Since I mostly just look and give instructions to the Super, it was a real "turn back the clock" moment for me recently when I was trying to meet an inspection deadline-not enough manpower to get everything done. There I was installing cabinets, painting apartments, etc. I had forgotten what it felt like at the end of each day coming home covered in paint with tired aching muscles.
The most interesting aspect of the whole thing was the psychological effect it had upon my tenants. I suddenly lost my "image" of the landlord that only cares about getting the rent and doing nothing. (Little do they know). As I sweated my butt off and they watched me, they acquired a renewed respect for me and those harsh landlord/tenant lines seemed to fade away.
I'm glad you earned their respect. However, I never do my own repairs. It's not worth my time....us investors need to always focus on high dollar activities.
We do some of our own repairs. It depends on the job and our time. There are times we do an extensive amout and other times we do very little.
It comes down to: do you have the skills and what are you doing today.
I agree in theory with Jason, but it CAN become an excuse to sit on your butt. For example, right now, we a furiously looking for the RIGHT DEAL to fit our particular needs, desires, and portfolio, but have not found it in a few months. We have a comfortable inventory and a good number of tenants. Thus, we are doing more rehab and minor repairs of late then we have other times or will in the future (I presume).
I look at it as staying busy and profitable. There are many here on BP who will likely make the argument (on this very thread, possibly) of the exact opposite of Jason's position. That is OK. Certainly, if you are handy and skilled, you can save a ton of money by doing work yourself. If nothing else, you are saving on the contractor's profit margin.
That assumes I have the ability to take down every deal I would find doing those "high dollar activities". I don't. So, yes, I'll paint or install cabinets. Or fix a toilet. I'd do more, but I do follow the local regulations that require licensed workmen for some tasks.
I've almost always done my own repairs, obvious exception HVAC, can't do freon. But even there I know how to troubleshoot so I'm not paying a guy to come out and replace an exhaust fan or thermostat.
1. Assuming you know what you're doing NO ONE else is going to do as caring (or in many cases as GOOD) a job.
2. Sometime when you're bored READ the back label on a can of PAINT, especially a can of primer, KILZ etc. Then ask yourself, "have I EVER seen a painter do ALL OF THAT?"
3. On another rainy afternoon READ the instructions on the back of a bundle of SHINGLES, then ask yourself the same question!
4. Consider the SKILLED TRADESMAN who is $40-$50/hour. Add in his benefits etc and your COST for him is about $100/hour. Is what you would be doing instead of that job paying you $140/hour? That's the amount you would need to earn BEFORE TAXES to NET $100/hour to pay the fee for that tradesman. You're probably not reviewing that many deals.
5. I don't think I ever CONTRACTED a job out because my time was otherwise engaged searching for, researching or closing on other deals. And I've never lacked for deals to do.
I'm young and trying to build wealth. So I do majority of the work. I try to save whenever I can. Eventually, I will pay someone to do my yard work when I don't have the time to do it myself. Right now I have plenty of time and don't mind getting my nails dirty. Most repair work is not difficult, just requires some labor and reading.
I used to do a lot more of it before time became a major problem. Obviously you save money. The other major benefit is reliability - you know you will be there when you told the tenant you'd be there.
Repairs and replacements, no matter who does them, can become costly, especially when they're not expected and not budgeted. In my situation, I have a part-time resident Super and there's no way he can meet the State mandated 60 day deadline alone. Yes I did earn some respect in the process and had the opportunity to finally meet some of my tenants.
I do almost all my own management and maintenance. I don't buy into the concept that you should be spending your time "finding deals" or some other equivalent nonsense. With several dozen rentals, I only work about 16 hours per week, which leaves another 152 hours each week to "find deals", whatever that means. In reality, people call me with most of my deals, and I can answer the phone even while fixing a leaky toilet.
I guess I have a different take on this whole DIY verses hire it out debate. It would be impossible for me to do the maintenance myself due to distance and number of units even if I wanted to do it; which I don't, thank you very much. I know how to do it, even used to do it about 20 years ago but part of the reason I started investing was to improve my life. Somehow, pulling another stuffed toy out of a backed up toilet just doesn't meet that criteria for me. If it does for you, more power to you.
I guess where I have heartburn is when people claim the ONLY way they can run their investment profitably is if they do it all themselves. That is just bogus and the sign of someone who, well, you get my point.
Some people enjoy the satisfaction of doing it themselves and knowing it was a job well done.
Some people aren't emotionally attached to the properties and see the real value in the tenants. We experience satisfaction in providing a great place to live at a fair price providing a fair profit to the owners.
It isn't really a matter of having that time to find other deals. For me, while my wife was battling cancer for over ten years, it was having that time to spend with her without having to worry about running to do "something" at a property. Now that I am a widower and single parent, it is having that time to spend with my son.
