Do you have a hard time when you need to estimate rehab costs? You’re not alone! One of the main reasons that people can’t sell their deals once they get them under contract is because they estimated the repairs TOO LOW! This makes for a bad deal for your buyers.
The maximum allowable offer formula is the same across the board (ARV *.65 Minus Repairs). So as you can imagine, if you get the repairs wrong then your whole game is thrown off.
If you estimate your repairs too low, because you’re just not in touch with what rehab costs actually are, then you’re cutting yourself out of deals AND out of profit. Let me explain. If you’re estimating repairs on your own (on that fancy sheet of paper that comes in wholesaling manuals) and you estimate repairs to be $20,000 then your offer may look like this:
$150,000 * .65 Minus $20,000 = Your MAX Offer to the seller will be $77,500.00
However, if you discover that the actual cost to rehab this house is $35,000,00, you’ve suddenly offered way too much for this house. You may even get stuck with it and not be able to sell the deal to anyone. Look at the numbers with an accurate estimate.
$150,000 * .65 Minus $35,000 = Your MAX offer to the seller SHOULD be $62,500!
The difference is HUGE. If your investors are willing to pay ARV *.70 minus repairs, then you could most likely sell this deal for $70,000 to a cash buyer. If you’ve estimated your repairs incorrectly, and offered the seller $77,500, then there’s no chance that you could sell this deal and make any money.
Now do you see how important it is to have an accurate estimate of rehab costs?
In this post, you’re going to learn of the tool that I use to estimate rehab costs accurately and exactly how it works.
The old school way of estimating repairs was to carry a clip board to the house, and fill out a bunch of information about the house and the condition it was in. Then, of you had a really cool document, there were some costs to make repairs listed on the form. You could manually add up all of the repairs that you indicated and come up with an estimate of repairs.
I’ve looked all over my computer and google drive for the old inspection shee that I used to use, but I can’t find it. I must’ve disliked it that much!
I came up with a solution to this madness.I developed a tool that would estimate rehab costs for me. I also wanted something that I could hand to someone else (who knew nothing about estimating repairs), and they could also use it.
I did some research using social media , asking people that I knew were actual rehabbers (not wholesalers), what the cost to repairs specific things were. Everything that I could think of was in the survey. Once I received 100 realistic responses (some people submitted ridiculous answers) , I found a developer to make the tool.
Basically what it does is ask a series of EASY “yes” or “No” questions. While you’re at the property, you observe the exterior details first, answering the questions. then you move to the interior, again answering simple questions. Once you’ve done a complete walk through and answered all of the questions that are made part of the form, you submit your answers.
While the questions are being answered, the tool is automatically calculating costs in the background. It’s using the AVERAGES that were submitted from REAL rehabbers and creating an estimate of repairs for the property. I don’t even have to use a “quick reference” Home Depot pricing guide!
What happens next is amazing! An accurate estimate of repairs is instantly displayed on your screen. If you’re standing in front of a seller, you now have a REAL number that you can use to present your initial offer.
This is the Tool to Help You Estimate Rehab Costs
This instant display of costs is a game changer for you. Not only does it make me look professional and polished at property inspections, but I can hand this tool of to my hired property inspectors and they can handle it just as easy.
In addition to the instantly display on my screen, I also receive a line by line itemized PDF report that shows how much each item is being allocated in repair costs.
This tool has enabled me to get the information that I need FAST while helping my offers get BETTER and BETTER!
By now, I bet you’re wondering how you can get your hands on this cool tool for your business? I knew you would!
For the first few years, I made this available to the Members of the MOB only. In fact, over 100 Mobsters have access to the tool and us it every day in their business and they LOVE IT.
Now that it has been tested through thousands of rehab estimates, it’s being released to you, a special reader of the Property MOB blog. Get the Rehab Estimator Tool Right now and start making smarter offers that will make you more money!
If you have any questions on how to use it, or how it works, you can leave comments right here and the MOB team will be happy to help you!