Why are DIY REI's Losers?

Buying & Selling Real Estate
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Why are DIY REI's Losers?

Max James
Investor · Cincinnati, OH · Member since 2015 · 229 posts · 50 votes

If you've read the The Millionaire Mind by Thomas J. Stanley, you understand most millionaires (as in 98% of them) are not DIYer's. This makes sense to me. To achieve true greatness, in any aspect of success, you need to be the manger, ruler, commander, leader… you get the point. However, starting out, I'm not sure if being an NON DIY'er is the right path to success. Especially in REI. Let me see if you agree.

If you listen to the Bigger Pockets Podcast, @Brandon Turner started out as a DIY investor and learned the trades himself before hiring them out to someone. I am currently in the same boat and believe this is a fantastic way to become a successful investor in the buy and hold rental space. Utilizing your resources when you have them to save cash for the next investment along with learning the true costs involved.

However, according to Thomas J. Stanley and plenty of other successful RE investors, DIY landlords don't have the right mindset and shouldn't be swinging hammers EVER. This side of the fence also makes sense. You are better using your time by learning more about your investing strategy and finding deals. Hiring out EVERY single little task required to re-position a property and normal tasks for landlording. Hedging your bets that if you learn more, this will offset the cost associated with hiring out help.

It’s obviously a personal preference, but if you can sacrifice your time to do the manual labor portions of a re-position/every day landlord tasks when you are starting out, I think you’re better off in the long run. You are giving yourself a competitive edge when in 5+ years you need to hire out the work. You know exactly how much a project will cost to complete and the time involved. You are saving money (sometimes LOTS of money) which can be put towards more investments along with your reserve account.

If you were to hire out EVERY SINGLE task when starting out, wouldn’t you agree this puts you in a position where it will take you longer to acquire more properties, due to the fact your burning money on hiring them? I’m currently performing this balancing act as I am starting to hire out more help. The question is, how much help do you hire out when you have the capability and are willing to commit the time to DIY.

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Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
10y

I think my view and application on this has changed over the years. I have read the Millionaire Mind and was a little shocked that none of them tend to do any labor around their ONE house.  What if they had 35 houses? 80?  Most of them had a business and ran it as such at the time they were wealthy.  I bet they got a little dirtier early on!

 I used to do absolutely everything.  Had to, really.  Just sunk all my $ into acquiring the asset, right?

I do things I can do that are expensive to hire out.  I just replaced a bunch of receptacles and a breaker.  I just changed out both tub stems at the diverter valve. Each task would have costed me $150 + material easy, but I was done with both in about an hour, and already had the material.  I do all plumbing and above-ground drain, most electrical and most HVAC.   This is expensive labor, and you usually have to be on the job-site anyway to get them started. 

Anymore - I don't clean, I don't dig, I don't hang doors or install trim. I don't do roofs.  I don't stretch carpet or mess with concrete. Learned I am not good at some things and/or just don't wanna do them anymore!   I paint when I feel like it.  Hire my guy when I don't. 

I wouldn't know what I don't like or can't do if I never tried.  To sit up in your castle stroking large checks  working 'on' your business when your new is just foolish to me.  Get in there and do, learn and figure it out!   You will be a better landlord/flipper/wholesaler and build character in the process!  Good question @Max James!

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  • Jassem A.
    Investor · PA · Member since 2013 · 1k+ posts · 602 votes
    10y

    How much you hire out is a personal preference but is also based on how much money you have to burn, your timeline for completion, your other obligations, and also whether you feel like you could do a good enough job or do the job at all without getting seriously injured.  If you feel like your time is worth more to you than whatever you pay your help then it is better to pay your help.  For me it's more about getting exercise while gaining more experience with different types of repairs which will be helpful in the event that I run out of money to pay help or if I feel a need to speed things along.  I can also see how it would be difficult for someone with no hands-on experience to be able to find reasonably priced help to begin with when many contractors (and people in general) are just looking for a quick profit.

    3Reply
  • Hugh Ayles
    Cedar Park, TX · Member since 2015 · 377 posts · 200 votes
    10y

    @Jassem A. pretty well covered why you do DIY.

