Peter’s Plan for Estimating Repairs Part One: Cosmetic Repairs

Knowing the dollars and cents needed to get a property market-ready is the first step in estimating the bottom line cost of the investment.
Room Painting

Part of evaluating an investment opportunity is learning how to analyze the as-is condition of properties. Are structural repairs are needed? How about cosmetic revamping? Knowing the dollars and cents needed to get a property market-ready is the first step in estimating the bottom line cost of the investment. Being able to do so on the fly comes with experience, but at the beginning you’ll need to rely on a system. Finding a property that meets your criteria for investment and calculating the cost of getting it market-ready is the next step.

Learning how to estimate repair costs is something you want to learn to do well. As I said, with some experience you’ll be able to size up a property to get a pretty good idea of what it will take to flip it or sell the contract. Depending on your type of investment business, you might not have to do anything at all. Selling as-is properties is commonplace. Just know you’ll get better over time.

There are specific things to look for when evaluating an investment opportunity. Knowing what they are will help you estimate the financial investment required to purchase and then resell the home at a profit. Arriving at a ball park figure of the cost of rehabbing the home, if that’s what’s needed, is essential in determining the value of an investment. Paying too much on the front end for a property that doesn’t sell might tie up your investment capital (or that of an investor/buyer). Not good. Depending on your stake in the game, not all properties will be worth it. If you’re flipping, your buyer will need to know what you come up with and if he is using hard money the lender will also need to know. There are three basic rehab categories an investment falls into.

Calculating the cost of these tedious yet minor repairs before you invest will help you determine the value of the investment. Remember, what might be valuable to one investor, might not be so to another. Only you can determine for yourself.

Cosmetic Refurbishing

The first category and least expensive are homes and buildings requiring simple fixes. On the other hand, they’ll often be more expensive to purchase so the profit margin will usually be lower on the back end. That doesn’t mean you won’t stumble upon opportunities and good deals. Here’s where your education pays off. Be sure you learn the difference between cosmetic repairs and a partial rehab. Your answer weighs in on a spectrum of thousands of dollars.

What exactly are cosmetic repairs? When inspecting a property, such things as landscape, or lack of landscape, can make a huge difference in the property’s appeal. A small investment in this area can bring in five times or more than what you spend.

In older neighborhoods, debris removal is a common issue. We might just be talking about a little litter removal or even a bag or two of trash. However, junk removal can also be a major issue.

When property maintenance is let go of over a period of time, the property owner often gets used to it. They don’t see it and so it continues to build up. The house could be in pretty good shape and an otherwise good investment, but in order to get the best ROI, you’ll need to address debris removal.

A fresh coat of paint and other exterior touch ups will improve the appearance and value of the home. Does the roof need a few tiles replaced? How about the window shutters? Even a new front door can make a world of difference.

Calculating the cost of these tedious yet minor repairs before you invest will help you determine the value of the investment. Remember, what might be valuable to one investor, might not be so to another. Only you can determine for yourself.

Watch for our next article—Part Two of Peter’s Plan for Estimating Repairs. We’ll be talking about the difference between Partial Rehabs and Full Rehabs. Subscribe to our blog so you don’t miss it.

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