Like Dr. Eble, everyone has number two.
No. 2, As you may remember, During Dr. Evil’s freezing at cryogenic temperatures for 30 years, he was responsible for the surge of Virtucon, the company that led to the increase in Dr. Evil’s astronomical wealth, all acquired by number two.
As you can see The second is pretty important.
In home flipping, we also have our own number two, Evil… unless you miscalculate it badly.
What is number one again?
Number 1 is of course ARV or Value after repair.. Most importantly in house flipping, all the calculations and metrics during house flipping flow from there.
But we have already discussed its importance a few weeks ago..
That leaves me with doubts …What is the second most important number in house flipping?
Or, as Austin said in the first movie, “Who … what … number … two … for working …? “
It can work for you, but it can also work for you because you might make it work, because it’s usually at the second highest cost of flipping a house Yes, and often The biggest cost of flipping the house.
Introducing number 2 …
Robert Wagner inside out the house is a refurbishment cost. This is the second most important part of making a transaction profitable. This is not only the second largest cost, but also the most difficult part to do right.
For major refurbishments, including refurbishments over $ 50,000, the refurbishment is a very important part of the overall cost. This is especially true for large-scale rehab of $ 50,000 or more, or $ 100,000 or more.
When dealing with very large numbers, there is more room for error, more room for price discrepancies, and more room for underestimation. There are currently contracted properties in Freetown, Massachusetts, with refurbishment costs in excess of $ 140,000. This is one of the biggest refurbishments we’ve ever made, primarily because it’s a complete knockdown.
Anyway, it’s very important to understand how a process works and learn how to manage it very tightly. If you manage number 2 correctly, you can make a definite profit. If you don’t manage number 2 well, it can be a profit difference or, in some cases, no profit at all.
In the second case, you don’t need to know everything
For the flippers of most homes, they are not general contractors. Okay, you don’t have to, it helps, but it doesn’t.
Managing renovations does not necessarily mean that you need to know all transactions inside and outside the country and become a professional plumber, electrician, insulation contractor, engineer or architect. The idea is to understand how all these different transactions work. Knowing how they all fit the big picture, I have some concepts.
in fact, I haven’t lifted a refurbished hammer for nearly two years.
But that doesn’t mean I’m not involved. I am involved, so you have to be involved.
So what I’m actually talking about here is management Rehabilitation process. You need to understand how the entire project works, even if you don’t manage the project directly as a general contractor.
Being able to determine a refurbishment budget is very important in deciding what to offer for a property. If you don’t set your budget correctly and make offers based on an unrealistic rehabilitation budget, you’ll have a hard time making money right away.
Well, does that mean I make this perfect every time? Absolutely not.
Is your budget off $ 5,000, $ 10,000, $ 15,000 $ 20,000? I have Actually many times.
This is why we use the Repair Cost Estimate Form or “CORE” for short.
Repair quote core
CORE is basically a one-sided form, with 25 or so different things to watch out for in your walkthrough. Think of it as a checklist of necessary repairs. You will be prompted to look at roofs, windows, siding, eaves, fascias, chimneys, landscapes and more. All items that may need to be fixed are in CORE.
It will help you make your own assessment of the condition of those things and will ensure that you do not forget anything as well.
Many improvements are self-explanatory. You can look at the roof and decide that it’s pretty bad and needs to be replaced. Or it could be a question mark and it could be unknown. Or, it may look pretty good, but it may require expert opinion.
If in doubt if something needs to be replaced, put a question mark next to CORE. You can count it as something that needs to be fixed, to say the least. When you walk through with a general contractor, ask the general contractor to fill it out as well.
At the end of the walkthrough, share CORE with him and compare notes. Maybe he has something that can be done in more detail. You can combine the two to create a collaborative list of things that need to be exchanged.
Therefore, by running a walkthrough and checking these items in CORE, you can get a rough idea of the cost. You simply add up all your costs and get your number, which is as easy as that.
Or is it?
The second “X factor”
It’s not that simple …
Not anyone So far, repair costs will be nailed. I don’t. I have no one to do that. I don’t think it’s 100% accurate, but I don’t really care because I have a plan.
The truth of the matter is that once you start refurbishing, you have no idea what’s lurking behind the wall. It’s a very rare case, but you can see what’s behind the wall. In fact, in Plymouth, Massachusetts, we were actually burning down the studs because of previous mold damage.
We love such homes, but it’s rarely that easy. In most cases, you will need some kind of insurance policy to cover you if you find additional repairs that you missed or underestimated.
That’s why we need an X factor of 10-20% of these costs of CORE.In most cases we over 20 Our core.
This is especially true if you are new and uncertain.
Renovation + X Factor + MAO = Profit
If your refurbishment comes in for $ 50,000 instead of $ 60,000, think of it as a small bonus … but don’t count on it.
Don’t worry about being perfect. However, if you overestimate it, it will always be covered. I’ve been doing this full time for 5 years and it’s not perfect yet.
In fact, the other day, one of our flips budgeted about $ 1,800 for electricity, which seemed to be $ 3,200. There were some things we didn’t see and to be honest we missed them. But every time we use it well and refine the process.
Taking into account the 20% X factor makes it safe. And that’s when number 2 works for you …
If you get this far, leave a comment below! What do you think? Is remodeling the second most important thing in turning a house? Please leave a comment below and ask me any question you want!
Photo: Rod father