Accurately assessing the repairs that a property needs and how much they will cost is critical to successful real estate investing.
After your first couple of deals you will definitely find assessing what repairs and needed and how much they will cost you easier, but even small mistakes can cost you tens of thousands of dollars. It is important to have a system that includes a checklist and series of questions in order to be able to accurately evaluate deals before you commit resources.
When flipping houses and conducting initial seller interviews you cannot just rely on the seller voluntarily telling you all the repairs that are going to need to be done. If you ask ‘are there any repairs that need to be done’, 90% of the time you will get a ‘no’. Though of course once you see the property it could be quite a different story. Instead ask specific questions like ‘what repairs would need to be done to get the property ready for a new tenant?’ or ‘when was the last time the bathrooms or kitchen was updated?’.
One major thing you need to watch out for when flipping homes is acquiring homes that have had extensions or structural alterations made. You must ensure that permits where obtained for the work or face thousands more in repairs and weeks of wasted time. At worst you may not even be able to sell the property.
Always have an inspection done by a professional inspector or at least a trusted contractor even if you are buying the property as-is. All too often what may look like a small issue to you may end up being a major electrical or structural issue that adds thousands of dollars to the project costs. Even items like fixing a shower in a high end home could run you $6,000 and quickly eat away at your profits. As you grow your real estate investing business and build relationships with inspectors and contractors they will be able to give you a better idea of what items you can skip over and what repairs are really critical. Above all, make sure you do a walk through before closing on a home to make sure no new major repairs issues have arisen.