The WTF House house been on the market for a couple weeks now and while it’s not under contract yet, we’ve gotten some great feedback and one offer (which likely won’t work out). This house is in a higher-priced neighborhood for the small city it’s in, so it’s getting less traffic than most of our houses do — it’s also prime holiday season and fewer buyers are out there.
Regardless, we’re confident we’ll have it under contract soon, and we’ve finally finalized the renovation costs for the project (we had been waiting for a few final invoices).
Here is a detailed comparison of the estimated and the actual budget numbers, and below that is an overview of why we were significantly over budget on this one:
As you can see, we were about $6000 (about 15%) over budget on this project, which is pretty significant for us — we’re generally under budget, and when we’re over, it’s not usually by this much. The bulk of the overages were due to the extra work we did redesigning the kitchen. Between the extra demo/dumpsters, the structural work, the extra electrical work, the extra sheetrock work, the backsplash that I forgot to budget for, etc, the kitchen ended up costing about $4000 more than we expected.
We also spent about $1000 more on finish electrical work than we anticipated (our GC switched to a new electrician who is a good bit more expensive than the previous one), I underestimated the hardwood cost and then there were a few other areas where I underestimated by a bit.
The house turned out great, and I’m confident we’ll get top of market value for it, so some of those overages will likely come back to us in sales price. But, that said, I’ve underestimated the renovation costs on several of our recent projects, which is never good — time to work on improving my estimation now that we’re using some new contractors and a GC who doesn’t give us fixed bids.
Why use a GC that won’t give you a GMP? That seems like a recipe for disaster on a rehab project. Was the scope unusually hard to define on this house?
Zach –
My GC and I work on a “cost plus” basis. Meaning, he has his crew do whatever I ask, and he passes on the exact costs of their labor and the materials to me…he then adds a pre-negotiated fixed mark-up to the cost for his time/effort. This project was over budget because I asked him to do more work than I had expected to ask him to do. It wasn’t his fault in any way, shape or form — he just passed on the costs of the work I asked him to do, and I’m familiar with the costs of his subs, so there weren’t any surprises there.
I prefer this way of doing things over fixed-price as it’s a lot less time consuming and likely saves me money.
Thanks for the reply. I struggle a little bit with time and material billings just because of the unknown. But I guess when you work with the contractor long enough that becomes less of a problem once trust is earned.
I’m a fellow 2p2er btw. Hoping to get in to the rehab business in 2013 and your blog has been an incredible resource. Thanks for the time and effort you put into it.
Zach –
T&M is definitely more risky. We’ve been working with this GC for about a year now, and I still don’t have the cost estimation down pat, but I’m getting there. You have to learn to factor in the little stuff that you never think about — like guys sitting at the house for hours waiting for building inspectors to arrive — as you’re paying for them by the hour, but are just so accustomed to it being rolled into the bid.
But, ultimately, I think it’s less expensive this way, especially if you’re giving the GC lots of business and he’s giving you a good fixed-fee for his efforts.
J Scott-
What is the square footage of this house? Do you know sqft of hardwood vs carpet?
Thanks,
Ian
Hi Ian,
The house is between 2300-2400 square feet. About 700 square feet of hardwoods and about 1700 square feet of carpet/vinyl.
If you’re trying to figure out hardwood and/or carpet prices, we pay $5.25/sf for new hardwood (3/4″ oak, site finished) and about $1.15/sf for carpet and vinyl. Those prices include all material and installation. Keep in mind that our carpet prices are very low, as we buy direct from the manufacturer.
Thanks for the quick reply!
Those are some pretty awesome prices! We had a flooring company quote us $7/sf for quick click flooring and install, I had a feeling that was pretty expensive, thanks for clarifying your numbers!
Do you go to a merchant like HD or Lowes for cabinets/granite or have you found a better alternative?
Ian
Hey Ian –
For cabinets and laminate countertops, we have a local cabinet supplier who has access to a couple lines of Chinese cabinet manufacturers — the quality is much better than the big box stores at about the same prices.
For granite, I have two local suppliers — both around $30/sf for what we use.
Hi J Scott,
I have been buying and selling real estate for many years now and was considering starting a blog/website to share things I have learned. I started researching sites and came across yours. I have to say it is a breath of fresh air! Great, great site! Thank you for all the effort and I can only hope to have something done nearly as well in the near future. I’ve not only renovated and flipped dozens of houses, but I also have been an appraiser for over 20 years which is an area that I think I can be very beneficial to others.
Thanks again for such a great site!
Bruce
Hi J Scott,
Do you still use a project manager, or is this house an exception? I thought a good PM costs less and or is better than using a GC.
Thanks,
Jeff
Hi Jeff,
Yes, we have a full time project manager, and he worked on this house as well. But, he’s not a licensed GC, so when we need to pull permits, we have to use a GC in addition to the project manager, as the GC needs to pull the permits. Our GC doesn’t really manage the project — he just pulls permits for us and supplies some great contractors to do the work.
As I am also in Atlanta, who do you use for your cabinets?
Thanks,
Terri
Hi Terri,
Send me an email (feedback @ lishgroup.com) and I’ll send you my cabinet guy’s info…