How important is the rehab list for a fix and flip project, really?
The answer is simple, it’s extremely important.
Having a detailed list of all the renovations needed when applying for a fix and flip loan is vital for the appraiser to develop a better understanding of the scope of the project and how much value the investor will be adding to the home.
When ordering an appraisal with a Private Lender both the rehab list and the appraisal order form are almost always needed. The appraiser is then going to look at two values: the current market value or As-Is Value and the After-Repair Value (ARV). With the rehab list being as detailed as possible, including the costs associated with each repair, the appraiser can then successfully determine the After-Repair Value, which can help determine how much a lender will loan on a specific project. For example, some lender will not lend above a certain percentage of the ARV.
Details Matter
Even though each investor has a different method of completing a rehab project, from stripping down to the studs, to adding luxury finishes, writing down the level of finishes on the rehab list is extremely important. The small details matter!
For example, when looking to update the kitchen as part of the scope of work it’s essential to go into detail about each specific update. Will there be granite counter-tops or laminate? Custom cabinets or stock cabinets? Stainless steel appliances? New flooring? These details will help the appraiser determine an appropriate After Repair Value.
Accurate Numbers
Now that you have each specific detail of the renovation in the rehab list it’s just as important to have the costs associated with each detail. This is extremely important when reaching out to a private lender for a rehab loan, as this will highlight the costs associated, ensuring you receive an accurate and complete rehab budget. Many private lenders will provide their own template rehab list/ budget builder to complete, but they may also accept your own personalized rehab list as well.
Overall, be clear with your numbers, check the numbers several times to make sure that the totals match and that something wasn’t counted twice or that a rehab item was omitted. The more accurate and detailed your rehab list is, the more accurate your appraisal value will be and the easier it will be to secure a rehab loan.
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