September 8, 2011 02:08 by
andrey
Estimating accurately is vital to ensuring you are successful in your foreclosure investment ventures. Not only you should you be be able to estimate accurately but you want to be working with a team of professionals who understand how to provide accurate estimates for their phase of work that you can rely on. It is a combination of this information that you will be basing your decisions on. Six common mistakes new and even some experienced investors make in estimating costs start are...
NOT UNDERSTANDING WHAT IS INVOLVED TO COMPLETE AN ITEM OF WORK
If you don’t know what it takes to get something done and then how can you hope to accurately estimate the time and cost for completing it? If you are not absolutely sure about an estimate for a phase of work, then get an estimate from someone who has worked on this type of task many times over.
STARTING WITH AN AMOUNT OF MONEY AND MAKING THE PROJECT COST FIT IT
This is something seen all too often amongst new investors who can become so focused on wanting every deal they look at to be the “next big deal” instead of using discipline to wait for the opportunity that fits well for them.
Do not use deductive logic here... starting with a picture in mind and looking for supporting date. Using inductive logic will serve in this area... gathering all the data and letting it paint the picture. Don’t try to fit a square peg through a round hole; accept that it is a square peg and let it go.
FAILING TO PLAN CONTINGENCIES
You need to factor in a budget and schedule buffer for potential contingencies you may need to use “in case X happens”. Walking a tightrope of a budget and schedule will simply guarantee that you go over both. Know what the risks are that you cannot control from happening, know what your plan would be for dealing with their occurrence, and factor this into your project estimate.
FAILING TO ADJUST AN ESTIMATE IN ACCORDANCE WITH SCOPE CHANGES
If you came up with what seemed like a well research estimate for a project and then discovered a few seemingly “minor” changes that would need to take place upon closer inspection of the property, you must adjust your estimate accordingly.
There is no such thing as something be so minor or negligible that you shouldn’t accurately reflect it in an estimate. What is a real estate project anways but a bunch of small things stacked up to make a ‘project’? Address all details thoroughly.
CREATING ESTIMATES UNDER PRESSURE OR IN A HURRY
Never be rushed into anything involving your money. Investment decisions need to be made in a calm environment. Also, the data gathered for the decision making ought to not be tainted by pressure or bias but be as neutral and true as possible. Everyone knows that as humans we tend to make mistakes when we try to hurry. Don’t hurry in your estimating process.
USE “SINGLE-DATA-POINTS” INSTEAD OF “RANGE ESTIMATES”
An estimate is a projection or in other words a prediction. Single data points, such as an estimate of 3 hours or $70.00 dollars are completely reliable only in historical context. After the fact. In estimating, it is wiser to use a range for a projection: It could take 2-4 hours and $50 to $100 to accomplish.
What you don’t want is too many estimates of exactly 2 hrs and $50 (because you are such an optimist) and it ends up being 4 hours and $100. Use ranges and base decisions based upon the higher value.
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