My project manager had a number of contractors out to The Pine House today to get bids on the work. I had to take a last minute trip up to NY today, so I didn’t have a chance to be there, but he gave me the run down…
On every project, I generally start by determining my worst-case (very conservative) budget and then choose my target budget, which is generally about 10-20% less. In this case, my worst-case budget was $60K and my target is $50K. In other words, we’ll do everything we can to hit $50K, but if we’re not careful and creative, it could easily hit $60K.
Unfortunately, after digging in a bit more, it looks like this might be the first project that I’ve severely underestimated the target budget (the $50K). I’m still hoping not, but given the condition of the exterior — and the problems it’s caused on the interior — we may have to be very creative to hit that budget. If we go over by much — for example, if it comes in near the worst-case $60K — our profit margins will be severely impacted.
By mid-week we should have all our bids back, and from there we’ll figure out where there’s room to negotiate, scale back, make trade-offs, or simply change the scope of work. I’m still a bit concerned that once we start ripping off siding and opening up walls we may face more surprises, so even after we get all our bids, we won’t know exactly what we’re up against until the work starts.
The first big set-back was that the listing agent told us today that there’s no way we’ll get to closing this week…while we’re probably being optimistic, we’re still hopeful we’ll get this one closed and started by Christmas…
hi and merry xmas
did you bid include an inspection period and are you able to go back after the inspection showing more damage then you though with pictures to get a reduction? i did this a few times and it worked for 5k off but the house was on the market a long time.
good luck you have alway found a way to made it work chris
Hey Chris –
No inspection period on this one. I was competing with several other buyers, so I had to put in my best offer…and that one with NO contingencies.
Actually, the issue wasn’t so much that there was more damage than I had known about…it was just that I had underestimated a couple of the costs. For example, I didn’t expect we’d need to do as extensive mold remediation as we need to do, and underestimated that cost by several thousand dollars. Also, while I anticipated that we’d need all new windows, I underestimated the cost of the specific windows we’d need (they’re non-standard).
So, those sorts of things will have an impact.
That said, I’m not worried about losing money on this one, just that we’ll end up doing a lot of work for minimal profit. Hopefully we’ve underestimated the resale value as well… 🙂
Nice blog.
“On every project, I generally start by determining my worst-case (very conservative) budget and then choose my target budget, which is generally about 10-20% less. In this case, my worst-case budget was $60K and my target is $50K. In other words, we’ll do everything we can to hit $50K, but if we’re not careful and creative, it could easily hit $60K.”
This is excellent advice, and probably not a system you arrived at easily. Hope all works out before the year ends. Peace.