Welcome to the blog. Today we will talk about repairs to your real estate flip projects. How do you identify them and determine their cost and the category of work they belong to? I identify and list repair projects into three categories, small, medium and large. This helps me to determine costs and what to expect. This is important to know when dealing with a contractor and negotiating a price for repair projects. As each property is different, you need to have a general idea of costs or a ballpark figure of what each repair job entails, both from a labor and materials view. So I classify these costs into three categories and then identify the six main things to look for when evaluating the repair costs of a property. When you purchase a property, I suggest you walk through it with your contractor to check its condition.
A small repair is considered repainting, minor landscaping, refinishing floors, minor wall repair, general cleanup of kitchen and bathrooms, sometimes changing a countertop or refreshing the bathtub. A medium repair includes replacing the kitchen counter and bathrooms, including walls and tile and replacing floors. A large repair would consist of removing a wall, changing mechanicals, redoing drywall in a large area that includes removing all the drywall, moving the plumbing, replacing mechanicals, doing some foundation work, adding a room and installing new wiring. With a large repair, you’re doing everything. Sometimes you only know that an appliance or fixture needs repair once you test it. So the most expensive repairs are usually the ones that are not seen, or they’re underneath something. The basic cosmetic look of a property is easy enough to recognize. Things like repainting, drapes, flooring, lighting and wallpapering. The big-ticket items can be tricky because they are not as easily identified, so let’s look at them now.
There are six big ticket items to identify when estimating repair costs with a fix and flip property, three on the outside and three on the inside. The three on the outside are,
To inspect these items, you need to walk around the house and look at what is happening. You will notice any problems needing repair right away. Is the foundation solid, or is it sinking? Are the windows appropriately sealed, or are they rotting? Are they old or new, and do they need replacing? The roof may be harder to identify because sometimes, with taller buildings, you may not be able to see from the top. But it’s a good idea to inspect the gutters and everything around the area, which will give a good indication as to the condition of the roof.
On the inside of the property, the three areas you need to inspect are,
When it comes to identifying repairs inside the property, this is something that a qualified home inspector can do for you. Even though they don’t go into details, they will identify electrical outlets that don’t work, a GIC outlet that needs to be repositioned or a specific electrical job that needs to be completed. It’s the same with the mechanicals. You will be testing the furnace, the air conditioning, and the electrical appliances. Checking that the plumbing is working by running the taps and flushing the toilets to ensure that it’s draining correctly, you will quickly tell that something is not working or may need to be moved.
Each of the above items will have a level of repair that can be classified into small, medium or large. As you progress with each project, specify exactly what each job will cost you. For example, if you are having a larger repair, that means that you’re adding a room that needs to have electricity or you need to replace all panels, so that’s going to cost you big money. So try to determine where you would categorize it into, a small job, medium job or a large job and its cost. The reason is that you need to have this little bit of an advantage in negotiations with your contractors; if you start developing an eye for things that need to be repaired, you’re going to start collecting prices along the way, and you will know exactly how much money is required to do a job. The better you become, the faster you’ll be able to make an offer on a property, and the more accurate you will be with the profits. So that’s what I have for you today. If you have any questions about the Big Six ticket items, let me know, and we can discuss that in more detail. For now. I will see you in the next one.
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