To swing a hammer or not?

Moe C.

Investor · Palm Bay, FL · Member since 2013 · 45 posts · 14 votes

13y

I just bought my first fixer upper and to know what this was before and see the after their is no better feeling of knowing I did that and I saved a ton of money.

Brett Russell

Investor · Chelsea, MI · Member since 2013 · 350 posts · 138 votes

13y

I'm not handy enough nor do I have the time to do things on my own, so I won't really have a choice, but there are 2 main arguments I see against being hands on:

1) Holding costs-- yes you might save on labor costs, but if it takes you much longer to be able to sell or get a tenant in place, those savings might evaporate.

2) Opportunity costs-- if you're spending all your time doing the rehab, you aren't searching for more deals. So, yes, you might save $10K on labor, but you could easily miss an opportunity that could net you $30K.

That said, if you're handy enough and don't have any other way to finance a rehab when getting started, go for it, but like any business you need to leverage other people's talents and time to get big.

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Brandon TurnerPro Member

Investor · Maui, HI · Member since 2009 · 13k+ posts · 3k+ votes

13y

Hey @Alan Mackenthun great topic! And yes, I do repeat myself! :)

My theory with the hammer is this: because I know how to do it, it becomes a crutch. It shuts my brain off from the business side of things, forcing me to work "in" my business and not "on" my business. I like being handy, and being able to fix things - but I would love to have systems in place so I didn't have to stay up till 3 am for 2 weeks solid at the end of every project (which I seem to.)

But yeah, I also feel sometimes there is an "anti-work" mentality among investors. In fact, check out this post sometime where I talk about the benefits of doing my own work.

Thanks for starting the discussion Alan! Love it! And thanks again for coming out to meet up!

Bryan L.

Residential Real Estate Agent · Cookeville, TN · Member since 2013 · 1k+ posts · 948 votes

13y

It's not that swinging a hammer is "beneath us". But rather, it's just not an efficient use of an investor's time. Believe me, I've done some manual labor in my life. But I can hire good workers to swing the hammer at $11 - $15 per hour. My time is better spent on activities that produce income at a higher rate. It has nothing to do with "being ashamed" or it "being beneath me". Some of the guys that I hire are friends of mine and I think highly of them. So, while the other guy is doing his own work, I'm moving on to my second or third rehab of the year, and making offers on number 4. But, if one really enjoys swinging the hammer, then more power to them. For me, the fun part is the hunt. The hunt for the next deal that is.

Jackie Lange

Investor · Central America, Panama · Member since 2010 · 423 posts · 293 votes

13y

While you are swinging that hammer, just think of all the great money making real estate opportunities that are passing you by. That will cure you of swinging a hammer pretty fast.

Your time is better spent finding opportunities and making offers.

Alan Mackenthun

OP

Rental Property Investor · Englewood FL & Prior Lake, MN · Member since 2012 · 107 posts · 33 votes

13y

Good for you Moe.

Thanks Brandon. Your older post you pointed me to states it quite well.

Brett, I perfectly understand #1 in the case of a flip. On the other hand, there are always going to be opportunity costs, but there's also an opportunity cost for not doing any of your own work. I can't spend all day, every day looking for new deals. I generally buy and hold, so I'm not looking to flip it quick and find another deal. I can spend a few minutes a few times a week checking on new listings and other time networking for financing to looking for deals other ways, but I can also add value to my deals with physical labor. On other deals, I can make a little cash acting as an RE agent for other buyers or sellers. If you've got the skill and the time, there's nothing wrong with swinging a hammer and the pride of craftsmanship shouldn't be overlooked.

Jerry W.Pro Member

Moderator

Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes

13y

@Alan Mackenthun good post. So far I have done at least 50% of every fix up, and every repair after renters move out of my rentals. I know deep inside this is not good from a business point of view because anything I do I could hire out for one tenth of the hourly wage I would make if I was working in my office. Sometimes there is no one available and I need it done now, sometimes I am cheap and don't want to pay out for something I consider easy, and sometimes I want to do it to learn how, ocassionally I even think I do it because I think I can do it best. The reality is I lose money by doing it myself. Rentals in my area have low rates of return and my wife really dislikes rentals, so maybe I am trying to make my bottom line look better. On big projects like rewiring a house or putting in a new floor it takes me a few months, my wife calls them my therapy houses. I have a high stress job that gives me no exercise so I am sure there is some truth to that. I do find a certain satisfaction in doing a project and coming back later or driving by and thinking I did a good job on that. I do not clean houses anymore though, so perhaps I am improving. My thoughts to other investors is you probably lose money doing it yourself, but you are able to make that choice, and having the financial freedom to decide any way you wish is a dam nice feeling. So do what makes you feel good, its not all about how many marbles you have when you die.

