BiggerPockets

Bryan,

I would not call myself an average investor, at this time, but the two properties I now hold required a large effort on my part, with low cash outlay. I started out with almost no cash, but good credit, and good rehab skills, coupled with the fact that I really like rehab work - like a hobby that could be expensive but isn't because I make my money back. Anyway, I have rehabbed two houses, one SFH, one duplex. I used some cash and some HELOC to buy very distressed properties and completely renovate them, then mortgage them after the fact.
Now, I have found that I want to do more properties, and as I have a day-job, I can't do everything myself very quickly, so I have been establishing relationships with contractors, trying them out on small things, hoping to begin to farm out alot of the work in the future, changing my equation to eliminate alot of my time and effort, just doing the things I like most.

Tough question. But one that too many people don't consider.

For me, the RO(Effort) is pretty variable based on the job. Lightweight rehabs, I tend to be very involved in the first week or so... I tend to manage demo myself, which gives me the chance to see everything that's wrong with the house and make a very, VERY detailed set of work orders for my subs.

After that, the house is basically turned over to individual subs... Rough to finish, I part out the work as much as possible.

However, as the jobs get more detailed and involved, my time investment has a tendency to skyrocket. The last house we built saw me and my designer on site almost daily, from start to finish, for 10 straight weeks while we built the place.

Of course, the end result was a very detail-oriented neo-craftsman/bungalow with so much trim detail it's ridiculous. Getting everything fine-tuned was a LOT of work and took a LOT of time... and believe you me, I paid myself pretty well for my time involvement before I calculated the ROI.

Smaller jobs with less involved trim where the finish crew can "blow and go" take a lot less effort. I don't need to be on site supervising standard finish work, and unless I missed something in the demo phase (Which happens rarely), by the time the lockout crew gets done the house should be done with very little or no punch out.

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That covers the rehab/build part of the business. The other half is the buying and selling part.

I freely admit, I suck at sales. My ability as a contractor far outstrips my ability as a listing agent, and I'm really ready to go ahead and outsource the listing and selling part of my business. It only took me 5 years to come to this conclusion. Yes, I am a stubborn SOB who likes total control.

I still rely largely on myself for deal-finding. I don't trust wholesalers and I don't really trust anyone else for that matter. I do my own diligence, drive the areas myself, and evaluate every deal individually. Even with a few key zipcodes, finding properties is a fairly exhaustive process that can take a lot of time.

What I've found is that buyer-agent commissions on purchases under about $150k simply don't even begin to cover the travel, time, and gas expenses involved in finding those deals in the first place. Maybe if I were a full-time buyer's agent dealing with a lot of different buyers I would feel differently.

Instead, I basically have to factor in an additional fee for myself as the buyer agent to actually account for my time and expenses properly.

It's very true the old saw about a flipper... an investor who puts blood, sweat, toil and tears into a property and upon sale often discovers that he has paid himself less than minimum wage (In some cases, waaayyy less than minimum wage)

This is why it can be hard to find deals... if you treat your business as a business and not as a hobby or side job (For me, it isn't. RE is my full-time occupation), deals with too-thin margins will leave you starving at the end of the year.

I have to agree with Don, the contacts and contractor relationships I've built with my current project are invaluable.

I can't even estimate the amount of time I spent working on a flip with a "partner" only to end up calling in some contractors to finish it up for us. The amount of money I'm getting off the place is hardly worth the time and effort I put into it.

From strictly a $/hour standpoint, it seems like a waste of the last 5-6 months of my life. If you add in the intangibles, of which there are too many to list, it starts feeling more like a paid (not paid for) education that will last me a lifetime.

Thankfully for me, I have a great day job where my ROE is insanely high :)