    For us right now, time is more accessible than cash.  Doing DIY plays more to my strengths currently also.

    As we accumulate more cash, we will look to hire out the rehab work.  We may still do some ourselves because we enjoy doing the work.

    I think another aspect of DIY si can you still keep the engine fed?  In other words, are you still able to bring in more projects to keep cash coming in.  We feel like we are able to do that even though we are not marketing enough.  For us, we feel like we are paying wholesalers as much or even less than the fees a GC would get, so DIY works for us right now.

    To your last question about how much do you hire out if you have capacity to DIY yourself, I think ti totally depends on how you want to spend your time.  Is it more important to stay busy doing DIY and keeping the cash or is it more important to save time and spend more money by contracting the work?  So long as we can keep our pipeline full, I think we will always have a DIY project going at any given time.

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  • Adam BartomeoBusiness Member
    Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
    10y

    I have read that book twice and listened to it once (it's been about 5 years) and have a completely different take away.

    My biggest take away was that you common millionaire next door was extremely frugal. The track and understand every expense. They spend only what is necessary and do so with intent.

    I do agree with what both points that were made. Yes, you need not work in the business but on it. But, I don't know (or have read about) any entrepreneurs that have not worked on the ground level of the business. Now, I used to preach to the supervisors and managers that they should only do that when absolutely necessary or when they wanted to build relationships with associates. 

    If you are going to work in your business you should have some kind of game plan to remove yourself from the hands on work and start leading the business.

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  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    10y

    I agree, more or less. When starting out you have more access to time than money, so paying yourself (DIY) rather than someone else is a great way of keeping costs under control. At some point, you have an empire to run, and emperors are usually not best served digging moats or fixing bayonets. Besides, once you acquire knowledge on doing something, unless you become amnesiac or demented, the knowledge stays with you more or less until you are dead. Knowledge is a tool, like a wrench, that you wield to get things done. More wrenches, more specialized tools, more experience with how to use the wrench will make you more productive. 

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  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    10y

    I think my view and application on this has changed over the years. I have read the Millionaire Mind and was a little shocked that none of them tend to do any labor around their ONE house.  What if they had 35 houses? 80?  Most of them had a business and ran it as such at the time they were wealthy.  I bet they got a little dirtier early on!

     I used to do absolutely everything.  Had to, really.  Just sunk all my $ into acquiring the asset, right?

    I do things I can do that are expensive to hire out.  I just replaced a bunch of receptacles and a breaker.  I just changed out both tub stems at the diverter valve. Each task would have costed me $150 + material easy, but I was done with both in about an hour, and already had the material.  I do all plumbing and above-ground drain, most electrical and most HVAC.   This is expensive labor, and you usually have to be on the job-site anyway to get them started. 

    Anymore - I don't clean, I don't dig, I don't hang doors or install trim. I don't do roofs.  I don't stretch carpet or mess with concrete. Learned I am not good at some things and/or just don't wanna do them anymore!   I paint when I feel like it.  Hire my guy when I don't. 

    I wouldn't know what I don't like or can't do if I never tried.  To sit up in your castle stroking large checks  working 'on' your business when your new is just foolish to me.  Get in there and do, learn and figure it out!   You will be a better landlord/flipper/wholesaler and build character in the process!  Good question @Max James!

    7Reply
  • Dev HornPro Member
    Flipper/Rehabber · Arlington, TX · Member since 2013 · 1k+ posts · 2k+ votes
    10y

    The problem I've seen with the DIY mindset is that people think "I'll do it myself to save some $" but they really don't have the time to do it quickly.  These are the rehabs that take 3 to 6 MONTHS sometimes for guys to complete when you could have knocked it out in 3 to 6 WEEKS with a crew.

    I do a few things on some of the projects to save some time or money, but never at the risk of taking more time and therefore more money (holding costs).

    "Distraction is the enemy of success." ~ Dr. Greg Steinberg

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  • Mindy JensenPro Member
    BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
    10y

    @Steve Vaughan said almost everything I wanted to. 

