A good investor knows that before you take on a new project, flipping requires research and budgeting. Before you purchase an investment property, you should always think about how much money it’s going to cost you for repairs and renovation. Here are some ways to estimate the repair costs for that property you’ve been considering.
1. Factor in the age and condition of the property
Remember, every house or condo is unique and has experienced different levels of wear-and-tear. While many experts recommend dedicating 5% to 10% of your budget to repairs, the formula may not always provide enough of a cushion and can leave you with an unexpected shortfall.
Your average 10-year-old house in the suburbs probably won’t require the same level of maintenance as a property built in a downtown area in the 1950s. Even if both houses have been properly maintained, you’re still likely to encounter age-related problems with older properties.
2. Get your hands dirty first
Don't be afraid to personally give the property a walkthrough before consulting a contractor. Grab a clipboard and make notes regarding the following parts of the house:
- Front and back yards
- Basement, attic, and garage
Note specific items in each portion of the house that need fixing. Make sure to pay close attention to these in particular:
- Water heater
- Windows, doors, and baseboards
- Baths, showers, and all plumbing
- Wiring and electrical fixtures
- HVAC unit and any appliances
- Exterior components like the roof, stucco/brick/siding, and porch or patio
Once you’ve given the house a thorough inspection, come up with a preliminary list of materials that you will need to complete the renovations. You can estimate material costs by visiting your local hardware or big box store. This will help give you an idea about how much the restoration will cost.
3. Experience helps
The best way to get better at estimating repair costs is to get more experience in the field. The more you inspect and repair houses, the better you’ll be at determining how much it’s going to cost you to get started.
Experience will also help you with pinpointing serious problems in a house. Structural problems are much more serious than cosmetic issues, so it’s important to pinpoint the following:
- Water damage
- Plumbing issues like stopped pipes, damaged valves, and leaky toilets
- Wood that’s rotting or damaged by termites
- Foundation problems
Unlike slapping on another coat of paint and replacing the light fixtures,these problems are much more expensive to fix and need to be accounted for when developing an accurate budget.
4. Get to know contractors
People who are not contractors themselves should make an effort to build a professional relationship with a reliable contractor. There are going to be times when your experience with flipping and home renovation is not enough and you’ll need to rely on a skilled professional. Furthermore, this relationship can benefit both parties. It allows you to get a better idea of all the repair costs to expect for your prospective property, and provides the contractor with an opportunity to create a proven relationship with a new customer.
So, before you commit to that next project, make sure you get accurate repair estimates to help you avoid surprises and stay within your budget.