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Software full of Performance

Repairs are a wild card in the rehab process, and you need to be as precise as possible to give yourself the best chance of getting the maximum profit. For each property, you will need to decide the level of work you want to do around the house. Please use the following categories, listed below, from cheapest to most expensive. I did not include the costs because they depend on your area. For example, a basic rehab might cost $ 10 per square foot in Ohio, but $ 100 per square foot in California.

Basic Rehab – This requires the least amount of work necessary to keep the home in livable condition. For a basic rehab, you will do a thorough cleaning of the house and lot, and you will paint and carpets. Work progresses quickly and the home is generally sold to a retail buyer for a low price, or an investor looking for rental property.

Standard Rehab – This is the most common project you will undertake. Make sure all the work you do for a standard rehab is consistent with the neighborhood standard.

· Remodeling – This is a standard steroid rehab. In a remodel project, you are replacing and improving the entire house. You may also be removing walls and expanding spaces. You can even decide to make changes to the layout by adding rooms, increasing the size of the rooms, or moving the bathrooms, etc. This represents the greatest amount of work, the greatest risk, and potentially the greatest reward.

So how do you determine a quick estimate of work? While you were back in your office, you should have done some math based on the information you got from any research you’ve already done on the property and the neighborhood. The numbers will change, but you need a place to start.

To determine the cost of repairs after the tutorial, you have two options;

Bring your contractor to your appointment for an estimate of the repairs. The benefit to you is precision. The downside is that it is expensive and it may take a few days to complete the job estimate. When establishing a relationship with a contractor, they will want a fee for their time. Later, once you’ve established a track record, most contractors will waive the fee because it has proven itself and they want their teams to keep working.

Your second option is to do the calculations and estimates yourself. If time is of the essence, you could even work out the numbers in your car with your calculator. You have other appointments to see and projects to manage. You have a couple of options here. The first is to use an online software program that will quickly generate an estimate, based on the cost of materials and labor in your area (for example, HammerPoint Project Estimator on OpenRoad). The second is to use some generalities based on what you know is needed to rehab a kitchen, bathroom, etc. You can also use square footage to determine costs, which will require some pricing research. To shorten the learning curve, network with other rehabilitators in your area to see what type of rehabilitation they typically do and what their cost per square foot is.

Note that you can have three contractors come to the property and provide you with three very different work estimates. So while a contractor’s estimate improves your chances of getting an accurate figure, it’s not foolproof. The key is to get a figure that comes close. You can have your contractor inspect the home later to adjust the numbers. Just be sure to leave a clause in the contract that gives you some protection in the event that a major repair that you overlooked suddenly appears.

Factor hidden costs

Beginning rehabilitators who use the bid formula I have recommended often make the mistake of believing that repairs are the only major costs. Not so. The bid formula is useful to generate a quick number that puts the investor in the best position, in case the project runs into some obstacles or takes longer than anticipated. In essence, you will always generate a lower bid than might be necessary, but you will find that you will need the extra padding.

Additional costs to consider include:

Purchase Costs – Every time you purchase a real estate property, you will incur the costs associated with the transfer of ownership. This includes title insurance, transportation fees, inspection and appraisal; however, it does not include the cost of the money used to make the purchase. Often times these fees will be paid by the seller, but it is a good idea to “Pay All Seller Closing Costs” as a way to provide additional value to the owner. Usually this equates to 1.5% of the purchase price.

Maintenance Costs – Some properties will sell faster than others. You never want to be caught in a position where you didn’t take into account the possibility that your home would take longer than expected to sell. Maintenance costs include property taxes, insurance, utilities, and any maintenance costs. You can also have a due association in case the property in question is part of a homeowners association. To determine a rough estimate of what your maintenance costs will be, multiply 1.5% by the purchase price.

Cost of money: Unless you have substantial savings, you will need to borrow funds for the purchase and rehabilitation of the property. Consider the following questions:

o How much money do I need?

o How long do I need it?

o What interest and fees will I have to pay?

Selling Costs: These are the costs incurred in putting the home on the market and selling it:

o Real estate agent commissions (typically 6% of the sale price, with 3% for the listing agent and 3% for the buyer’s agent)

o Closing costs (generally 1.5% of the sale price)

Depending on the volume of properties you want to rehabilitate and sell per year, you can decide to sell the house on your own or enlist the help of an agent. If your business is doing rehab after rehab, you’ll want to spend your time managing projects, researching potential clients, and filling your portfolio; therefore, it is probably best to use an agent. However, if your business is small, you may only rehab one house per quarter, you may prefer to sell the house on your own and save commission costs.

Again, the formula I recommend will put you in the best position to make an offer that protects you in case something goes wrong. At some point early in the process, you will want to take a closer look at the costs of the project. This means getting a more accurate repair number from your contractor, in addition to including the additional costs described above.

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