December 9, 2011
Yesterday I told you that our offer on Mesa Verde was accepted, today I’ll tell you the first thing I do when I get a house under contract. In Texas we have an “option period” this is an amount of timed spelled out in the contract which you offer a specific amount of money for, typically $5 a day for a 10-day option period, although the holders of a foreclosed property usually offer a free option and some homeowner’s will accept one as well, which gives you that amount of time to walk away from the deal for any reason just by forfeiting your option fee. The option period is the reason I was able to make an offer on the house so fast. I told you that I use a quick estimating tool when I’m evaluating a potential project, actually I have two, one is very simple and just takes care of construction costs, the second is more detailed and includes desired profit and carrying costs in the calculations. (If you e-mail me at tamara@3dogproperties.com I will send you a free copy of my spreadsheets.)
The first day that I saw the property I was pushed for time so I walked through very quickly and then I entered what the items that I saw needed repair into the spreadsheet. When we all walked the house the following day everyone noted different things that needed repairs and then we plugged those numbers into the spreadsheet as well. This step ensures that I was still in the ballpark for making a profit if I sold the house at a certain price. At this point, I also try to figure out who my target audience is, the eventual buyer of the home. I try to reconcile the style of the home with the potential buyer so I have a design direction in mind, this decision affects the finishes which drive budget.
The day that we received notice that our offer was accepted we went back and walked the property once again. This time I was attempting to compile a material list. This is how much of everything I would need to complete the house. I focus on finishes and nice to haves because the necessities are non-negotiable, and they cost what they cost. One page of my list looked like this:
- entry set w/deadbolt (1)
- garage set w/deadbolt (1)
- privacy set (7)
- passage set (7)
- 44″ vanity guest bath
- 36″ vanity master
- vanity mirrors (2)
- kitchen sink faucet
- bathroom sink faucet (2)
- tub/shower faucet
- tub drain assembly
- shower only faucet