We’ve all been there. We go through and estimate repairs on a property and miss something. Sometimes, that something may be minor however it could be quite significant. This tends to happen when the rehabs are larger in scope or have a structural or foundation issue that needs addressing. I don’t usually see wholesale courses that teach how to address these sorts of things when dealing with these points beyond generalities. However, generalities is usually not going to get this done right and does little to build confidence in Buyers.
While Buyers of course are expected to do their own due diligence, it has more than frustrated countless Buyers when wholesaler numbers end up being way off due to this common ignorance. I thought I would take some time to outline some common figures for our market for a variety of these often overlooked items. Take this and adapt it to your area and this will give you a solid starting point.
Surveys are needed to outline the property boundaries and the layout of the land. These are nearly always required for large scale renovations where an addition is needed or new construction.
These are the documents that outline how the finished product will layout on the land, how demos are being handled if physical property is being demolished and what items are being put in place to handle stormwater runoff.
Bring out the Bobcat and move some dirt! It is common for some dirt moving to have to happen before the next phase of the construction happens.
Largely varies by area, the permits needed and how many different ones needed are requirements to ensure the job gets done right the first time
This is the actual demolition of any existing structures and cleaning up the mess it leaves behind.
What I call the ‘tree fee’. When taking down live trees, you have to get permission in many areas, especially in the city. The city will let you do it with justification and they will bill you per tree. This is on top of the cost to actually take down the tree.
Maybe you are dealing with a property on a well or septic and want to tap into city water. Maybe it’s just raw land. Whatever the case, the county and/or city will bill you to tap into their water system. This does not include the actual pipe that has to be buried in the ground for the water to flow through.
Many rehabbers, especially in nicer areas are going to stage the house. Staging done well can make all the difference in a property that sells quick or sits on the market. Reality is staging helps homeowners visualize the property without having to work at it, thus increasing the chance of a sale.
This is by no means an all encompassing list but it does make all the difference on whether a deal can work or not. Many of these costs will be grouped together and termed ‘prep costs’ since a lot of them occur before any actual renovation begins. A good rule of thumb on larger projects is $15000-20000 in prep costs give or take depending on the specifics of the deal. This 20k does not include any of the actual construction that needs to be done.
These figures can significantly impact your numbers as a wholesaler. Whether you do construction or not, knowing this information will help you to structure more deals that make sense not just for you but for your Buyers. Believe me, they will appreciate your foresight into thinking about it from their perspective.
Next month we will talk about how similar wholesalers and their Buyers really are.