All Forum Posts by: Account Closed

Originally posted by Tim Wieneke:

Originally posted by Taz:

Not quite. The work has to be done.

Not everything. More than once I've had to "tame" a contractors scope of work to what is necessary. Besides that, it doesn't have to be overpaid for.

"Taming" the scope of work is part of good project management. It applies whether you are using a contractor or doing it yourself. I don't think you are saying the only way to manage scope is to do it all yourself. If you are, I obviously disagree.

Also, no one is talking about "over paying" we are talking about whether you do it yourself to save the labor costs or for other reasons.

Originally posted by Michael Rossi:

Quite the contrary, THAT IS THE POINT! Even with your number of a $3,900 savings, that's a lot of money for two days work! This is an excellent example of why I do the work myself. To me, it would be incomprehensible that a contractor could turn $2,000 in materials in a kitchen rehab into two manweeks of work! However, we've all seen it happen. A little work, a lot of talk. An hour for lunch. Frequent breaks. RIDICULOUS! Anytime I can save $3,900 or $6,000 for two days work, I'll take it!

I think you misread the hypothetical. There was no indication a real bid for $6000 turned into a real DIY for $2000.

That is why I said I'm not sure we are talking apples and apples.

However, I agree, if you can save $3900 in 16 manhours by all means that becomes an attractive rate.


That is interesting.


LOL!

Let's see, according to you, I have a complete lack of understanding of the rental property business. Now, THAT is really funny.


Now, THAT is even funnier.

Attacks like that show a lack of ability to support your position.

I don't care if you do your own repairs. I choose to run my investments differently. I choose to structure them in a way that does not require me to be joined at the hip with doing to type of work you want to do and enjoy doing.

That is what makes this country great, you can choose to do your own maintenance and I can choose to hire it out. We are both able to use our time, money and other resources as we see fit.

I'm going to leave it at this. The question in the first post in this thread asked if we did our own repairs. I don't and I buy my real estate investments with the additional costs already taken into account.

For those who enjoy doing their own repairs, good for you! No one is going to make you stop, certainly not me.

Originally posted by Tim Wieneke:

This line of thinking is the same that buys something you don't need just to get the 35% discount.....

Not quite. The work has to be done. Whether you do it yourself or hire it out the tax implications affect your final price. I'm certainly not saying you should spend a dollar to save 35 cents. What I am saying, though, is make sure you are really comparing apples to apples when you count all that money you think you are saving.

I liked some of Gary's analogy. There are lots of things in this world I could do for myself and would probably save some money if I did it. But, like I said before, it isn't always about the money.

Originally posted by Michael Rossi:

Holy Moses!!! Two manweeks to rehab a kitchen in a rental???? The last one I did with all new cabinets, new vinyl floor, and new paint took 2 days. That's another advantage to doing the work yourself. When a contractor does the work, there's too much goofing off to please me. When I work, I WORK! No breaks, no shooting the crap, just work!

Not sure if that fits with the $2K DIY verses $8K hired out rehab but good for you!

You did all that in just 16 man hours, way to go. I guess you didn't do anything at any of your other properties that week?

Originally posted by Ingrid Nagy:

I believe? that he's saying that if I rehab a kitchen that I'd pay a contractor normally $8000 to do and choose to do it myself for $2000 and my time, that I am giving the government 35% of my $6000 profit instead of writing off that $6000 paid as a repair cost/capital improvement.

Doing your own repairs vs. hiring out is a personal choice. I don't find fault with either. For myself, however, I don't normally make $200 an hr. in my full-time profession. Therefore, if I know how to gut & rebuild the kitchen, have the time, make the time, etc. I earn the $200 an hour instead of my contractor.

This is a great example to explore.

That $8000 kitchen really has an effective cost of about $5200 after tax savings. Well, to be honest a full kitchen rehab would probably need to be capitalized and that leads to depreciation, then recapture when you sell then cap gains tax rates on the profits, so let's pretend it is a full write-off in the year of the rehab to make it simple.

If you do the work yourself your example says it would only cost $2000. So you "saved" $6000. Not really. Your real effective cost of your $2000 DIY rehab is about $1300. So, your savings is $5200 - $1300 = $3900. That may still work out to an attractive hourly rate for you but I suspect maybe not. If it took you 100 hours (2.5 manweeks) your effective hourly rate of your savings would be $39. You would have to get it finished in less than 40 manhours to get your rate up to $100 an hour.

This is why split testing is your friend in this type of analysis.

