Tuesday, November 9, 2010

The First Lesson: An Estimate is Not a Quote

The title says it all.  This is one of the reasons why it took longer than we thought to get started.  And the honest truth is that it's not something you can research because each house presents it's own special challenges.  Which means that unless you have unitized prices (per piece pricing), square footage pricing, or lineal foot pricing for each of the trades and know exactly what each of them can bring to the table, it is literally impossible to know how much something is going to cost.  You only know how much you want to spend!  Here is how it happened...

We had 2 others houses that we were thinking about taking the plunge on.  The first one was comparable to the 508 S. Potomac one.  We had a contractor come in a give us a price for what I was thinking about doing.  I had drawn up some plans and made some basic finish decisions.  While this guy did some nice work on our house, it took a few weeks longer than we'd like to get a quote.  When the quote came in, it was significantly more than I wanted to spend.  That was when we decided to "open" the field to include more General Contractors.

I'm going to cut some of this story because it's more color than context.  One of the GCs that we started working with was Highland Renovations.  When he came and meet us at 508 S. Potomac, he walked the space, we talked about what we wanted.  The organized nerd-designer in me provided schematic drawings, a small finish schedule, and a project scope form.  For me it's easier to provide this information than have the constant questions.  This turned out to really really work well with Highland Renovations (hereby known as Thom, the GC).

While we were there, I pressed him to give me an estimate.  I knew that any number he gave me was off, but I was willing to accept him number then and there and add a large percentage.  Well, he gave me a number, and it was much lower than I was expecting.  Let's call that number X.  We did some back and forth talking and finally we received our quote.

Well, that number was not X.  It was 2X.  Let the "Flipping" out commence.  Which is what my money guy did.  However, the good, or bad thing about buying a house is that once you've signed papers, backing out on a house deal is bad bad bad mojo.  So, we had to work with the price.  This is when we were were literally thinking "before we just sign anything and start work and lose money, let's take a step back and reassess what we need."

This is an important lesson to learn.  Something unexpected happens?  Take a step back and a deep calming breath, and think.  Construction is unpredictable.  You never quite know what is going to happen.  But you have to put faith in those around you to be reasonable and knowledgeable.  And if they aren't, you find new people.

In the end, we hashed it out Thom and got his number down by talking through things, having him push back on his trades for a better price and taking over the purchasing of the finishes.  Now we are in a good place and we are working with someone who understands our needs and our expectations.  It means that when we do the next house, we can really work on cutting down our carrying costs by lessening our timeline.

Monday, November 8, 2010

So our story begins a quarter of the way through...

R3 Renovations started back 6 months ago.  Well, the idea for R3 started a year plus earlier than that, but that is a story for another time.  We looked at a couple of houses, even put an offer in on one before we found the one we purchased.

Our first property is 508 S. Potomac.  We purchased her in July and did something they always tell you not to do.  We sat on it.  In all fairness, we did that because it took a long time to get to a point of signing contracts.  Our feeling was that it was better to pay a few months of carrying costs (the cost of holding a house which includes taxes, utilities and mortgage payments) rather than over pay for construction and run head first into something that we didn't have all of the information that we needed to make good sound business decisions.

I knew there would be a big learning curve and we did as much research as we could before hand, but honestly, there comes a moment when it's time for experiences to start teaching.

Our time line was to have the house on the market approximately the end of October.  Well, we didn't start demolition until the beginning of November.  It's okay though.  The amount that Shawn and I have learned has made it worthwhile.  The good news is that in 3 months, we'll have completely renovated a 100 year old rowhouse.  Considering I wanted to start easy and do a house that needed a new kitchen and some bathroom work, this is a major deviation.

But of course there are reasons.  First off, we live in Baltimore, in one of the neighborhoods that are 99% Rowhomes.  Because we didn't want to go too far on our first renovation, a lot of neighborhoods and towns were out of the question.  Having made the decision to stay local, that left us with only 100 year old rowhomes.  Some of those places had been renovated at one time or another but the place to make real money is in buying a shell and doing a ton of work.  In for a penny in for a pound.

That leads us to November 4th, 2010.  This is the first day of demolition.  The first day of true work. The Beginning.  Below are pictures of the house beforehand.

And below this is the Demo day from November 4th:

The Adventure has just begun...