Imagine if the first thing you saw when entering your home at the end of the day was unpainted and unspackled sheetrock. You have to walk by it every day, subconsciously aware that your to do list is out of control. And you are always dreading returning to that one bedroom apartment that has been vacant for a year. You have been working on it little by little, and you don’t want to hire anyone else to do the work. Months fly by without rent coming in, and you could be making $1000 a month if that apartment was rented out. You lost that money.
As a landlord, you get paid when you provide someone with a place to live. The quicker you get paid the better, right? However, I have seen so many property owners put off finishing renovations that could make them more money because they insist on doing the work themselves. They think, “Why should I pay someone to do this when I can do this myself?” This is especially common for contractors and other “handy” people.
I buy houses. I flip houses. I rent houses. And I am not “handy”. And even if I was, I believe that hiring other people to do repairs and renovations has made me more successful in my real estate business than other investors constantly in the midst of projects that could have been finished months ago.
It is true that it may be cheaper if you do the work yourself. But how long will it take you to do it? And what could you be doing instead that could be making you more money? Your opportunity costs could be huge. And sometimes you are giving up doing what you love with the people you love as well.
Every month you have a place sitting empty or being worked on you are losing money.
Yes, it might cost you more to hire someone, but then it’s done. If it takes you 12 months to renovate an apartment that can be rented out for $1000 a month, you just lost $12,000 dollars. Let me say that again: $12,000. It’s math! It might not seem like it because you didn’t pay that money out of your pocket, but if the apartment was finished and rented you would have an extra $12,000 in your bank account. Not only would you be wealthier, you also wouldn’t have to think about finishing the project. It would be done! You would clear space in your brain to work on other projects that make you money, and maybe even buy another income-generating property.
A project that could drag on for a year of your life might only take two months if you hired help.
That means your $1000 apartment would be empty for two months instead of being empty for a year. You could have $10,000 in your pocket that could cover the cost of having someone else do the reservations and leave you extra cash. Do you really want to do it all yourself if it ends up actually costing you more money because of lost rent?
If potential rental income > cost of hiring the job out = pay someone to do the work
I would even argue that in many cases it’s worth hiring out if it costs you more than the potential rental income because you don’t have to take up mental space thinking about an unfinished project.
The bottom line: Hire contractors to help you get your rental on the market.
Of course, there are other limiting factors.
#1. Money. I don’t have the money to hire someone to do the repairs.
So borrow it. There are banks, hard money lenders, LOCs, credit cards, friends, family…there’s a lot of money in the world! Here’s the new equation:
If potential rental income > cost of hiring the job out + the loan interest = still pay someone to do the goddamn work
Or find it. If a tenant would like to sign the lease for the apartment before the renovations are finished, you can use their last month’s rent toward the repairs.
I even rented out an apartment without telling the incoming tenants that we were doing renovations, and they were thrilled when they moved in. And it was much easier to rent the next time around.
Note: Know your market and make renovation decisions based on real income potential.
There is definitely someone that can get the job done for you, and do it well. Ask members of your local landlord association for referrals, post on Craigslist and test contractors out on smaller jobs, ask your realtor for contractor referrals, look at Angie’s List, ask around at your local hardware store. Just figure it out and stop acting like you are the only person in the world who can do this job. This is a key obstacle that keeps so many of us real estate investors from thinking big and getting to the next level.
#3. I’m too busy. I don’t want to spend the time figuring out how to do this more efficiently and make more money.
Really? I am sure you value your own time more than that. And I am sure you would actually like to make more money.
So next time you are planning a renovation project, consider two scenarios:
#1. How much time and money will it most likely take me to do this myself, and how many months of potential rent income will I lose?
#2. How much time and money will it most likely take to hire someone and get this finished, and how many months of potential rent income will I lose? And what could I be doing to grow my business and enjoy my life while someone else is working on the renovation?
Be honest with yourself. There are definitely times that doing the work yourself makes sense, but don’t just do it because you don’t want to hire someone else. Do it because it is clearly the best use of your time and energy. Life is short and we all have the same 24 hours in each day, right? Let’s make the best of it.