I am perfectly willing to trade a few dollars here and there to improve my quality of life. Great deals come along about once a week. I can always buy more property to increase my income, but I can't ever get back a single minute wasted on anything. And yes, to me, time spent doing the maintenance would be wasted because I could spend it in so many other ways.
"Finding the deals" is not a high dollar activity for me. In fact for me it's a no dollar activity. I have someone who is willing to do it all at no cost to me. It's called a realtor. :D In this market, the guru speak of 3-5 years ago doesn't apply anymore. Realtors are negotiating shortsales, listing REOs and finding a preforeclosure lacks the value it had before because of the prevalence of post-foreclosures.
Taz, while I can respect your post - again, you stated earlier that while you built your investment portfolio over a span of 20 years, you had a job for 15-20 of those years if I remember correctly. I'm sorry but I'm just not willing to give up that much time to an employer so I can outsource running my business to someone else. I'll take a couple years of pulling toys out of toilets if it means I can avoid 20 years of shoving my nose up some boss's posterior. Will I do it forever? Of course not, but the overhead I'm saving now that I can reinvest into my business now will only speed the growth of the portfolio to the point that I have the overhead to cover outsourcing this. That's just me and my way. This is definitely a "to each his own" thing.
Besides - women dig men who are handy. :mrgreen:
Tim
P.S. I am lucky in that I had a significant construction background before getting into this. I know some investors who are still creating spreadsheet databases to determine which end of a hammer to swing. For them, hiring a contractor is probably the cheaper option.
Yes, I retained a full time W-2 job, BY CHOICE, until December of 2007.
I'll take a couple years of pulling toys out of toilets if it means I can avoid 20 years of shoving my nose up some boss's posterior.
I know that is the popular view of work by many in this country today but when you aren't dependent upon your employer for your financial survival you don't have to shove your nose anywhere you don't want. My real estate investing gave me the freedom to put principles and ethics above my job. It gave me the ability to fire a customer, at their offices, and bring my team home when I was a consulting project manager and the customer was being unreasonable. I didn't worry about what my "boss" would think or say because it was the right thing to do. BTW, my company fully agreed with my decision.
Will I do it forever? Of course not, but the overhead I'm saving now that I can reinvest into my business now will only speed the growth of the portfolio to the point that I have the overhead to cover outsourcing this.
You aren't saving as much as you think and you could easily split test to find out. Theoretical numbers are fine, but they do not tell the real story.
That's just me and my way. This is definitely a "to each his own" thing.
True, but it is also an attitude thing. If you don't hire someone our outsource there is a physical limit to how much you can do, or more to the point for me, want to do. To me, a total and complete living hell would be dealing with properties, tenants and toilets as my full time job.
Besides - women dig men who are handy.
They also dig men who have the flexibility and free time to devote to them. Lots of couples get divorced because money and life get in the way.
I guess where I have heartburn is when people claim the ONLY way they can run their investment profitably is if they do it all themselves. That is just bogus and the sign of someone who, well, you get my point.
I haven't heard anyone claim that the ONLY way to make money is to do it all themselves. In fact, I have repeatedly said that you must have cash flow with ALL the real world operating expenses included and that you can EARN the management and maintenance fees IN ADDITION to the cash flow.
For me, while my wife was battling cancer for over ten years, it was having that time to spend with her without having to worry about running to do "something" at a property. Now that I am a widower and single parent, it is having that time to spend with my son.
I agree with that 100%! That is the beauty of the real estate business. If you have an urgent need to spend all your time with family - you can do it. On the other hand, if you want to do some or all of the work, you can do that and earn the maintenance and management fees in addition to the cash flow.
I am perfectly willing to trade a few dollars here and there to improve my quality of life. Great deals come along about once a week. I can always buy more property to increase my income, but I can't ever get back a single minute wasted on anything. And yes, to me, time spent doing the maintenance would be wasted because I could spend it in so many other ways.
I agree, but how many hours per week can you spend with non-work activities? I ride my bike, my motorcycle, go camping, snowboard, scuba dive, work at Church, and take a 3 or 4 day weekend almost every week. But that still leaves a LOT of time during the week. Working 3-4 hours per day, 3-4 days a week to double the amount of money I make from the rentals (cash flow alone) seems a worthwhile endeavor and no-one will manage or maintain my property better than I can.
I do all my own maintenance except when it requires a licensed contractor or it is beyond what I can handle. I grew up in a construction family and worked in construction for 5 years so I have a good working background of doing most home repairs.
Like others have said if your paying a contractor $50/hr to do maintenance on your property that you are able to do just so you can sit and watch TV, that's not being very cost effective. Before you pay someone to do it you need to make sure that during that time you will actually be doing something that is making you more than $50/hr for it to make sense.
