Networking and Taking Action is the Key to Estimating Repairs

What? I don't need spreadsheets, documents, and formulas to estimate repairs?

Like many of you out there, I struggled with estimating repair costs when starting out. I too had the fear of never being able to wholesale houses until I knew the cost of every single building material used in a house. I let it cripple me for a few months and the analysis paralysis actually cost me a deal. I’ve never been one to read a book to learn something new. I even started a thread requesting that J. Scott convert his invaluable book on estimating repairs to an audio version. I’ve always been the type of person to jump in and learn by doing, so that’s what I did!

The vast majority of the investors that are featured in the BiggerPockets Podcast say, “The key to learning and being successful in this business is to take action.”

I took action for the first time in the summer of last year. I sent out my first direct-mail campaign targeting absentee owners in Indianapolis and started to build my website to generate leads. I wasn’t sure what exactly I was doing, and my local mentor liked to tease me and say, “You don’t have a clue what you are doing, but you always find a way to figure it out.”

I guess I didn’t have a choice, the calls started pouring in and before I knew it I had sellers calling and asking to schedule an appointment for me to look at their house and make them an offer. Again, I had no idea what I was doing, but I wasn’t going to allow that to prevent me from learning what I needed to be successful. If I didn’t know the answer to something, that’s okay because I had BiggerPockets as a resource in addition to the successful investors I had meant through my Indianapolis real estate networking efforts.

My first deal came when I received a call from a motivated seller who had a house in a nice historic neighborhood in Indianapolis. The property had been vacant for almost three years, and the seller was behind on his property taxes, and the code violations on the house were starting to add up. I went to look at the house and it was in complete disarray. As a new investor at the time, and with no prior experience it was a little overwhelming.I had no idea where to begin with my repair estimates. There was mold, there was water damage, there were foundation issues, and there was a termite problem. In my opinion, no fix and flip buyer would want to take a chance on this property. Not to mention, if I couldn’t estimate repairs, then I wouldn’t be able to structure a deal that made sense to all parties involved (the seller, myself, and cash-buyer).

However, rather than spending valuable time and countless hours trying to itemize every repair item in the house, I instead reached out to my network and asked a cash buyer if he would be kind enough to take a look at the house with me. In exchange for first right of refusal to purchase the house, he agreed to help me estimate repairs. He looked at the house, and before we even left he told me that he was a buyer and made me an offer. Now, it was up to me to negotiate a price with the seller, and that’s what I did. I disclosed everything with the seller; we negotiated a price that we both thought was fair, and we helped the seller solve his growing tax problem. We offered to pay all the tax liens on the property in addition to purchase price and closing costs. The seller was happy, I was happy, and the cash buyer who helped me estimate repairs was happy that he purchased the house at the right price.

The point of this post is to share what’s possible by taking action and building a network locally and through BiggerPockets.In the forums I constantly hear newbies complain that they are having trouble estimating repairs.In the beginning, you don’t need to know everything about estimating repairs to invest in real estate. There are people out there in your backyard and on BiggerPockets that are here to help you estimate repairs. They may not say, “hey I’m hear to help you estimate repairs.” In fact they will never say that, but if you ask for help, and offer them something of value for their expertise, then I think you’ll find you will have no problem estimating repairs.

I’m getting better at estimating repairs, and I still ask for help from my network of investors. In fact, every deal I’ve closed since my first, I’ve brought a cash buyer with me to help with estimating repairs, and for his expertise, I give him first right of refusal on the purchase of the property. Maybe someday I’ll read that book on estimating repairs, but for now I’m taking action, and applying what I am learning through my network to estimate repairs with no construction background.