    The problem is finding good contractors. I'm AWESOME at finding bad ones... Nobody is more invested in my property than I am. I'm still looking for a great contractor at a fair price.

    I have great gutter guys, an awesome roofer, and great drywall guys. I also have a terrible roofer, and an HVAC guy who borders on criminally negligent. It doesn't make sense to hire out tile, when it will cost me $5-$10/sq ft to have it installed, when I paid $2/sq ft to buy the tile. And I know how to do it. 

    Also, I think knowing how to do it can help you when you do finally start hiring it out. It helps you vet contractors. 

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  • Max James
    OP
    Investor · Cincinnati, OH · Member since 2015 · 229 posts · 50 votes
    10y

    How much you hire out is a personal preference but is also based on how much money you have to burn, your timeline for completion, your other obligations, and also whether you feel like you could do a good enough job or do the job at all without getting seriously injured.

    Great quick way to sum it up @Jassem A. and I feel like they would even go in order.  I can definitely see how in some cases your timeline is a HUGE driver, just as @Dev Horn pointed out as well.  For example, say you want to rehab a duplex and you plan to do the work before you get new tenants in.  If you can hire someone to do the work and get new tenants in quicker with higher rents, will that higher rent offset the cost for the contractors.  If so, I think it might make sense to hire out and get the job done.  But it's all specific to the end goal.  

    0Reply
  • Max James
    OP
    Investor · Cincinnati, OH · Member since 2015 · 229 posts · 50 votes
    10y
    Originally posted by @Steve Vaughan:

    I think my view and application on this has changed over the years. I have read the Millionaire Mind and was a little shocked that none of them tend to do any labor around their ONE house.  What if they had 35 houses? 80?  Most of them had a business and ran it as such at the time they were wealthy.  I bet they got a little dirtier early on!

    This is one big point I am trying to make!

    When you listen to seasoned RE investors on Podcasts and read in a lot of REI books, they make you feel like you shouldn't be doing any hands on work.  I am reading Multi Family Millions by Lindahl right now and he makes it sound like if you are doing any of the managing, hammer swinging, etc. then you are doing it all wrong.  The book is big on repositioning apartments and has a TON of really useful information in it.  The book just makes it sound like if you do any of the work, you're not doing it right.   Thanks for the insight Steve!

    0Reply
  • Max James
    OP
    Investor · Cincinnati, OH · Member since 2015 · 229 posts · 50 votes
    10y
    Originally posted by @Adam Bartomeo:

    I do agree with what both points that were made. Yes, you need not work in the business but on it. But, I don't know (or have read about) any entrepreneurs that have not worked on the ground level of the business. Now, I used to preach to the supervisors and managers that they should only do that when absolutely necessary or when they wanted to build relationships with associates. 

    Thanks Adam for the insight, I completely agree with you here and can stem from the last comment I made as well.  

    I think it can boil down to the philosophy of each REI business owner. Just like how all business in a similar market have different business strategies, philosophies, and ways they run things.

    Look at UPS for example. There is not a single one of their executives, VP's, Senior VP's, or CEO's who did not start at the very ground level. Their philosophy is that to reach the top, you need to understand how things operate at the ground level. This is something I believe is true for REI as well.

    0Reply
  • Steve Smith
    Beverly Hills, FL · Member since 2013 · 388 posts · 62 votes
    10y

    @Max James

    I do believe that Brandon also said it was his biggest mistake not by doing his own maintenance but not planning on maintenance when he ran his numbers before buying the property, just to insure that it would still be profitable if and when he hired it out. I have and will always figure on using a contractor when running my numbers. I do not always use them, but It is up to you or not you use them or not

    Make it happen

    Steve

    0Reply
  • Max James
    OP
    Investor · Cincinnati, OH · Member since 2015 · 229 posts · 50 votes
    10y
    Originally posted by @Steve Smith:

    @Max James

    I do believe that Brandon also said it was his biggest mistake not by doing his own maintenance but not planning on maintenance when he ran his numbers before buying the property, just to insure that it would still be profitable if and when he hired it out. I have and will always figure on using a contractor when running my numbers. I do not always use them, but It is up to you or not you use them or not

    Make it happen

    Steve

     I specifically remember him saying that at one point as well.  I was confused in that episode because he said he didn't account for the maintenance.  In my numbers I run, I don't have a separate cell that shows DIY vs Contractor.  In the maintenance portion, I always assume my monthly maintenance will be 20-25% of the rental income.  

