Investor Payroll, who's in your wallet?

Investor Payroll, who's in your wallet?

Mark UpdegraffBusiness Member
Real Estate Broker · Rochester, NY · Member since 2010 · 1k+ posts · 706 votes

I thought it would be nice to hear from other investors about how their payroll came to be, and what positions are on it.

If you could rank your employees in order of importance and put a brief description of their duties that would be very helpful for young investors.

If you don't have any employees, could you elaborate on why, and maybe comment about your use of sub contractors or your methods for getting things done.

Thanks so much! I'm feeling very overwhelmed at the moment. It still seems to me like contractors are very expensive compared to employees. So if you've gone that route in lieu of contractors I would love to hear about your progression. What level of person you initially hired, how that grew, and what their duties were.

I can afford to hire one person currently, but can't decide if it is the best route or exactly who I am looking for. Any advice is greatly appreciated.

Thanks BP!
Mark

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J ScottPro Member
Moderator
Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
14y
Originally posted by Mark Updegraff:
John S. - So, if they quote you a weekly labor rate, what checks and balances do you use to make sure they are working the full 120 hours? Do they provide you with a project completion date? Does your construction manager handle all the supplies & delivery?

This is the reason I would never (and would never recommend) paying contractors hours/weekly/monthly. You want your contractors to have their incentives aligned with yours, and by paying based on time, their incentives are then diametrically opposed to yours (the longer the project takes, the more money they make).

If the contractors say it will take 4 weeks and are charging $2250 per week, I'd much rather set a fixed fee of $9000, which would encourage them to finish sooner -- thereby increasing their hourly earn. Doing it that way aligns incentives.

Unless you plan to be on-site 100% of the time, hourly payments will most likely hurt you in the long-run, not help you. There are a very specific exceptions to this in my experience (punch work is the best example), but those are few and far between.

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  • Mark UpdegraffBusiness Member
    OP
    Real Estate Broker · Rochester, NY · Member since 2010 · 1k+ posts · 706 votes
    14y

    Rusty Thompson Yes, I'm always on the look out for a cheap labor that is still skilled and motivated. Easier said than done. I don't wan't to pay someone $25-$35 / hr to do grunt work. And with contractors, that is what I'm seeing. I'm sure as I interview more and more contractors I may be able to find some that I can afford, who do good work. Otherwise, I will need to build a team of people myself. I'm starting a general laborer in 2 weeks at $10/hr full time. I'll report back as to how it is working out. I have a feeling it is going to save me money.

    Cheers,
    Mark

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    14y
    Originally posted by Luis A.:
    In an age where everyone has a cell phone and there are virtual assistants and such I find it very hard to justify the need to hire an employee. There are a dozen different ways that a work agreement can be structures that would avoid hiring an employee.

    Absolutely agree that employees aren't "necessary." That said, I probably work half as much as other investors while doing 2-3 times as many deals as they do -- just because I have a full time employee to manage the day-to-day aspects of job and to be my "right hand man."

    Having one employee allows my wife and I to do about 15 of our own flips each year, while consulting on another 15-20 flips per year, as well as staging/listing another 15-20 flips per year for other investors, while only working about half time each.

    In other words, having one employee turns real estate in a business for me, as opposed to just a full-time job (i.e., I'm earning money even when I'm not working or when I'm on vacation for month).

    I don't imagine anyone could accomplish that without at least one employee. And if they could, I'd love to know their secret.

    Btw, if anyone thinks all that could be accomplished with just contractors, my guess is that you'd be using those contractors enough and directing them enough that the IRS would classify them as employees even if you wouldn't. So, you wouldn't really be getting around having employees, just creating an audit nightmare...

    Just my opinion, I could be wrong. But, all the rehabbers I know doing the volume I'm doing (which isn't really that many), have at least one employee or are working at least full-time. Those that are doing many more projects per year than I am generally have several employees in my experience.

  • Real Estate Investor · Salem, OR · Member since 2011 · 422 posts · 149 votes
    14y

    @Mike Updegraff

    Try thinking outside of the box. Construction workers are often looking for side work. If you can network with enough of them you will always be able to find someone to take care of what you need done.

  • Mark UpdegraffBusiness Member
    OP
    Real Estate Broker · Rochester, NY · Member since 2010 · 1k+ posts · 706 votes
    14y

    Rusty Thompson No "contractor" wants to work for less than $25/hr. Even those with little experience and track record.

    That is pretty salty if they're not fast at what they do, and if they need to "run to home depot" or do some of the grunt work... the list goes on. I have no problem paying a high labor rate for skilled work. What I've seen in a typical contract crew in my area is 3 guys that all want to make $25-$35 hr. They want to do the whole project, and don't have anyone that they use to be errand boy, clean up boy, demo crew etc. When doing a complete rehab @ $35 / per man hour.... why not just build a freaking new house?!?

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