What killing a small conversion deal in due diligence actually costs, using a real sequence of numbers

Wait, eighteen thousand dollars on a building you never bought? That is new to me. Is that normal for conversions or is that a lot?

@kevin_lombard it's normal and it's the part that stops most people from doing more than one. On a straight rental you spend $600 on an inspection and an appraisal. On a conversion you're buying answers from four or five professionals before you know if there's a deal, and most of the time there isn't. A few deals in I budget a kill fee per building I look at seriously, and I only get serious about buildings where I can imagine paying it.

The order-of-tests point is the real content here. Cheapest test that can kill the deal goes first. Always.

$2,200 to kill it versus $7,400 spent first on drawings that assumed the answer. That sequencing is going straight into my notes even though I'm on the capital side and would be writing checks rather than running this.

Ten weeks and $18,400 works out to roughly 6% of a $295k ask. Looking at ten of these and buying one means the acquisition cost on the one that closes carries $184k of dead diligence, which is 62% of the purchase price. That math either means the process has to get much faster at killing bad candidates, or much more selective about which ones get taken seriously in the first place. @tylerbrooks9 what was the kill rate before this one? Worth knowing whether ten weeks is typical or whether this one dragged.

@hannah_west29 that number is brutal but I don't think it's right to load all ten kills onto the one buy unless you're doing exactly ten. Some of the kills cost $400 because you find the answer in the zoning map in an afternoon. This one was expensive because it got to week ten.

The three days on the contingency extension is the cheapest lesson in the post and the one I'm most likely to repeat. I've already had a date slip on me on a plain house purchase. Do people set calendar alarms for these or is there a better system?

@aliyah_b alarms at seven days, three days, and the morning of. And you send the extension request in writing the moment you know you'll need it, not the day before it expires.

@tylerbrooks9 the vault-as-amenity thing making everyone happy is exactly the tell you called it. Every renovation I've regretted had one feature that was fun to talk about. It buys you nothing on rent and it eats a week of drawing time.