    I didn't understand if he was saying his mistake was running his numbers or if it was he wish he hadn't done so much DIY at the beginning.

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  • Steve Smith
    Beverly Hills, FL · Member since 2013 · 388 posts · 62 votes
    10y

    @Max James

    My understanding oh Brandon Turners remark regarding maintenance and I think he also included property management that because he had experience doing repairs he didn't figure it into his numbers as a results he now has to manage his properties otherwise he would loose $4000 a month if he turned them over to a property manager . I would ask you to listen to podcast 139 he talks about it I don't know if this helps 

    Make it happen

    Steve

    0Reply
  • Max James
    OP
    Investor · Cincinnati, OH · Member since 2015 · 229 posts · 50 votes
    10y

    Thanks @Steve Smith

    0Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    10y

    Whether something makes sense to hire out or not, assuming you can do it, depends a lot on what Steve said. Let's look at the context of the time it takes to do a rehab yourself vs. hiring out. Let's say a rehab on a rental will cost $6k if you hire it out, and take less than 30 days, or will cost $2k if you do it yourself and takes 3 months. If the place rents for $2k per month, you should probably hire out, because you will break even on costs but will (hopefully) get a professional job. If it rents for $600, on the other hand, you will be saving a bundle of money doing it yourself.

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  • David Dachtera
    Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    10y

    @Max James,

    Other than my own physical challenges, my take is that since I am proficient at none of the skilled trades my resources are better invested in skilled, licensed professionals who can do a good job AND be held accountable for their work. My time is better invested in building more business / income / my network / etc. than it would be in physical labor.

    Stated another way, rather than avoid expenditures I see the pursuit of income as a better use of my time and energy.

    My $0.02...

    0Reply
  • Dawn BrenengenBusiness Member
    Moderator
    Real Estate Broker · Raleigh, NC · Member since 2014 · 2k+ posts · 1k+ votes
    10y

    When I started investing, I had more time than money, so I did as much as I was qualified to do myself.  During turnover, I painted, I installed tile, I cleaned, I installed new hardware, etc.  Now, the reverse is true.  I have no time, but I have enough money to hire out what I need. I hire out as much as I can to create more time in my life.

    I suppose it worked out because I have more money now than I did back then, and that's the goal, right?! :)

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  • Linda WeygantPro Member
    Investor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
    10y
    Originally posted by @Mindy Jensen:

    @Steve Vaughan said almost everything I wanted to. 

    The problem is finding good contractors. I'm AWESOME at finding bad ones... Nobody is more invested in my property than I am. I'm still looking for a great contractor at a fair price.

    I have great gutter guys, an awesome roofer, and great drywall guys. I also have a terrible roofer, and an HVAC guy who borders on criminally negligent. It doesn't make sense to hire out tile, when it will cost me $5-$10/sq ft to have it installed, when I paid $2/sq ft to buy the tile. And I know how to do it. 

    Also, I think knowing how to do it can help you when you do finally start hiring it out. It helps you vet contractors. 

     Oh Mindy, I have not laughed so hard in days.  Please give me a full list of all your contractors so I know who not to call.  (Although I think I do need a great drywall guy.  I'll swap you the name of my awesome HVAC guys for your awesome drywall guys....

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  • Chris Field
    Investor · Milford, CT · Member since 2015 · 200 posts · 69 votes
    10y

    Personally I believe when you start out you should do as much yourself as possible. It helps you learn the business and save money. As you grow you should be more hands off, and concentrate on running the business not working in it.

    I started off sweeping floors and helping to do site work. I know most of the jobs, subs can't BS me because I have been their and done it. I also know what they cost. 

