Flipping minimal repair houses: Contract vs. Do It Yourself?
Member since 2008 · 38 posts · 0 votes
My question is based on the scenario that you are taking out a mortgage to buy the property so as to leverage your money. When flipping houses in short time periods do you believe it is better to contract the services (i.e. painting, landscaping, and minor improvements on the scenario that the house was only needing minor cosmetic improvement and you were able to get it at an undervalued price) to get the job done quicker and more professionally so as to have it back on the market quicker which in turn will shorten the months in which you will pay the mortgage payments on the house, or is it better or equal to do the actual jobs yourself? Any feedback is greatly appreciated as always as well as any feedback on my idealism. Thank you very much in advance.
Jon,
I guess you have to consider what your time is worth. I was raised to never pay someone for a job that you can do, which has lead me to always doing my own work, whether it be mechanical or home repairs. I am in the process of trying to get this rehab complete right now and found a kid that works really cheap. I hired him to scrape the old paint off the basement walls and repaint them for $150.00. He kept bothering me to cut the grass. So I finally gave in a paid him $20.00 to cut the grass. I feel very guilty in doing so, my dad would have had a heart attack, but while this kid is taking care of the little things like the above, I can concentrate on the more important stuff, like building a new front porch and finishing the bathroom rehab. I make $30.00 dollars an hour at my ft job, so paying this kid to work 3 days painting the basement and 2 hrs cutting the grass for $170 bucks just comes down to simple math and common sense. He now wants to paint all the trim on house for another $150, this job would take me may be 10 to 12 hrs and I am under a time crunch to get this place done by Aug 1st. So it looks like he will get the job.
Do you make the money from finding good deals or from being a contractor?
If you are not finding many deals and want to use up your spare time then doing the work yourself is fine. A friend really likes working with his hands. He pays cash and then has a project to focus on. He is not trying to maximize what he could make based on volume. He wants to get dirty and feel the pride from doing the work himself.
If you find more deals than you have time to handle yourself then what would you do? Turn away the deals or hire someone.
A different friend turns around 100 properties a year. He used to be a contractor and pound nails. He figured out that he could make a lot more money by focusing on the deals than focusing on the repairs.
There is no perfect answer for all people. If you really want to maximize your profits per deal do it yourself. If you want to maximize your total profits find more deals and sub out the work.
John Corey
I've found that the decision is often based more on the availability of good, reliable, cost effective labor. I used to have a neighbor who got whacked from his Fortune 500 job at the ripe old age of 50, with a decent pension and lots of time on his hands. On "turnover" of my rentals he would say "I'll paint the interior for $200, you buy the paint".
After a day or 2 he'd ask me to bring over my lawn mower, weed whacker and hedge trimmer, then he'd want all the cleaning supplies, etc, etc. When he'd get done I'd ask what I owed and he always said, "I told you $200!"
Due to the size of my market, and the fact that I really don't have any need, and little desire to do more flips I pretty much do everything myself. Like someone else said I was raised to not pay for what I was capable of doing myself. Some key points on this reasoning.
1. I'm "better" at many things, it's subjective but since the work being done has my eyes a couple of feet away, I can see every mistake and I'm really anal retentive. I've NEVER seen a "professional" roofer put the starter course of a comp roof on correctly.
2. Outsiders a real expensive. If someone is charging me $500 to do a job, I have to "earn" much more than that to net the $500.
3. Borrowing to increase your "leverage" and then paying a lot to shorten your turnaround time are are kind of at odds with each other. "Leverage" is only a big factor if your bank accepts checks with % signs instead of $ signs, mine doesn't.
If it costs me $12K in (paid) labor, versus ZERO or even $6K to do it myself I have to gain one heck of a lot of "leverage" to make that pay. However, if it takes me 4 months instead of 1 month, AND THE MARKET TURNS, like many of them have recently, then that's different. But I can't predict markets.
I just did a rehab on a 1000 sq ft, 2/2 near me. Roof, new ceramic tile in kitchen and living room, some lanscaping, replaced some fascia, a couple of windows, a bit of plumbing, a bit of electrical, replaced both exterior doors, painted living room and kitchen and complete exterior paint.
I did all labor myself, I DON'T start real early, I get off the roof in the middle of the day and I DON'T work late.
That took me SIXTY DAYS, from closing to closing. In that time I did miss about 5 weekly golf games, 1 weekly poker game and took off to CA for a week. It did get me into mid June (school out) which is prime selling season so I didn't consider I lost anything time wise.
My TOTAL material cost was about $3500. The LABOR alone on the roof and ceramic would have added pretty close to $2K, or FIFTY SEVEN PERCENT. Now that is LEVERAGE.
all cash
Wow, those were some very good points to consider. I see that a lot more factors add into the equation then just face value. I appreciate all of your feedback. Thank you very much.
Another point to consider-
Depending on your locale, you may be required to use a licensed contractor, especially for plumbing/electrical/HVAC , and in some areas ANY work over a certain $$ amount.
The REAL problem can come when its time to put the house on the market to sell, you will be required to "disclose" certain facts. A buyer may not be able to obtain financing if proper permits were not obtained etc.