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Will BarnardPro Member

Moderator

Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes

13y

Here is my take on this topic: Having such knowledge really helps you better manage contractors, know what specific repairs should cost, know how long they should take, and know when contractors are not meeting standards. Actually doing the work provides a great feeling of accomplishment and merit, though the cost IS your valuable time. Gurus that state you should never do such tasks that are beneath an investor is just more typical hogwash out of their foolish mouths.

There is a time and place for everything: When first starting out and you are a rehabber, doing some of the tasks really helps your learning curve. It also helps save money and in your first deal or so, that is often very important and necessary.

Now, as an investor becomes seasoned, part of that is the ability to build systems and not do the manual labor (or at least minimize it to very small functions). Spending time finding deals and finding money is certainly a better use of the time once experienced, but as a newbie, it is just as important to learn the ropes by DOING the physical tasks (in my opinion).

Brandon Hicks

Investor · Avilla, IN · Member since 2013 · 796 posts · 769 votes

13y

I work a factory job for 40-56 hours a week as well as manage my 19 units and try to be a present father and husband.

I'm not handy.....I do paint and handle cosmetic stuff in between tenants but I leave pretty much everything else from cleaning to repairs and improvements to people that are both better at it and have the time for it.

I like to think that I know a fair amount of what needs done and what's involved in getting it done. That said, having a great, trustworthy handyman is an invaluable way to leverage my time.

I do feel that having the skills and knowledge could be a crutch like @Brandon Turner

said.

Alan Mackenthun

OP

Rental Property Investor · Englewood FL & Prior Lake, MN · Member since 2012 · 107 posts · 33 votes

13y

Originally posted by Jerry W.:

@Alan Mackenthun My thoughts to other investors is you probably lose money doing it yourself, but you are able to make that choice, and having the financial freedom to decide any way you wish is a dam nice feeling. So do what makes you feel good, its not all about how many marbles you have when you die.

Very well said. The thing I like best about working independently in real estate is that it is my choice (as long as my wife's ok with it ;) ). No doubt, money is important, but it's certainly not the only thing. Choosing what you do yourself and what you contract out is important, but there's no shame in jumping in and doing projects. When I bought my 1st little house back when I was going to college one of the best feelings was realizing I could knock down a wall andI didn't have to ask anyone (except my wife...).

Karen MargraveBusiness Member

Moderator

Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes

13y

The question is, can someone else do the work that needs to be done better than or as good as you for less money? For us, as developers, we locate property, figure out the highest and best use, get everything together (financing, marketing, etc.) then build it.

We've found there are certain parts of the job that we do that add real value to the project and help get it ready to go, so we do those. Once the actual job starts, we hire others to do that. We do all go over to the jobs at various times. Sometimes my husband and son do physical labor, but that's because they like doing physical work once in a while.

Everything on any job has a value associated with it, but not everything we do is dictated by money, nor should it be. Time spent on the job with subs, etc. are just as important a relationship as time spent networking with lenders. They both have value, though maybe not measurable. For instance on one job we had to install a steel stairway that our son had designed, and had fabricated. It was heavy. Some of the subs volunteered to drive over an hour on a weekend, after their part of the job was done, to help install the stairs, for free, because they liked my husband and son, though we didn't have them do it.

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Dawn AnastasiPro Member

Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes

13y

Originally posted by Will Barnard:

Here is my take on this topic: Having such knowledge really helps you better manage contractors, know what specific repairs should cost, know how long they should take, and know when contractors are not meeting standards. Actually doing the work provides a great feeling of accomplishment and merit, though the cost IS your valuable time. Gurus that state you should never do such tasks that are beneath an investor is just more typical hogwash out of their foolish mouths.

There is a time and place for everything: When first starting out and you are a rehabber, doing some of the tasks really helps your learning curve. It also helps save money and in your first deal or so, that is often very important and necessary.

Now, as an investor becomes seasoned, part of that is the ability to build systems and not do the manual labor (or at least minimize it to very small functions). Spending time finding deals and finding money is certainly a better use of the time once experienced, but as a newbie, it is just as important to learn the ropes by DOING the physical tasks (in my opinion).

THIS.

I have done A LOT of rehab work over the past few years. I have put up drywall, put in flooring, painted (lots of painting), put in switches/outlets, light fixtures, installed a dishwasher, removed wallpaper, hung curtain rods, put in a toilet, installed ceramic tile floor, hung kitchen cabinets, etc.

