Know the repair estimate before making an offer on investment properties
As a wholesale real estate investor, you may not even be involved in repairing a property. Chances are, you can even sell a property without even looking at it. However, it is still very important to know how much repairs will cost before making an offer on an investment property. The cost of repairs figures prominently in the calculation of the final offer that an investor must make for a property. He will have to deduct the cost of the ARV repairs (after the value of the repair) before he can calculate a feasible amount to offer the seller.
The value after repair is the value of the property if it were new or if repairs were made. You can calculate the ARV by getting information on comparable properties within the area. Comparable means being “similar to” the property in question as much as possible. Be sure to compare apples to apples.
If you’ve been in the real estate business for quite some time, you’ve probably picked up a “gut,” or instinct to know how much a repair would cost on a property. You should be able to distinguish those that require some cosmetic repair and those that require major repairs. If you’re new, or if you don’t yet trust your instincts, you can have a contractor provide you with a free estimate of how much the repairs would cost.
For property wholesalers, estimating the cost of wholesale home repairs can mean the difference between making a profit or wasting time and money. You identify arriving at an offer by subtracting the estimated cost of repair and other expenses from the ARV. The result must be multiplied by a maximum of 70%. If you can reduce that percentage, it will be better for your benefit.
Real estate investing courses will often include how to calculate repair costs. Estimating the cost of a wholesale home repair is not an exact science. Something could go wrong and significantly increase the price of repair.
As a wholesale real estate investor, you can protect yourself from inaccurate repair cost by selling your investment property “as is.” You will find buyers who are willing to buy investment real estate “as is.” So don’t worry. The quicker you can get rid of a wholesale property, the better for you as a wholesale investor. The more properties you sell in a short period of time, the better.
That is essentially what it means to invest houses. You may not make much per investment property, but you do make money on the volume of properties sold.
Still, knowing the repair estimate before making an offer on an investment property is essential so that you can make an offer that is fair to the seller and profitable for you and the future buyer as well. You’ll need to do your due diligence to learn how to arrive at an accurate estimate. It is a learned skill. Within a reasonable period of time, you should be able to estimate how much repairs to a property will cost.