    Real estate by its nature is a very hands on business and I have seen a lot of new people struggle with what simply is a basic lack of knowledge.


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  • Account Closed
    Contractor · Raleigh, NC · Member since 2014 · 651 posts · 510 votes
    10y

    I certainly applaud and encourage dyi. It's fun and enormously satisfying to build and fix things. However,another thing to consider when deciding whether or not to contract work out, is the quality of the finished product. I suppose it's less crucial on a rental property but for flips the work should always be of a very high quality. To sell someone anything less is criminal. I'm also not convinced that one can do professional grade work after just watching a YouTube video.  Craftsmanship takes years to fully develop. A little bit of knowledge is a dangerous thing.

    I suggest that one wanting to learn spend some time working with and for a contractor. I've done that with some people over the years and it can be a mutually rewarding experience. 

    0Reply
  • Dan Kelley
    Rental Property Investor · Leander, TX · Member since 2015 · 89 posts · 51 votes
    10y
    Originally posted by @Account Closed:

    I certainly applaud and encourage dyi. It's fun and enormously satisfying to build and fix things. However,another thing to consider when deciding whether or not to contract work out, is the quality of the finished product. I suppose it's less crucial on a rental property but for flips the work should always be of a very high quality. To sell someone anything less is criminal. I'm also not convinced that one can do professional grade work after just watching a YouTube video.  Craftsmanship takes years to fully develop. A little bit of knowledge is a dangerous thing.

    I suggest that one wanting to learn spend some time working with and for a contractor. I've done that with some people over the years and it can be a mutually rewarding experience. 

     I think one caveat to that is, if you are going to hire the work, finding a real CRAFTSMAN. I've seen a lot of "professional" jobs that were pretty terrible. The owner would have been better off doing it themselves with their eyes closed. Granted, in the instance that comes to mind, the property owner doesn't have much passion for things being done right. 

    If you're going to hire it out, you've got to be willing to pay for the quality work.

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  • Account Closed
    Professional Auctioneer · Baltimore, MD · Member since 2015 · 1k+ posts · 1k+ votes
    10y

    Most all successful investors have done lots of their work, I've be schocked, fell off a roof, a ladder, cut myself with power tools and spent hours trying to smooth dry wall.

    No more! Thank you........that stuff is farmed out to people smarter than me.

    Charles

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  • Account Closed
    Professional Auctioneer · Baltimore, MD · Member since 2015 · 1k+ posts · 1k+ votes
    10y
    Originally posted by @Account Closed:

    Most all successful investors have done lots of their work, I've be schocked, fell off a roof, a ladder, cut myself with power tools and spent hours trying to smooth dry wall.

    No more! Thank you........that stuff is farmed out to people smarter than me.

    Charles

    0Reply
  • Timothy Riley
    Investor · Chicago, IL · Member since 2013 · 451 posts · 96 votes
    10y

    I totally believe in DIY that's why I hire everything I possibly can out. :)

    I know what the work takes and what it's worth.

    I've learned to value my time. If I screw up some money for some reason I put that much work in myself to make it up or at least feel that I made it up and take that loss of time in my mind a s a reminder before I blow another wad of cash on her - I mean on something. :)

    I love reading The Millionare Mind and Next Door (at least once a year), but they don't truly focus on how they built their money. I'm pretty sure if they started off broke they were DIYer's at some point.

    1Reply
  • Max James
    OP
    Investor · Cincinnati, OH · Member since 2015 · 229 posts · 50 votes
    10y

    It really boils down to the analysis of projected rental rise vs contractor cost when analyzing repositioning deals.

    For example, say rents are $500, $475, and $475 with the potential to all rise to $650... Therefore, a monthly increase of $500/month after the repairs are made... Say one could do all the work themselves saving "x" amount of dollars.  Your other variable is time.  If it is going to take you 6 months to do the work, you are missing out on that extra $500/month, or $3,500... 

    If your projects would cost under $3,500 to have a contractor do, then you should hire the contractor probably.

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