When it comes to estimating the repair costs of a potential investment property, let’s face it. There’s no simple, easy answer. In a perfect world, we could call up the right contractors and price out piece by piece. Unfortunately, this convenience would likely come at an additional cost itself.
So instead, we’re going to show you some tricks you can apply to your estimates. By applying these rules of thumb, you can help keep yourself in the profit zone at all times. Here are our 3 tips for you:
Estimation Tip #1 - Better Over Than Under
Do yourself a favor and always err on the higher side of things when you’re making estimates. You’d much rather be a little over than under. This way, you are more likely to end up with extra profits rather than less.
Of course, you don’t want to be extremely over the top with your estimates. This may lead you to place extremely low offers that may not even be considered by the seller. There’s a healthy balance that you’ll find through experience of your own.
Estimation Tip #2 – Always Assume You’re Paying Someone Else
Even if you plan to do certain repairs yourself, include the costs you would incur if you hired someone to do it for you.
This way, you can still pay yourself when you complete the work yourself. After all, you want to be compensated for your time too, right? Now any work you do yourself instead of hiring someone will be bonus profits just for you.
This will also ensure you’re earning returns that are consistent with the market.
Estimation Tips #3 – Nurture Contractor Relationships
When it comes to real estate investment, contractors can be your best friends, but only if you build these relationships right. Ideally, you want to find contractors who are available, competent, and trustworthy, so you can use their services frequently.
In the early stages, it will be tough to bring contractors around with you to help estimate your costs. So, you’re going to need to know how to do it yourself.
One day though, if you bring these people enough consistent work, you may build closer business relationships with them. In fact, if it’s in their interest, they may be willing to come and provide accurate estimates. You’ll also get much more familiar with the costs they usually charge. All of this helps to make your estimates easier and more accurate.
If you follow these three tips, you can make real estate estimates a lot easier for yourself. The key is to do your research and know the average rates for your market. If you can beat them, even better.
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