The other day, I was talking to one of our bankers, Richard, about getting an appraisal on a project we were refinancing as a rental. (Remember fix and rent is one of our six exit strategies and the one that does the most for building wealth over time.) Richard said that he looks for two qualities in an appraiser:
- Who can get it done the fastest?
- Who is the cheapest?
That statement took me back to my days of studying the Project Management Professional (PMP) curriculum from the Project Management Institute (PMI), a professional organization that educates and supports project managers around the world. As when I became a Certified Apartment Manager (CMA), I never intended to become a project manager. Never mind that my instructor noted, “No child daydreams of becoming someone with no real power other than influence but ultimate responsibility for a project.” My intent with both of these programs: I really wanted to understand what project managers and apartment managers do, how they approach their jobs and accomplish their responsibilities.
One of the tools of a project manager is the project management triangle. Project Scope is the total amount of work to be done on a project. It is comprised of three aspects:
- Quality—how well the work gets done
- Cost—how much it costs to complete the project
- Duration—how long it takes to complete the project
Managing a project means choosing which two of these aspects is most important to the current project. That means if you change the scope of the project, you affect all three aspects of the project. Otherwise, you can pick two out of the three aspects to control:
- You can have it fast and cheap, but the quality will suffer.
- You can have it cheap and good, but it won’t be fast.
- You can have it fast and good, but it won’t be cheap.
Of course, all three aspects are variables that you have to balance. Moving toward one point of the triangle, moves away from at least one of the other points.
For example, one way to speed up a project is to pay additional people to work on it. Three people can paint a house faster than one person can. But then you’re paying three people, not one. Obviously, that is more expensive. The other caveat is that some tasks can’t be sped up by throwing more resources at them. The classic example is that you can’t bring nine women together to make a baby in a month.
So what Richard was telling me when we talked was that he had a clear understanding of what he was asking for. He needed an appraisal to make a loan on the property. Because he knew my business relies on moving quickly, he was willing to go with an appraiser who might not spend as much time as another to identify all of the market conditions and weighing how they affect the present value of the property. He also favors cost effective appraisers over those who spend days thinking about all aspects of the project. In short, he was saying the same thing my managers at a large computer manufacturer used to tell me: “Sometimes good enough is good enough.”
What are your experiences with different types of appraisers? Would you like to share?