I do feel that it was worth it for several reasons:

a) I know what's involved in doing certain tasks. I have had contractors try to give me hogwash prices for things and it may be because I'm female. Then when I tell them that sounds like a lot and start talking the talk, they suddenly backpedal.

b) I like seeing what something looked like before and what it transformed to. There's a certain sense of satisfaction in knowing "I did THAT." There's only one life to live for everyone, and feeling good, feeling proud of oneself, is a benefit.

c) It did save money on the early deals for future deals. I'm now starting to wean myself away from that.

My grandfather was a contractor (mostly masonry work but he did carpentry, painting, and almost everything else). My mother worked with him when she was younger at the job sites. She actually taught me how to do many things when I got started in real estate. YouTube videos taught me a lot too. And trial and error.

So women out there -- don't be afraid, you can do it too!

Patrick L.

Real Estate Investor · Saint Petersburg, FL · Member since 2013 · 1k+ posts · 951 votes

13y

I wouldn't consider it "beneath me" but I wouldn't consider it an efficient use of my time. For what I pay people to do the work for me I can spend my time making far more than that so the opportunity cost would be pretty high if I were doing the work myself. I run two businesses so doing any rehab work would take too much away from taking care of my business. I do however show up for demo on most rehabs because destroying stuff is a great stress reliever for me....putting it back together is just too slow to do anything for me.

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Dawn AnastasiPro Member

Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes

13y

Originally posted by Patrick L.:

I do however show up for demo on most rehabs because destroying stuff is a great stress reliever for me....putting it back together is just too slow to do anything for me.

Agreed! Taking a hammer to things and destroying them is one of the benefits of owning real estate!

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J ScottPro Member

Moderator

Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes

13y

If your primary goal is being able to take pride in your work, then doing the work yourself is the correct option.

If your primary goal is to maximize income as an investor, then not doing the work yourself is the correct option.

I'll probably be vilified for this statement, but I firmly believe what I say above is not an opinion, it is fact. You can hire out most renovation tasks for less than $50 per hour. A good investor makes more than $50 per hour. Therefore, there is a financial opportunity cost for doing the work yourself (i.e., you make less money by doing the work).

People will contend that you need to do the work yourself to understand how to do the work. I don't believe that's true -- I've never swung a hammer on a construction project, and I've gotten pretty good at learning how to keep control on my projects. Not to mention, you wouldn't hire a contractor who didn't know what he was doing...why should you do it yourself if you don't know what you're doing.

People will contend that, if you're a novice without much cash, you don't have the resources to do more than one project at a time, so why not do the work. That logic doesn't hold, as spending that contracting time raising funds will alleviate the lack-of-funds problem.

People will argue that doing the work yourself increases your profits. That's pure BS. Your profits are exactly the same. All it does is provide you some contracting income in addition to your profits. The cost of labor is the cost of labor, whether you're doing the work yourself or you're hiring it out. You can play accounting games and trick yourself into believing that you're making extra money by doing the work yourself, but in reality this is no different than hiring out the work to a contractor at $15/hour and then going to work a retail job for $15/hour. The math is the same.

Again, when you do the work yourself, the most money you're saving is $50/hour (in theory -- I actually can't think of any contractors I pay $50/hour to). I can name lots of RE tasks that consistently generate more than $50/hour (fundraising, marketing, strategy/planning, networking, etc) -- do those and you'll make more than you're saving by swinging a hammer.

That said, if you're doing the work because you love the work or because you take pride in doing it yourself, go for it. Those are excellent reasons. Just don't convince yourself that it's making you a better investor or making you more money.

I'd say this is just my $.02...but I actually believe it's more than that...I believe it's mathematical fact. Feel free to fire away...I can take it... :-)

Alan Mackenthun

OP

Rental Property Investor · Englewood FL & Prior Lake, MN · Member since 2012 · 107 posts · 33 votes

13y

J Scott, everything you say is true, but I have to say that I haven't ever been able to find contractors who'll work for $15/hour. Maybe it's where I'm based (Suburban Twin Cities, MN) or maybe I haven't been looking in the right places.

My other thought is that I'm not necessarily trying to maximize my income as an investor, but rather I'm trying to build a real estate business with sufficient income so that I can get out of the rat race of software consulting services at something close to the same income (to start anyway). (My actual long term goal is to never have to to another timesheet again, but that should probably have been left unsaid.)

I suppose I should spend some time figuring out how to find decent, better priced contractors.

Ben R.

Investor · Nashville, TN · Member since 2013 · 187 posts · 23 votes

13y

I could hire somebody to go to the grocery store, cut the grass, wash the car, and do a whole multitude of other things I am capable of...I bet I could hire somebody to go to the gym for me so I could spend my time on more profitable things....but then again, some things really are more important than profit...

