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Investors: Why Doing Your Own Labor Isn’t So Bad

by Brandon Turner on October 28, 2012 · 29 comments

  
rehabbing a house using your own labor

It’s a simple question: when you invest in real estate, should you spend your own time doing the labor or hire that work out? I’ve wrestled through this issue for most of my career in real estate; sometimes I’ve done the work, other times I have hired it out. I’ve had good and bad experiences with both and want to share a few stories with you and lessons I’ve learned.

A Tale of Two Houses

The first house I officially tried to “flip” was a large four-bedroom home right before the housing market began to tank. I purchased the home for, what was then, an incredible deal. I then spent the next nine months remodeling the entire thing with just me, my wife, and some friends when they had time. In those nine months, we:

  • Repainted the inside and outside
  • Added a new roof
  • Refinished the hardwood floors
  • Added a brand new bathroom
  • Transformed an attic into a bedroom
  • Gutted and remodeled the entire kitchen
  • and a lot (LOT) more.

In all, we spent close to $50,000.00 in materials and holding costs during those nine months. By the time the house was finished and placed on the MLS, the housing market and credit market had killed any chance of making a good sale. After six months I put renters into the home and refinanced the home pulling out all the money we had put in, but making nothing for the nine months of work (except equity and a cashflow positive property.)

Let me fast-forward a few years and tell you about another flip I purchased last month. I closed on a small house near my own home that needed significant improvements to bring it back up to retail condition. In just under a month, hired contractors went in and remodeled the entire house for a total cost of $15,000.00. The home was just listed for sale this past week and I hope to have it sold before the end of the year.

So Which Experience Was Better?

Most investors would tell you quickly that the second option was better. I didn’t have to put on grungy clothes, cycle through boxes of band-aids, or come home covered in paint. The second story took just a month from start to finish, where the first took almost a year. Clearly, from a monetary standpoint and time standpoint the second example was far superior. I know my back thanks me for choosing to do less of the manual labor.

Even I have written a lot both on the BiggerPockets Blog and on my own blog about hiring others to do work. And while the second deal hasn’t yet sold, I am confident that the second deal will result in a greater ROI.

However, I can’t say the first house was a mistake.

Let me explain why:

Working Isn’t Always Bad

Hard work gets a bad name sometimes.

  • Yes, I am all for hiring work out when it’s more efficient or others are better at it.
  • Yes, I believe sometimes being cheap is more expensive.
  • Yes, I know there are opportunities lost when you spend time working rather than finding deals.

However – sometimes it’s okay to get your hands a little dirty.

This is especially true if you don’t have a lot to bring to the table. Perhaps you are just starting out and want to start flipping homes or remodeling for a buy-n-hold situation. If the list of assets that you are bringing to the table doesn’t include a sizable amount of money – you may need to get your hammer out and start swinging.

Doing your own work, while not always the most efficient way of doing a rehab, does offer significant benefits that shouldn’t be merely discarded because it’s unpopular to do manual labor. Some of those benefits include:

  • Saving money by not paying contractors to do certain jobs
  • Learning how difficult/easy certain jobs are
  • Helps you better grasp the “big picture” for future jobs
  • Gives you an asset to bring to a deal when you have none
  • Can help speed up completion, fill in a labor gap, or finalize a project.
  • The project is done the way you want
  • Helps you understand the right way to do things

Doing some or all of your own labor doesn’t mean you are not a good investor. It simply is another way to do a project (that some might not always agree with.) If you enjoy the work or have little to bring to a deal to make it work – by all means, consider doing at least some of your own labor. In the end, you may find it will help get you into the game sooner than normally possible.

Most of the gurus and real estate writers will tell you to hire all the work out. However, I believe they have been in the game for many years and most likely spent the early part of their careers with a hammer and nails before getting to the point where they are at. It’s easy to look back and say “wow, it’s way easier now” and forget that the only reason they are where they are is because of that hammer.

Do you agree with me or disagree? Leave me a comment and lets talk about it!

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{ 29 comments… read them below or add one }

Dale Osborn October 28, 2012 at 9:33 am

While in SFRs and APT, we did everything we could handle ourselves. If a job was over our heads, then we hired it out. However, when we got into MHPs we felt we were in a better off position so started hiring the work out. Also we were not familiar with MH take down and set up procedures. It worked out and we found ourselves with a lot of free time to get into other activities.

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Brandon Turner October 28, 2012 at 5:32 pm

That’s a great point Dale, about having more time once you hire the work out. I admire that you started doing your own and “moved up” to hiring the work. You also said something else important – “if the job was over our head, then we hired it out.” There are times when things are too complicated and trying to do it ourselves will just cost more. It’s a delicate balance!

By the way – now that you are more comfortable with mobile homes, do you do more work yourself or still hire it out?

