Fix and Flip Property - Express Evaluation
Oct 16, 2017 / Real Estate News
Our most valuable commodity as a fix and flip contractor is our time… time is money.
If you've been in the fix and flip business for a while you understand that everyday you're spending time visiting the property, you're spending time talking with contractors, you're spending time looking for the perfect products for the fix up, you’re spending time analyzing invoices, you’re spending time writing checks, you’re spending time marketing for the next property, you're spending time with your realtor analyzing current properties… you get the idea.
Here at FixAndFlip.com we've come up with an “Express Evaluation” form which you can download for free under our forms section, at our website FixAndFlip.com.
Our Express Evaluation form has a few different categories;
Estimated fix up costs.
For a minor project paint and carpet will use $5 per square foot - for a mid-grade renovation which would be paint, carpet, refinishing hardwood floors, new light fixtures, new interior doors, painting the cabinets, new hardware, etc. we're at $10 a square foot - for a mid plus you've got all of the above plus window coverings and a kitchen and bath remodel that's a gut and remodel new cabinets new fixtures we estimate that to be $25 a square foot. Finally there is a major fix up which is essentially a gut and remodel - everything in the property, plus we may move or remove partial walls, or add a wall or two, install new windows, new plumbing and electric updates, etc. we estimate this major renovation at $50 per square foot.
So what we do is we take the total and finished square footage of the property X the dollars per square foot that we get from the formula above, based upon the complexity of the job to get our fix up costs.
The next thing we do is add a contingency which is 5% of the purchase price.
Now with every property that I've ever fixed and flipped there is always a surprise. In the most recent duplex that I fixed and flipped, we had a couple of surprises, number one was mold not just in one area but in both basement family rooms (exterior wall, broken hose bib pipe). After we had that professionally mitigated we then ran into more mold in the basement bathrooms so that was surprise number one and two. At the very end of completing one side of the duplex we discovered the sewer line was backing up so we tried to snake the line, ultimately discovering the sewer line was actually collapsed in a sinkhole in the street! Budget for surprises – you will have them.
The next line item is “Soft Costs” – Realtor selling fees | Cost of Money | Closing costs… use 10% of the ARV (After Repair Value).
Now you have your total expenditures; Purchase Price + Fix-up Costs + Contingency + Soft Costs.
Subtract this from your ARV (the After Repair Value | estimated sold price) to determine you NET before taxes.
This is meant to be a down and dirty way to evaluate a property quickly! Determine in minutes if a more though evaluation is deserved, or to be considered.
Jeff Hammerberg has specialized in Real Estate for 35 Years – He is a Broker, Fix and Flip Contractor / Coach and President of FixAndFlip.com. The Nation's #1 Source for tips, products and education geared toward ensuring your success in the fix-and-flip business.