What is your biggest 'out-sourced' expense, aside from contacting?

Question

My husband and I are just getting started on our real estate investment journey. We both are prior-military and have education benefits at our disposal from our time in. (Basically, we have some free schooling) I am looking for some advice on what education we should seek in order to maximize profit. So, that being said, aside from actual contractors doing labor in/around the home, what is your biggest expense? Realtors? Design? Legal aid?

Any input and advice is welcome. Thank you for your time!

Dev Horn · Answer

@Jay Neil is spot on - it's MARKETING.  People don't plan for it, but once they get involved in this business, the cold hard reality hits - this is ALL about FINDING MOTIVATED SELLERS on a consistent basis and that is NOT cheap (but it can be reasonable given the ROI).

For some deals, the cost of MONEY can be another big expense.  We've done some deals with private/hard money and the money was not cheap, but we made money on a house that we would not have done otherwise.

Bryan H. · Answer

I am a buy & hold investor, my expenses after contractors in order is vacancies, financing, taxes, property management and insurance.

Jay Neil · Answer

Marketing your services and remaining active in the market. Business cards, flyers, postcards, bandit signs, any direct-mail campaign, these are some of the small expenses necessary to keep any real estate investor's business actually work.

Melissa Thompson · Answer

Thank you all SO much, this has been very informative. I wasn't even thinking about some of the things that you gentlemen mentioned. I'll pursue a real estate license and continue to learn as much as I can about the process in the meantime.

Brandon Sturgill · Answer

Depends on your business model, but the comments above are on point. I do rehab/resale with short term hold...so, generally speaking, the cost of money is not a big deal for me. Cost of labor and materials for a complete remodel is a different story. And holding costs...a "basic" rehab/resale of a SFH will cost you about $17k in costs. Entrance and exit costs should really be considered if you are doing anything other than wholesaling. Realtor commissions are 6%, so it is an easy "known" cost. And nobody has mentioned taxes yet...

Joe Norman · Answer

I second Dev's comments that Marketing and Cost of Money are my biggest expenses.  Unfortunately you can't "school" yourself out of these, but you can learn to be smarter about the costs and track and improve your ROI.  I also spend a lot of money paying good real estate agents, but again they are well worth their money (the bad ones are a different story).

Will Barnard · Answer

Biggest expenses are as follows and in order:

1. Agent commissions

2. Cost of money

3. Marketing.

Therefore, I would suggest one of you get your RE license and then find the least expensive money you can. Marketing costs will be what they are.

Jay Neil · Answer

@Dev Horn  Great point with the cost of money!

What is your biggest 'out-sourced' expense, aside from contacting?

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