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Dale Osborn October 28, 2012 at 5:40 pm

No – got spoiled and hire most things out. My wife is a workaholic though and could probably out work 3 guys so she still putters around on different projects to keep “busy”.

Dale

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Jerry Kisasonak October 28, 2012 at 9:38 am

Great content Brandon! I agree totally with your closing remarks: “Most of the gurus and real estate writers will tell you to hire all the work out. However, I believe they have been in the game for many years and most likely spent the early part of their careers with a hammer and nails before getting to the point where they are at.”

My real estate investing is finally to the point where I am skilled enough to find great deals, hire out all the work, and still come out with a finished product that is below market value. In my earlier years I simply didn’t have the skills or the resources to pull this off. In fact, I was sweating bullets just to make the payments on my first property!

Personally, I love the rags to riches stories. And I’m not knocking the successes from people like “The Donald’s” of this world, but in reality just about all of us weren’t handed $200,000 to get started, backed by the team, resources, connections, conditioning, etc that he had. Yes, we all can make it big, but we have to start where we are. Sometimes that means with a few dollars, a head and heartful of courage and ambition, and a hammer.

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Brandon Turner October 28, 2012 at 5:34 pm

Thanks Jerry! I’m glad others see things like I do. Labor gets picked on a lot in real estate investing. Usually for good reason – but like you said, sometimes when you begin it’s all you have (and it’s a lot better than nothing!)

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Jerry Kisasonak October 28, 2012 at 9:41 am

Clarification: “Below market value” meaning my all-in cost is less that what the market value of the home is.

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Shanequa Jones October 28, 2012 at 10:07 am

With my first 2 houses, a lot of the work was not hired out. Yes, it took forever to finish. However, it felt good once the project was complete to know that we did it. I’m currently rehabbing a house and I’ve decided that I won’t do any of the work. Doing the work is cheaper, but it takes longer to start making money. In my case, I actually lost money because the rehab took forever. I look at it like a credit card. Instead of paying for it in full, I did monthly payments with interest. The interest is the lost rental income.

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Brandon Turner October 28, 2012 at 5:37 pm

Hey Shanequa, Thanks for your view. It sounds like we have a similar background! It sure does feel good to do a job yourself, but I also find I feel just as good when others do a project for me. Weird, I know, but when I walk into one of my flips that was just done I think “wow, I did this :)

You make another great point about time. If trying to do it all alone results in lost time, that can be costly as well.

Thanks again!

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Steve Toohey October 28, 2012 at 10:12 am

Brandon,

I believe that doing all, or almost all, of the work on your first investment is very wise. Beside the obvious statement that you may not have much to bring to the table, you hit the nail on the head by saying that it gives you a “big picture” appreciation for future projects and an understanding of the costs involved with all of the required renovations, which will help in working with contractors in the future.

I continue to do much, but not all, of my own work primarily because I enjoy it, although I know that my time could be better spent… but if you’re not doing what you enjoy, then what’s the point in gaining the freedom that real estate can provide?

Thanks for the article.

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Brandon Turner October 28, 2012 at 5:39 pm

Hey Steve. So true! What’s the point of financial freedom if you don’t get to enjoy the results (and the process, too!).

When we do the work ourselves, we are better equipt to avoid being ripped off in the future. It helps when a contractor quotes $1000 in just labor to replace a small simple window (I’ve had that quoted before… insane!) and you can slam the door in their face.

Thanks for the comment!

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neilinmadison October 28, 2012 at 6:28 pm

Brandon
Interesting post as usual. I have only a half dozen unit with a buy and hold approach. I do the work that I am good at and that is otherwise expensive to hire out from the trades, but leave the back breaking and tedious work to others with less skill. Things I do and enjoy: replacing dishwashers, water heaters, toilets, faucets, light fixtures, switches, outlets, fixing anything mechanical, small remodelling projects or finishing out projects to create more livable space. Tenants really appreciate it when this work is done timely and well and doing it is a great opportunity to keep track of my places and to build good relationships with the tenants. Things I have learned I don’t like to do: roto rooting, painting whole units or whole buildings, roofing whole roofs.
I hear people often talking about how many houses they can flip when they have contractors doing all the work. But there is still a lot of work managing those people, and then there is all the time spent keeping in touch with realtors and bankers handling all of the details of buying and selling. I have found that I really don’t enjoy that work near as much and I can’t see holding down a regular fulltime job with a good salary and benefits and interesting work in another field while trying to flip a bunch of properties. It is important to figure out what you like about this business and to do it well, I agree with you there is not one best way to do it.