For me the numbers on contracting aren't theory. I have estimated in excess of 500 construction repair and improvement projects on residential properties. I know the numbers and am saving more than what you think because I know to reduce rehab costs. I know the scope of work that is required and the means by which it can be done with the least time investment.
"If you don't hire someone our outsource there is a physical limit to how much you can do, or more to the point for me, want to do. To me, a total and complete living hell would be dealing with properties, tenants and toilets as my full time job."
Conversely, if you spend your capital on unnecessary overhead, it limits your reinvestment. Your "hell" sounds just fine to me. Then again I know the trick of replacing certain systems rather than repairing them and its' something I figured out when I was 20 and watched a repairman bill 2 hours to repair a faucet that cost $15 and took about 10 minutes to replace. Toilets need fixing on average once every 5 years. I konw what goes wrong with 99.9% of them - the flapper wears out. A plumber would "repair the flapper". I know that a whole new internal assemply costs $24 and takes about 20-30 minutes on average to replace and it's good for another 5 years. This year alone on the 11 properties I've had to repair this year, I've had to spend 1.5 hours and about $72 fixing toilets. I can buy a whole new toilet for a hundred bucks and have it in place in an hour if I needed. Dear lord how did I survive that hell......
"They also dig men who have the flexibility and free time to devote to them. Lots of couples get divorced because money and life get in the way."
You're not listening to what I said. I said that I do it now because it will allow greater reinvestment now to create the overhead to outsource it later. You don't get all the flexibility of having a business system in place just because you showed up. Well, maybe you do if you're Trump and were born into a 400 Million dollar portfolio. But for the rest of the world we're talking about classic business building here. Creating a position that you as the owner may have to start by doing, but in time an employee will fill that position.
I'm curious though why you had a job "by choice" with all the success you had with REI? Did the job pay that well that it truly was the highest and best use of your time? Did you have a part ownership in the company you were an employee at?
That is an excellent question and to be honest I am REALLY surprised it took this long for anyone to ask.
I have always looked at my investments as a long term strategy. I never wanted to just "live off" the income from my real estate or stocks or any investment. I guess in the strictest terms I would have made far more money each year had I totally devoted all of my time to managing and maintaining the properties myself. But, I know if I had done that I would've ended up one of those burnt out landlord types. You know, the ones the kids talk about as they go by his house with him outside mumbling to his garden hose.
Anyway, I kept my W-2 job even after I reached critical mass with my investments because I could. I enjoyed the work and have definitely made a difference in people's lives in the medical industry. Once my wife was diagnosed with breast cancer that difference was tangible and real.
But the biggest reason I did it? Because I knew I didn't have to do it. I still remember the year when I figured out I could quit my job if I wanted and I no longer had to even think about layoffs and such. I also remember the day my boss at the time figured it out. :cool:
Did you have a part ownership in the company you were an employee at?
Sometimes yes, sometimes no. In 1995 I started a consulting group and it grew to over 300 consultants and support personnel by 2003 when I sold it that fall. After that I joined a development group as a technology advocate for speech recognition in the medical industry.
I can honestly tell you I have enjoyed every single W-2 job I have ever had since college and I know a big part of that was because I never once had to worry about compromising my principles because I was dependent on a paycheck.
You want real financial freedom? Continue to work when you no longer have to work.
Ok, now look at this. You were working in companies you owned and you don't think an investor should be working on his properties? Don't you see how a person working on investment properties is doing exactly the same thing as you taking a salary from the company you built?
I know in your career, real estate may have been the side activity but in my business it is my primary focus. I don't have nor do I have the intention of creating another business and putting REI to the side focus.
That is the difference. You spent years "fixing the toilets" of your company to make it a saleable company. I'm simply doing the same only I'm not going for 300 employees, I'm going for 300 properties that act as income generating entities.
Actually, I wouldn't have been able to build the consulting group I built if I stayed at the equivalent level of fixing toilets and patching wallboard.
I know in your career, real estate may have been the side activity but in my business it is my primary focus. I don't have nor do I have the intention of creating another business and putting REI to the side focus.
Yeah, I see your point. But, I've just never wanted real estate investing or stock trading for that matter, to be my "job".
That is the difference. You spent years "fixing the toilets" of your company to make it a saleable company. I'm simply doing the same only I'm not going for 300 employees, I'm going for 300 properties that act as income generating entities.
Actually, most of my efforts were spent in getting the right people in place to "fix the toilets" of the company when they needed it. Which is the same way I run my real estate investments.
Not that you asked, but if you want some insight into my management "style" the book titled Good To Great will explain much of my management philosophy.
Anyway, I don't mean to take away anything from anyone who likes to do this stuff for themselves. I have known many like that. Some even work for me now. :wink:
I guess at the end of the whole discussion it comes down to kind of leverage we seek and how we choose to use it.
Sep 09 '08, 09:13 AM
