My story

My real estate career started when my partner bought houses, I fixed them up, and then we split the profit. We did a few deals this way, and it taught me alot about the rehab process. I also worked maintenance for him at a couple of apartment complexes he owned. This way worked for a while, but then I decided to branch out on my own and use my partner’s money to buy them on my own.

My company bought it’s first property in July of 2005. It took me 3-4 months to rehab it, but by the time I finished it, it was near Thanksgiving and the market died, plus my realtor told me to list it for $69,900. As this one was wrapping up I bought my second one.

My second one was an interesting story. I bought it from a lady that was behind on her taxes and thought she just needed to unload it. I bought it in September of 2005. I gave the resident 2 weeks after closing to be out of the house. Well, they weren’t. I ended up having to evict this lady and take her to court. I wasn’t able to gain possession of the property until December 15, almost three months later. After a long rehab, this home has been on the market for 3 weeks now. I started the listing at $79,900, and this past Friday I lowered it to $74,900. I expect an offer or two this coming week.

I made alot of mistakes on both of these properties. The first property was in a less than desirable location, and I listed it WAY too high. The second property I had unrealistic expectations thinking that they would be out in two weeks, knowing in the back of my mind that there was no way they could be due to the amount of crap in the house. I also listed the second one too high. In the second project I took on too much. I refinished hardwood floors throughout, put in ceramic tiles and wood floor in the kitchen, and paid too much for ceiling fans and sinks and faucets to “spice” things up a bit.

When I started in REI I read Ron Legrand’s How To Be A Quick Turn Real Estate Millionare. My good God did it make real estate sound easy. I was less in to due dilligence and more into throwing money around trying to be a hot shot. I set up a postcard campaign and blew close to $10,000 in marketing, getting numerous leads that I didn’t know what to do with. I couldn’t recognize what type of deals were in front of me because I did not educate myself. I’m sure I have looked past 20+ possible deals.

The bottom line is this. All of you newbies just starting out: Do your homework, know your market, have an exit strategy before you make those offers, be clear and direct in what you are putting into the rehabs, get a realtor that you can trust and that has a good understanding of your market customer and the neighborhoods that you are working, and the most important thing of all… this is not rocket science, but IT IS NOT EASY. The guru’s make you think it is a piece of cake and within no time you are having 2-3 closings a month taking your significant other to celebratory dinners every weekend.

Also don’t give up. I have had my a$$ handed to me over and over and over, and I see those as learning experiences. Does it hurt? Yes. Is it necessary? Yes. This stuff takes time and does work, as it is working for me. I felt inspired to write this because I know that when I was starting out I wished that people would have been more honest with me about it, instead of the GET RICH QUICK stuff that was laid on me. Any newbies have questions feel free to email anytime. I will help with what I can.

Thanks for reading and good luck to all of us.

Jared :slight_smile:

Jared you had some great comments! I started 3 years ago and it is finally starting to get a little bit easier. The first house we did we invested $45K and it was only worth about $60K on paper. This was a very big project since it was a ground up. The second one we made $23K on in 3 months. Fortunately for me we have not had a difficult time finding properties and we are set to buy one this month and sell another on the 5th of next month.

The more you do the better you get. Start spending a lot of time at open houses and researching on to get you a rough idea of what homes are selling for. It’s OK to make mistakes just don’t make the big ones. Another piece of the puzzle is to learn how do some or much of the work yourself. Most people are not living in areas that they can make $50K per house in two months.

Keep in mind that with the market softening it is just making it better on the buyer. This is not easy, it does take hard work and a persistant attitude. It would be in your interest to find a mentor to teach you.

Good Luck!

Jared - you are right on with your comments. I do most of my work myself, probably on the order of 80% - 90%. The more you do, the better you get at it.Thats where I make my money, along with a good purchase price. It’s work.But I love it. It’s my project, my a$$ on the line. I feel like I’m really living when I start one of these. Better than my ball - and - chain job in so many ways…


Great post and I hope new REI’s take it to heart. But, now you know that good ol’ Wallace Hobbs will now lump you in with me as being “negative.” :slight_smile:

I wanted to address Mike’s comment, too. If you’re doing most of rehab work yourself, if you’re not paying yourself for doing it, then you’re shortchanging yourself, both as a laborer and as an investor.

