Good people! As of lately, it’s been on my mind to share some of my knowledge of active real estate investing! One of the hardest things when you start in this business is accurately estimating repairs on an investing property.
The Big Three
When evaluating a deal for the first time, you will hear more savvy investors want to know three main details — price, ARV, and rehab.
Price is self-explanatory… how much you are purchasing the home for before any repairs have been completed. ARV stands for After Repair Value, how much the home will be worth after repairs. When thinking repairs, investors should be able to get a pretty close estimate of repair costs by looking at three major areas. The Roof, Foundation, and HVAC.
As I walk through this property in Dallas, I give some good visuals on coming up with these numbers.
The foundation is what holds the house at the right elevation and keeps it level. Depending on the type of soil that the house is built upon, the foundation elevation will change over time. Here in Texas, we have black soil that expands and contract as weather changes, which eventually causes movement.
Because of this, a good majority of rehab houses you deal with will need to have this corrected. Contractors can correct this by literally digging underneath the house and using concrete blocks to jack up the house to the correct elevation.
They do this roughly every 6 feet around the home where the shifting has occurred. This process is known as “installing piers”. So when I am running my foundation numbers, I try to access how much of the home has shifted, and count my piers accordingly.
When estimating repairs on foundation keep in mind that 1 pier foundation repair = $250.
The main purpose of the roof is to protect the house from any leaks that may occur due to heavy rain or other inclement weather. For this reason, you want to make sure the roofing shingles have sufficient life on them and has survived normal wear and tear.
For this reason, I’m looking for any dark streaks, discoloration, humps, missing shingles, etc. These are all signs that the roof life is less than desirable and may have a hard time passing a home inspection. Time to replace!
In my YouTube walkthrough, I talk about the difference between a 10– 15-year single tab roof, and a 25– 30-year composition tab roof. Obviously, a composition tab roof would last much longer and appeals much easier to an end buyer on the open market.
1 new roof on a home >1700 sqft = $3000-$5000
This stands for Heating, Ventilation, and Air Conditioning.
The heat (ventilation as well) is controlled by either an air handler or furnace. There are some differences between the two and are not to used interchangeably. But for the purposes of this article, I won’t differentiate the two.
Air conditioning is controlled by a condenser. The condenser removes warm air from the inside of the home and converts it to cool air to dispense throughout. This unit typically sits outside of the house and resembles what you are most likely used to seeing.
Full replacement of an HVAC system = $4500
Servicing of an HVAC system = $800
If you are looking into real estate investments and have no clue of where to start, reach out to me. Let’s get your questions answered and your dollars working. No fluff, no seminar.
Only SERVICE, HUSTLE, and INTEGRITY! God Bless.
Nyalls Carlton | Real Estate Investment Specialist | NyallsCRealEstate.com |
📧 Nyalls@NyallsCRealEstate.com | 214.476.4638