out of the house because he gets terrified by the beeping firing alarm.  The poor little guys heart races.

I will leave you with some pictures of the house..

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Comments 9

  1. Scott,
    I am far from an expert here, but changing your formula is not always the best idea until you get a lot more experience with these houses. Higher end homes fluctuate more on ARV and so do repairs. Also, if you can’t wholesale it, you want to be able to rehab it. Not sure who is lending money out there, but no one is above 70% ARV here. Everything over that 70% would be out of pocket. I learned a real hard lesson on the tree times house that way.

    Jason

    1. Well, it’s not easy to get into the house when ever I want. They owner lives in Virginia and would have to drive the 5+ hours just to let me in.

      I was just asking if higher end neighborhoods could support a lower mark down rate that’s all. I’ve heard that in a few places and was curious.

      The next home I make an offer on I will try and get a contractor through to give me a bid on the job for sure.

  2. Scott,
    I am far from an expert here, but changing your formula is not always the best idea until you get a lot more experience with these houses. Higher end homes fluctuate more on ARV and so do repairs. Also, if you can’t wholesale it, you want to be able to rehab it. Not sure who is lending money out there, but no one is above 70% ARV here. Everything over that 70% would be out of pocket. I learned a real hard lesson on the tree times house that way.

    Jason

  3. Scott,

    I think Jason gives some great info there. It would be very educational and good for the heartburn/stress factor too if you had a few professional contractors come out and give you some estimates.

    Awesome job tho with having a productive weekend and getting out there with Lance. Keep the momentum moving Scott!

    1. Yea, I could stand to learn a few things from how a contractor thinks. I’m looking into creating a post series on what to look for with particular items like breaker boxes, furnaces, roofs, etc.. I’ll research each and create a post about my findings. Would help me and others.

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    1. Well, I first had Lance help me identify the items in the home that would need fixing, replacing and upgraded. I then took each item and did some research on price per unit (Square for siding and roofs, linear feet, etc…) and then did my calculations based on the measurements I took.

      Somethings like the AC Compressor I could just get a figure for replacing it like $5000.

      The next time I look at a house I’m going to call in a contractor just to see how they work and estimate things.

      Hope that helps.

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