Tips for Estimating Repairs on Orlando Investment Properties
Have you ever bought a car without first finding out how much the monthly payment will be or how much it will cost to insure it? Of course not, that would be crazy and irresponsible. You would first find out how much everything will cost to determine if you can afford it or not. The same thing holds true when you’re talking about buying Orlando investment properties. When you buy a house with the intention of selling it for a profit, it’s crucial that you get the numbers right from the very start or you could end up losing money.
Know the difference between Cosmetic Repairs and Structural Repairs
Just about anyone can recognize when a house needs a paint job, new carpet or maybe even some minor carpentry repairs. These items are considered cosmetic repairs and can usually be completed with a few thousand bucks depending on the size of the house.In some instances you may even want to do some upgrading such as new kitchen cabinets or replacing fixtures, etc. I consider these items tobe cosmetic repairs as well though they will be a bit more costly. However,it’s very important to know if the house you’re about to purchase has any major structural issues with it.
Structural damages on a house can be a game changer and most of the time will turn a deal into a non-deal depending on the extent of the damage and much it will be to make the necessary repairs. Unless youare a seasoned investor, I would highly recommend that you steer clear of any houses in need of major repairs.
Some examples of major repairs are as follows:
Updating the Electrical system– Houses that are older [30+] will sometimes need to have the electrical system brought up to code. This can sometimes meanthat the whole electrical system will need replacing or rewiring.
Rotten Plumbing – Having corroded or rotted plumbing has the potential to be a re-habbers nightmare. Plumbing runs through the walls as well as the foundation and leaky pipes can easily cause severe damage over time.
Dry rot and termites- This can be another major problem tothe structure of a house, especially if it’s an older home. There are rafters in the attic as well as studs in the walls that are made of wood and if there is evidence of termites or dry rot, you may be looking at replacing most of it which means a lot of demolition in addition to replacing the rotted wood.
All of the above mentioned repairs can cost a lot of money. Also, it can be risky because most of the time you won’t know the extent of the repairs until you start the project and know exactly what you’re dealing with. As an experienced re-habber myself, I’ve seen what I thought was going to be a $5,000.00 repair turn into a $15,000.00.
Keep it Simple
Remember that your goal is to resell the house for a profit. That means that you need to get a good enough deal so that you can do all the repairs and get it sold quickly. My advice to any investor experienced or not is stay away from homes in need of major repairs. If you have to repair to many things, not only will you end up spending too much money, but it will also take longer to get the house ready to put on the market. Like that old saying goes “Time is money” and another month or 2 of carrying costs while your house gets repaired can mean thousands out of your pocket.
Follow this simple formula when looking at investment properties
2- Determine the value of the home after repaired. Always expect your house to sell for less than the lowest comp in the area.
3- Determine how much you will spend on making repairs then add on another few thousand to it be safe. You should also add your projected carrying costs to the budget.
4- Price the house correctly from the start, too many people make the mistake of pricing the house too high and it ends up sitting in the market for several months and they ultimately end up lowering the price anyway. This is where a good Orlando realtor can help you tremendously.
By following these basic guidelines, you will have a much better chance of making a profit once the house is ready to be put on the Orlando real estate market.