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Brandon Turner October 29, 2012 at 9:36 am

Hey thanks! I found, also, that when I switched to hiring all the work out I would have a lot more free time. However – I found that it was a huge workload just managing the contractors. I’m sure it would have been easier to simply just have one contractor do it all – but that’s a subject for another day! :) Thanks for the comment!

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ken lavoie October 29, 2012 at 4:49 am

I am no longer looking for deals as we’ve decided to pay down mortgages early vs. acquire (much) more. However, I still dont’ do much of my own work outside of landscape / mow / and “odds and ends” (little stuff that would take 2 minutes to explain or 3 minutes to do myself! Like bring salt and sand to the apartments, put the storms up in one older building that has old windows, turn the boilers on where needed, change a few light bulbs, maybe put some mini blinds up if I’m SUPER ambitious!)

I do sometimes feel “guilty” because most of my time is ‘clerical and errands” which doesn’t seem like a great use of an “entrepreneurs” time …. but dammit, that’s what I like! I LOVE leaving the house at 7, doing a few errands, stopping for coffee, talkign to a tenant or two, maybe do an hour’s winterizing, check out progress on a paint or remodel job, home by noon, work at the computer, make more phone calls. I just LOVE that life and that schedule, and though I have some skills, I’ve never done any real carpentry, plumbing or electric, (and it’s illegal to do electric or heating here in Maine on rentals) so I think my time is better spent elsewhere. Or maybe I’m just a little lazy!! haha!

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Brandon Turner October 29, 2012 at 9:42 am

Hey Ken – I can identify completely! I do a lot of the little things to because, as you said, it would take longer to explain than to just do (light bulbs are a great example.) I also enjoy doing some work. The best part is being able to choose what you want to do. I spent years crawling under houses and on wet roofs. No more of that for me! I try to only do things I’m interested in now.

Thanks Ken for the comment!

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Mike October 29, 2012 at 7:01 am

Hey Brandon, another excellent, thought-provoking post.

Personally, I first started doing all the rehab work when I first began flipping and it taught me a ton as far as how the mange the job site and manage subs when needed. I even went so far as to get my GC license in Mass, which does still come in handy now. Maybe it’s different in your state (Washington as I recall), but here if you GC a flip, you need to pull permits and need the license for that.

I don’t do the work now, unless it’s needed in a pinch (see my last post lol) primarily because we do a flip a month now, so there’s no way I can do it all. But when I was first starting out, it absolutely helped keep costs down and get my feet wet to have a deal under my belt.

I think a house flipper should start with doing some of the work, then as time goes on, outsource more and more of it. However, if your day job doesn’t allow for that kind of flexibility, you have no choice. Regardless, it’s a great experience to get your hands dirty and although I’d rather not do it any more, an experience I’ll never forget and refer back to quite often.

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Brandon Turner October 29, 2012 at 9:43 am

Thanks Mike – I actually started thinking about this post after reading your last post! (So thanks for the inspiration!) In Washington, a flipper needs to be a General Contractor as well, even if they don’t touch anything at all. Ugh.

I agree- start with some labor and outsource as your cash and confidence build!

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don hines October 29, 2012 at 8:43 am

I have just finished my first remodel using contractors. I absolutely love one of them. But the other is a total flake. This remodel is my largest to date and I have to say, it was so nice to tell someone what I wanted and it got done. Even though the hired labor added much more to one column in the ledger, it save so much by eliminating about a thousand trips to Home Depot. I can’t ever complete a job from my original plans. So, it takes me at least one more trip after I have changed my mind. I found it (DYI) even affects my contributions to the JOB. I can’t concentrate on my daily activities when my mind is on that electrical or plumbing project I “have” to do when I get off. Maybe if they fire me I will take the leap.
Don

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Brandon Turner October 29, 2012 at 9:45 am

Hey Don – the most recent flip i did was my first without doing any work. Over the years I’ve done less and less, but now I finally feel like I can handle to hire it. My situation was similar – I had some great help and some not-so-great. And I can totally identify with the “1000 trips to home depot!”

My record in 9 trips in one day. Plumbing. Ugh!

Thanks Don!

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Karen Rittenhouse October 29, 2012 at 9:12 am

Ahhh, there’s nothing like stepping back and seeing the fruits of your labors! Not only is doing it yourself the best way to learn, to understand cost, and to get a TON of exercise, but most of us count our own time as $0 per hour so our costs stay low!

In our very poor beginning, we picked up the hammer, the screwdriver, the caulking gun, the paint brush, and plenty of other tools! We are so busy now, however, (11 full-time employees) that we hire out all work.

You made a great observation – that picking up all those tools early on is exactly what got us to the point where the only thing we pick up now is our cell phone!

Excellent post, Brandon.

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Brandon Turner October 29, 2012 at 9:49 am

Thanks Karen! Exercise is another great benefit to doing your work that I forgot to include but is actually one of my favorites!

