I received an email from a gentleman marketing one of my properties I have on contract. He's actually from another state. I believe he came to me through this site (there's a tip). One simple question in his email...
What are the estimated rehab costs?
That's a great question. As a wholesaler you will need to estimate rehab costs. It's not all that complicated. I'll get into that on another day. For now I wanted to explain the two types of rehabs.
1) Fix and sell at market value.
2) Fix and rent then sell later.
You will find most rehabs come down to these two categories. Obviously some investors will fix houses in nicer areas just to compete with the market, but more times than not they will probably skimp in order to maximize profit.
A fix and sell simply means they will go above what a normal fix and rent rehab calls for. You'll see things like granite, slate tile, decorative fixtures, landscaping, and double pane windows in a fix and sell. Essentially the investor is adding selling points to raise the overall value of the property.
In a fix and flip you'll see things like, standard veneer counter tops, linoleum, basic fixtures, etc. Keep the area in mind when estimating rehabs. Is an investor likely to fix and flip in that area or are they likely to use the property for cashflow?
The beautiful thing about this... when you do estimates always provide a FULL estimate to the seller. Figure on fixing the house to sell it when you are putting in an offer. This will build additional wiggle room for you and the investor. In reality an investor will most likely buy, paint, carpet, and linoleum the place just to give it a fresh facelift. Know your investors and the market. Prepare a rehab estimate for their purposes.
Own Your Situation,
Ben
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