The time to add up the true costs of fixing a house is not after you buy—but before you make an offer. The better you are at estimating home repair costs, the more confident you can be about choosing profitable investment opportunities.
Impatient investors make the mistake of moving too soon on a house deal without anticipating real repair costs. At the other extreme, overly cautious dealers don’t move fast enough on a deal, losing out by overanalyzing repair costs. But seasoned real estate investors know that surmising repair costs of a property is key in moving in on the right deal. They make it a practice to always improve their methods for making quick and accurate repair appraisals.
Get Your Own Style of Guesstimating House Repair Costs
There is no single way to ascertain rehab costs for a house. Until you become expert, expect to always underestimate true repair costs. There are many methods for coming up with your best ballpark guess—from computer software programs to practical experience—but all of them work together.
Getting good at guesstimating home repair costs takes time, learning and practice, but as you get more efficient your skills pay off. With experience, you can often tell just by looking a property over, whether it will be worth your investment with the repairs. Then, when you do see a profitable opportunity you can make an offer to the owner on the spot, (subject to a more formal and thorough repair estimate later). Develop confidence by using simple methods the pros use.
Get Out and Look at Properties to Learn Repair Costs
Looking at properties gives you an up close appreciation of what it takes for repairs. Look at hundreds of properties until you recognize all the nuances of construction in your market. You will learn which materials and features are standard in most homes, which guides you to know where to spend and where to leave well enough alone.
Network with other rehabbers and ask questions to real estate agents. Consider taking some classes in real estate.
One of the most important things to include in your formula for figuring home repair costs is square footage. Estimating construction costs per square foot provides you a realistic overview of a home improvement project, which you can use to compare with other properties. (Square footage for a property is usually included on property tax records.)
If you think you might want to make an offer on a house, find out financial details before you view it—like the balance on the mortgage, issues with the title and prices on comparable homes in the area.
Get to Know Prices of Local Materials and Labor
Knowing costs of materials and labor in your area equips you to make quick calculations on repairs when shopping properties.
Study every aisle at home improvement stores to learn the details and pricing for everything from tile and carpet to paint and fixtures. Realize it takes many months to learn the basic variables of materials. But you will soon be able to survey a property knowing the standard prices for doors, windows, carpet, paint, toilets, tubs and other common materials.
For a reference, consider getting a hold of the latest National Repair & Remodeling Estimator book.
Get into Computer Software Technologies
For modern efficiency and precision, track home repair prices with an investment calculator or computer software.
Invest in a home repair cost guide from real estate building experts like Marshall & Swift: http://www.marshallswift.com/. You can identify and track repairs you never thought of before.
Get to Know General Contractors
General contractors can provide you with bids for home repair costs. Even if you are a do-it-yourselfer, you benefit from a network of knowledgeable contractors who can keep you updated on costs and help you with odd projects.
Get Familiar with Home Inspection
Have properties inspected by a certified home inspector and take the opportunity to follow along during the inspection to ask questions. Consider becoming certified your self at home inspection.
Have a Home Repair Contingency in a Purchase Contract
No matter how good you are at guessing home repair costs, you will not be accurate every time. Protect yourself by always including a home repair contingency in a purchase offer, which allows you to back out of the contract if repairs turn out to be too far beyond what you originally estimated.
Make an Offer With Confidence
When you can accurately guess repair costs just by looking over a house, you become a more confident rehab investor. Rely on continual learning, efficient technology and the knowledge of fellow professionals to become your own expert at repair costs—and an overall shrewd investor.
- When you can make accurate guesses about home repairs you are in a position to know which real estate deal is worth moving on quickly.
- Make it a game to guess what the home repair costs would be for each property you see.
- There is no perfect way to anticipate home repairs for an investment property, but use the many methods available for your own approach.
- Get out and look at homes to learn the standard materials and features in your area.
- Develop a network of professionals, from real estate agents to general contractors, who know the ins and outs of repairs.
- Always estimate home repair costs in terms of square footage for the most accuracy.
- When making a repair estimate, add in a cushion of cost since it’s quite easy to underestimate what you will spend rehabbing a property.
- Invest in a home repair cost guide for an up to date reference.
- Continual learning about home repair costs makes you a shrewd fix and flip investor.
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