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J ScottPro Member

Moderator

Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes

13y

Originally posted by Ben R.:

....but then again, some things really are more important than profit...

Exactly. For me, it's spending time with my wife and kids. That's precisely why I DO hire out things like cutting the grass, washing the car, etc. If I'm going to be away from my family, it's going to be to do things that earn me more than what it costs to do these types of tasks.

In fact, now that I think about it, I can't think of too many things in my life less important to me than cutting the grass and washing the car... :)

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J ScottPro Member

Moderator

Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes

13y

Originally posted by Alan Mackenthun:

J Scott, everything you say is true, but I have to say that I haven't ever been able to find contractors who'll work for $15/hour. Maybe it's where I'm based (Suburban Twin Cities, MN) or maybe I haven't been looking in the right places.

Every location and every contractor will be different. In Atlanta, I typically pay $10-15/hour for non-specialty contractors (handymen, carpenters, painters, etc). In Wisconsin, I typically pay $25-30/hour for these same contractors. In my other market, I pay pretty much in-between. For specialty contractors (electrician, plumber, hvac), I typically pay $45-50/hour in all markets.

So, it really depends on your market and the contractors you hire. But, I can't imaging having to pay more than $50/hour for any contractor in any market (except in very rare specialty situations or high-end artisan work).

But again, if you're goal isn't necessarily to maximize income, then you can throw everything I say out the window. My comments are directed at those whose goal is to maximize their investing income and growth.

Wendell De Guzman

Investor · Chicago, IL · Member since 2013 · 2k+ posts · 1k+ votes

13y

My hammer is my cellphone. It's not because the work is "beneath me". It's all about leverage.

A smart man once said, "I would rather have 1% of a 100 men's efforts than 100% of my own."

Imagine had Bill Gates decided to do the filing in his office when he was still in Microsoft instead of hiring a secretary...he probably won't be the richest man today.

Leverage is the key to wealth.

But if you want to exchange one rat race (your JOB) with another (being your own contractor and handyman), by all means continue to swing the hammer.

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J ScottPro Member

Moderator

Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes

13y

Originally posted by Wendell De Guzman:

Leverage is the key to wealth.

Many people think leverage only applies to financing. Wealthy people recognize that leverage can apply to many facets of a successful business.

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Joel OwensBusiness Member

Moderator

Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes

13y

Yes some people get enjoyment out of other things people cannot stand to do. I pay people to mow my yard. I can't stand yard work.

Spending time with family and friends is high on my list.

If people want to rehab houses themselves to give a sense of accomplishment that is great.

Mine is running my commercial real estate business, martial arts, and my exercise. Everybody has a different thing they put currency in. If it isn't your thing then people sometimes discount it or do not understand it. Some people just enjoy deconstructing things and then rebuilding them into something better using workers or employing their own hands.

Having lost people in my life at an early age I grew to understand that money wasn't important but it was TIME that mattered. No matter how rich or poor we all have so much time on this planet. The freedom of having passive income working for you while going to bed every night versus being chained to a job that sucks more and more life and time out of you is a no brainer.

It's not money but the freedom it gives you to get the most out of your life doing what makes you happy.

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Ben R.

Investor · Nashville, TN · Member since 2013 · 187 posts · 23 votes

13y

Originally posted by J Scott:

Originally posted by Ben R.:

....but then again, some things really are more important than profit...

Exactly. For me, it's spending time with my wife and kids. That's precisely why I DO hire out things like cutting the grass, washing the car, etc. If I'm going to be away from my family, it's going to be to do things that earn me more than what it costs to do these types of tasks.

In fact, now that I think about it, I can't think of too many things in my life less important to me than cutting the grass and washing the car... :)

Whatever floats your boat...

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J ScottPro Member

Moderator

Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes

13y

Originally posted by Ben R.:

Originally posted by J Scott:

Originally posted by Ben R.:

....but then again, some things really are more important than profit...

Exactly. For me, it's spending time with my wife and kids. That's precisely why I DO hire out things like cutting the grass, washing the car, etc. If I'm going to be away from my family, it's going to be to do things that earn me more than what it costs to do these types of tasks.

In fact, now that I think about it, I can't think of too many things in my life less important to me than cutting the grass and washing the car... :)

Whatever floats your boat...

Why the seeming animosity about my statements above?

I've already said that if your goal isn't to maximize income, my statements don't apply. If you have goals more important than profit, that's great (I do too!!!)...but it's outside the scope of what I wrote...