Rehabbing Cost Explained in 5 Important Stages: A Revelation

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Knowing how much you give is the start of assessing how much you may want to receive in real estate business. If you spend a certain amount of money on the subject property, you will aspire to get more than the value of your expenses. 

Rehabbing a house is a rewarding experience especially when it gives you good returns. A successful rehab starts when you set the best price for the property. You can set the maximum offer when you know how to estimate the rehab cost. This is truly important especially when you are engaged in wholesaling and flipping houses. 

Here is how you can estimate the rehab costs in five important stages:

1 – Do a property valuation and visit the property

You can best assess the subject property by conducting a valuation and by visiting it. You need to walk through the property thoroughly and take photos for analysis purposes after securing the seller’s consent.

The Big Six and Other Expenses

In doing a property valuation, you must estimate the rehab price for the big six factors enumerated below. These are the major areas that usually require repairs and improvement in flipping a house:

  1.   Roof
  2.   Foundation
  3.   Structure
  4.   Electric
  5.   Plumbing
  6.   HVAC

Aside from these six areas, other expenses may include purchasing appliances, installing doors and windows, cosmetics (painting and flooring), landscaping, fixtures and cleaning.

2 – Determine the operating expenses

Operating expenses refer to the expenses that you incur in the operation of your business. In real estate investing, the operating expenses include the following:

  • Taxes
  • Insurance
  • HOA
  • Utilities
  • Title and escrow fees
  • Real estate commissions
  • Survey and inspection

3 – Calculate the ROI

In calculating the return on investment, you must determine the  maximum allowable offer for the subject property. The maximum offer must be based on the results of the previous steps you have taken such as property valuation, rehab price for the major and minor expenses, and operating expenses.

4 – Fund the property and do the Rehab

Funding the property is definitely necessary in flipping a house. You do not need to worry in funding the property and being at loss, as long as you made a careful assessment and rehab estimate. You may read our blog, “Avoiding Common Mistakes in Flipping Houses” to help you determine important factors in doing fix-and-flip.

There are a lot of ways in funding the property. You can fund the property using your own money, OPM or Other People’s Money, or borrowing from the bank.

You may need the help of other professionals in doing the rehab. You may ask the services of a contractor, wholesaler, or other real estate investor. If you need real estate investor association and other services, feel free to check our marketplace anytime!

5 – Sell the property

You may offer the property for sale after flipping the house. As others say, “if you find the good deal, money will find you”. 

In Real Estate IQ, we can provide you with 45,000+ leads every month. Feel free to check our Deal Finding Suite where we offer a list of motivated and distressed sellers!

As you break down your duties  in 5 significant stages, you can estimate the rehab costs in an easier and more achievable manner. You may check our blogs here and learn more about real estate investing strategies. 

Source: https://www.forbes.com/sites/forbesrealestatecouncil/2019/10/10/the-five-important-stages-of-rehabbing-for-new-real-estate-investors/#1246dde71969

Disclaimer
The blog articles are intended for educational and informational purposes only. Nothing in the content is intended as legal or financial advice.

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