11 employees! Wow! That’s super exciting. The business model definitely changes with more experience, eh!? Very cool!

Thanks Karen, as always! (and Congrats on the new amazon eBook! I’m working on one right now too!)

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Jim Pratt October 29, 2012 at 12:26 pm

Hi, I’m able to build a house from the ground up, so naturaly I do most of the work myself. One time was on vacation, had to hire an Electrician to fix a light switch-$135 for a new 50 cent switch:( I love remodeling and get great satisfaction from doing it right the first time. If I do the work-$10,000, if I hired it- $25-30,000, big differance!

With age comes experiance, nowadays I’m able to purchase nice properties that requires very little work. Also love insurances, remember a couple of years ago when Aberdeen and Hoquim had that big win storm? They put on a lot of new roofs for me:)

Nowadays I remodel for sear pleasure as I don’t have to look for that “next great deal”. I can afford to hire it out, but where’s the satisfaction and pride? Last month I installed over 35 yards of concrete- two driveways and two sidewalks just to have something to do.

I think most good investors like doing the work themselves, at least a big part of it. You make your money when you buy and save money doing your own rehab if you have the skills.

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Brandon Turner October 31, 2012 at 10:54 pm

Hey Jim – for sure, doing the work yourself can save a ton. I did a huge remodel last year that I spent six months on and off working on, but probably saved $50,000 in labor. (Whether I should have done this deal at all is a whole different story!)

Thanks or the comment!

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Chris Clothier October 31, 2012 at 10:45 am

Brandon –

Very good article again. Love the fact that you try to provide as much detail as possible. I have to tell you, I hire out everything and have from day one. I’m not going to sit here and preach about how much my time costs or how much I can earn versus the time I spend, but I will say that every investor simply view certain things differently. I have a two lawyer friends who are investors. One does all of the work himself and the other does nothing. The one that does all the work thinks nothing of leaving work at 11:00 AM on a Wednesday and laying floors or painting walls for the rest of the day…even though he bills out his time at over $400 an hour. The other would rather pay a fraction of the $250 an hour he bills to laborers to fix his properties. Two different approaches and neither is right nor wrong.

Me personally, I simply know the limits of my strengths and weaknesses. I have never learned the intricate details needed to do some jobs and have never cared for the patience required for others. I just enjoy doing other things and have been confident enough to hire (and sometimes fire) until I have surrounded myself with the right people to handle my real estate.

Thanks for the article – very good stuff. All the best –

Chris

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Brandon Turner October 31, 2012 at 10:52 pm

Thanks Chris, I appreciate it! I definitely like seeing both sides of the coin on this one. You are proof that it can be done without being the labor guy! I hope to be more like you in the future!

Thanks for what you do!

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Frank DeFazio November 9, 2012 at 5:33 am

I think a lot has to do with whether or not you are a full time investor or part time. I’m actually somewhere in the middle. I invest and property manage but I’m also a full time real estate agent. The time of year and scope of the project really determines how involved I can be. In the Summer it’s hard to do much besides run around with buyers and sellers but come Fall/Winter I can get more hands on. Some projects are too big so I feel better hiring a GC to keep an eye on the project but for smaller ones I can GC them myself. I wholeheartedly agree that there is value in being as involved as possible so you can understand the difficulty and cost of each job. Great post!

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Brandon Turner November 9, 2012 at 3:02 pm

Hey Frank, That’s a really excellent point. There are definitely seasons in our lives that make labor more or less feasible. Thanks for pointing this out!

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JB Wolff November 10, 2012 at 5:52 am

Hi Brandon,
I think everyone above has hit all the points I too have thought about and/or done. I am an investor and General Contractor in the Palm Beach area. So working my own projects was always 2nd nature. For me the challenge has been to stop doing all the work and hiring others.
I agree with many that say that its a good idea to work a few jobs to understand the value of your blood, sweat, and tears. But its not a good idea, its a great idea, even if you have the financial backing to do the deal without ever laying a hand on the project. Puting your hands on a project teaches you far more than could ever be learned by a pay check.

I could ramble forever on this one, but I’ll spare your time.
Good Read, Thanks!
JB

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Brandon Turner November 10, 2012 at 9:10 am

Hey JB,
It’s always challenging for me to step away also! When I do, though, things tend to go much faster. It can be tough for me to trust others, but that comes down to my ability to effectively manage. Thanks for the comment JB!

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Brandon Turner October 29, 2012 at 9:38 am

Hey Charles – your comment backs up my thoughts exactly! Thank you for the real world examples! It’s actually great to know about the updating of the service panel – because I need to do that for my own home someday soon and the 3k bid was scary for me too! Maybe I’ll get in touch with you when it’s time and you can give me some pointers! :)

Thanks Charles!

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