The Quick Guide to Estimating Repair Costs for Real Estate Wholesale Deals!

Estimating Your Property Repairs Like Jerry Norton!

Introduction to “Estimating Your Property Repairs”

For real estate wholesalers, speed and accuracy are key when evaluating potential deals. But also making sure your numbers are as accurate as possible! Quick Reference Sheet Below!

Disclaimers!: The Real Estate HUB is an Amazon affiliate, some links in this article will take you to products and we may earn a commision at no extra cost to you. Furthermore, The Real Estate HUB and its affiliates are not Licensed Financial Advisors, Consultants, nor are lawyers or attorneys at law. The Real Estate HUB is also not a licensed broker. Please DYOR and speak to professionals. We claim no responsibility for any financial or legal decisions you make.

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One of the most critical factors in determining whether a property is a good investment is understanding the repair costs involved.

While a detailed contractor bid is ideal, it’s not always practical when you’re working on tight timelines.

That’s where quick reference tools come in handy like this one! Provided by Jerry Norton, a licensed broker in the state of michigan, he gives us a detailed estimate of repairs.

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We inflated the repair costs by $2000 USD to adjust for todays costs of labor, materials, licensing, insurance etc.

In this article, we’ll explore a simple “Repair Value Quick Reference Sheet” designed to help wholesalers estimate repair costs based on the size of the property and the level of repairs needed.

However, it’s important to note that these figures are estimates, and actual costs can vary significantly depending on your local market, local labor rates, who you hire, and specific property conditions.

A Practical Example

Applying the Reference Sheet to a Deal

Let’s say you’re evaluating a 2,800-square-foot property in your market.

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After a quick walkthrough, you determine that the home needs medium repairs — new flooring, a partial roof replacement, and some plumbing updates.

Using the reference sheet, you estimate the repair costs at least $60,000 (since the property falls in the 1,500–3,000 SqFt range).

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You know the After Repair Value (ARV) of the property is $300,000, and you’re aiming for a 70% rule (buying at 70% of ARV minus repairs). Here’s how the numbers break down:

• ARV: $300,000.
• • 70% of ARV: $210,000.
• • Estimated Repairs: $60,000.
• • Maximum Allowable Offer (MAO): $210,000 — $60,000 = $150,000.

With this estimate, you can quickly decide whether the seller’s asking price aligns with your target. If the seller is asking for $180,000, the deal might not work for you.

But if they’re willing to sell for $140,000, you’ve got a potential winner — pending a more detailed repair assessment. A general rule we use in our own business is budgeting a few grand, say $5K, for unexpected costs.

These numbers reflect the estimated repair costs on any of your real estate deals. These are to start as a base-line for your estimates. Adjust accordingly for your own market.

Assessing the Repairs.

Walk through the property (if possible) or review photos to gauge the extent of repairs needed. You should see if the house needs any new big ticket items like —

• Plumbing
• Electric
• Foundation Repair
• HVAC System
• Roof & Siding
• Attachment Repairs like- Attached garage, sunrooms or any other additions to the original house design.
• Septic Update

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Here is a general guideline for each category to better understand how to estimate the repairs —

Light Repairs

This is cosmetic updates like painting, minor flooring repairs, or replacing fixtures. The property is generally in good shape but needs a refresh. Cosmetic Rehabs are generally $25K or Less.

Medium Repairs

Medium rehab jobs need more significant updates or repairs, such as replacing a roof, updating electrical or plumbing systems, or addressing structural issues that aren’t extensive.

Heavy Repairs

Major renovations, such as foundation work, gutting entire sections of the property, or addressing severe water or mold damage. These properties often require a full rehab and will cost anywhere between $80,000 and $125,000 depending on the size on the house, (sqft living space.)

Adjust Yours Costs for Your Market, the reference sheet provides medium, or an average, estimates on repair costs and can vary widely depending on your location, Labor, and materials.

1,500 SqFt or Less

• Light Repairs: $20,000.
• Medium Repairs: $45,000.
• Heavy Repairs: $80,000.

1,500 — 3,000 SqFt

• Light Repairs: $30,000.
• Medium Repairs: $60,000.
• Heavy Repairs: $110,000.

3,000+ SqFt

• Light Repairs: $45,000.
• Medium Repairs: $75,000.
• Heavy Repairs: $125,000.

Photo by Scott Graham on Unsplash

Disclaimer!: “Actual home repair value or costs may vary in different markets. DYOR (Do Your Own Research) or ask your local contractors.”*

How Wholesalers Can Use This Reference Sheet

For wholesalers, the goal is to quickly assess whether a property is worth pursuing before investing significant time and resources into due diligence. Here’s how you can use this reference sheet effectively:

Determine the Property Size

Start by confirming the square footage of the property. Most listing details will include this information, or you can estimate it based on a quick walkthrough or comparable properties in the area.

Photo by Austin Distel on Unsplash

Why These Are Estimates — and Why It Matters

It’s critical to emphasize that these numbers are rough estimates. This is a starting point for you. This is designed to help you estimate repairs on your deal to get your first contract sold to an investor.

Several factors can cause actual repair costs to deviate from these figures:

• Market Variability Construction costs fluctuate based on location, demand for labor, and material prices. A $30,000 repair budget in one city might balloon to $50,000 in another.
• Property-Specific Issues: The reference sheet can’t account for unique challenges like hidden water damage, outdated electrical systems, or local building code requirements.
• Contractor Rates: Some contractors may charge more for rush jobs or specialized work, while others might offer competitive pricing.
• Hiccups: Once repairs begin, unforeseen issues often arise, increasing the overall cost.

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For wholesalers, these estimates are a starting point to help you run your numbers and determine if a deal has potential.

However, before finalizing any wholesale or real estate deal, it’s always best to get a detailed contractor bid or consult with local experts who can provide a more accurate assessment. You may have to pay these individuals for an estimate or repair quote.

Thoughts at The Real Estate HUB —

The Repair Value Quick Reference Sheet is a valuable tool for wholesalers looking to estimate repairs quickly and move on deals faster. By providing a rough framework based on property size and repair level, it helps you filter out unprofitable deals early in the process.

However, these are just estimates, and relying solely on them without further due diligence could lead to costly mistakes. To maximize the effectiveness of this tool, combine it with your own market knowledge, input from local contractors, and a thorough property inspection.

By doing so, you’ll be better equipped to make informed decisions, secure profitable deals, and grow your wholesaling business. Always remember: speed is important, but accuracy ensures long-term success.

DO YOUR OWN RESEARCH

Thank you for reading!

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