Originally posted by Tim Wieneke:

Originally posted by Dan Davis:

I am suprised nobody mentioned the tax savings becase when you do your own repairs there are none and at 35 % it can add up pretty fast

Huh? Don't follow you here.

I think he is talking about a $100 repair has an effective after tax cost of $65 because of the deduction.

Dan, I didn't mention it because it is a difficult concept to explain to others. But, you are correct. The real cost of contracting out a $100 repair is about $65 once the dust settles and tax returns are filed.

Originally posted by Tim Wieneke:

Originally posted by Taz:

Actually, I wouldn't have been able to build the consulting group I built if I stayed at the equivalent level of fixing toilets and patching wallboard.

"Stayed at the equivalent level". Exactly. Indicating that at some point in building the business you were doing the fixing and patching.

Only when there was no other viable option.

Originally posted by Taz:

I guess at the end of the whole discussion it comes down to kind of leverage we seek and how we choose to use it.

It's also a matter of backgrounds and timing. I did notice that your tech consulting firm you refer to, you built in the midst of the Dot Com boom. Any fresh graduate with a degree in computer science could become a "consultant" upon graduation during that era. That era is over, though you got in and got out at the right time.

Not exactly.

The consulting group started in 1995 and continues growing to this day. The dot com bust happened in 2000/2001 and we were still growing high double digits before, during and after that time. While the consulting group was high tech it was not part of the hysteria of that time.

I sold the majority of my stock in the fall of 2003 but remained on the board of directors until the summer of 2006. I still do some consulting with the board and the executive team there. By the end of this year they will be twice the size they were when I sold my interests and a good 25% larger than when I left the board. I remain a very minor shareholder to this day.

Yeah, I don't chase fads and those of us who were doing the foreclosure thing long before it became fashionable know we are already past the point of diminishing returns.

Originally posted by Tim Wieneke:

Ok, now look at this. You were working in companies you owned and you don't think an investor should be working on his properties? Don't you see how a person working on investment properties is doing exactly the same thing as you taking a salary from the company you built?

Actually, I wouldn't have been able to build the consulting group I built if I stayed at the equivalent level of fixing toilets and patching wallboard.


Yeah, I see your point. But, I've just never wanted real estate investing or stock trading for that matter, to be my "job".


Actually, most of my efforts were spent in getting the right people in place to "fix the toilets" of the company when they needed it. Which is the same way I run my real estate investments.

Not that you asked, but if you want some insight into my management "style" the book titled Good To Great will explain much of my management philosophy.

Anyway, I don't mean to take away anything from anyone who likes to do this stuff for themselves. I have known many like that. Some even work for me now. :wink:

I guess at the end of the whole discussion it comes down to kind of leverage we seek and how we choose to use it.

Originally posted by Mike K:

a D&B number is very important if you are trying to get financing, you can get one instantly by calling 866-705-5711 and telling them you need it for a gov. grant/contract. Dont ever pay for anything with them theres no need to, they will try to get you to buy something everytime you talk to them.

In over 24 years of investing and building three separate businesses I have never needed a D&B number. I have never once had a lender say, "Golly, we'd like to write this loan, if you only had a D&B number!" :roll:

Originally posted by Tim Wieneke:

I'm curious though why you had a job "by choice" with all the success you had with REI? Did the job pay that well that it truly was the highest and best use of your time?

That is an excellent question and to be honest I am REALLY surprised it took this long for anyone to ask.

I have always looked at my investments as a long term strategy. I never wanted to just "live off" the income from my real estate or stocks or any investment. I guess in the strictest terms I would have made far more money each year had I totally devoted all of my time to managing and maintaining the properties myself. But, I know if I had done that I would've ended up one of those burnt out landlord types. You know, the ones the kids talk about as they go by his house with him outside mumbling to his garden hose.

Anyway, I kept my W-2 job even after I reached critical mass with my investments because I could. I enjoyed the work and have definitely made a difference in people's lives in the medical industry. Once my wife was diagnosed with breast cancer that difference was tangible and real.

But the biggest reason I did it? Because I knew I didn't have to do it. I still remember the year when I figured out I could quit my job if I wanted and I no longer had to even think about layoffs and such. I also remember the day my boss at the time figured it out. :cool:

Sometimes yes, sometimes no. In 1995 I started a consulting group and it grew to over 300 consultants and support personnel by 2003 when I sold it that fall. After that I joined a development group as a technology advocate for speech recognition in the medical industry.

I can honestly tell you I have enjoyed every single W-2 job I have ever had since college and I know a big part of that was because I never once had to worry about compromising my principles because I was dependent on a paycheck.

You want real financial freedom? Continue to work when you no longer have to work.