Something to think about, especially if you have a full-time J-O-B.

If you spend 150 hours and 3 months fixing a property yourself, how long would it have taken a paid handyman/contractor to do it? Answer: 20 days or less. 150 divided by 8 rounds out to about 19 days. But, I say less because, most handyman/contractors have at least two or more people working, so more gets done in less time.

That’s one month of rehab vs. three. 2 more months of marketing time and two less months of payments.

Also, in most cases, not only can a professional finish quicker, it usually looks better, and in many cases is done cheaper, than if you do it yourself (especially if you’re paying yourself as a laborer).

Finally, the property that you put 150 hours of labor into sales for a net profit of $10K. You didn’t pay yourself as a laborer, just collecting the profit at the end. Add in 10 hours of time as the investor for a total time of 160 hours on the project. Your hourly wage is $62.5/hour.

Same deal put you used handyman/contractor to rehab. Because they finished the rehab quicker and the property sold quicker, even though it cost a little more in labor, you still make $8K in net profit. Now take the same 10 hours of time as an investor and you make a whopping $800/hour.

Just food for thought.


RAJ, That is so true and it doesn’t hit you until you are done with one to see that. I know I have been so proud of the job I have done and I get of the mindset that “only I could have done it right” but you do have to know when to let go and have others that can do it quicker and with less expense do it for you. Good lesson!!! Graciez


You and I are usually on the same page, but not on this issue. I totally disagree that using a contractor or handyman is the way to go. Contractors certainly can do the job faster IF THEY WANT TO. However, often they take just as long or longer than it would take ME to do the same job and they often do lower quality work. If you pay them by the job, they will cut every corner to make a better profit. If you pay them by the hour, their only incentive is to put in hours. Contractors frequently don’t show up when promised, screw up the job, and then leave without finishing. In my opinion, dealing with contractors can be a bigger job than just doing the job yourself.

Moreover, in your example, you say that doing the work yourself might result in making $62 per hour. I AGREE! That $62 per hour is many times more than most newbies make per hour in their JOB.

I am primarily in the rental business. I have rehabbed new units both ways - with a contractor and by myself. I started by doing the work myself and then transitioned into using contractors. The contractors were costing me so much money that it became impractical. I am now doing almost all the work myself (except HVAC) and my bottom line has really improved.


Mike, everybody’s entitled to an opinion.

All I wanted to point out was that if you’re not paying yourself as a laborer, then you are short-changing yourself, both as an investor and a worker.

Yes, $62/hour is probably more than most make. I’d prefer my $800/hour though, if we’re comparing.

As to using handymen/contractors to do the job, like any other aspect of this business, from finding a Realtor to an attorney, it takes time to find a worker that you like to use. In my case, now I’ve found one that is very good at what he does and knows that I have enough business to keep him employeed for as long as he wants, so he does great work, finishes fast, and is ready for the next project.

Even, if you prefer to do your own work, if you’re not paying yourself as a laborer, then from an investor standpoint, you’re losing out on a tax write-off. Free labor can’t be expensed.


I have to agree with Mike. Newbies will not have the credibility of dealing with contrators and there are many contractors that will take advantage of the sitiuation. God knows that I have had at least 3 of them. Right now in, my area, all of the good contractors are all booked up and they don’t like smaller jobs. They will tell you next week and a month later they are still not there to start the job. All of this results in wasted time and money.

New people have to know what it costs to do a repair and what the steps are for a specific job. A newbie could use multiple contractors and lose money if they don’t know what they are doing. I do use contractors for some things such as heating and air and electrical, but I would say that only 1 out of 20 is decent.

I have been doing this for 3 years and still consider myself a rookie, but I am finally starting to recognize the good buys to make quicker money. The average price of a home in my area is only $118K for a 1200 sq ft ranch with 3br and 1 bath and 2 stall garage. The margins are thin.

If a newbie has to have different contractors come in and bid a job before they even buy the property they will never purchase a property. Some friends have been waiting a month for a contractor to give them a bid on their new house, I told them to get a new contractor.

Raj you are very fortunate to have a great crew in place that will allow you to make $800 an hour as an investor! My guess is that it took time and experience to find the right people and you didn’t always make $800 an hour.

The one thing we all agree on is that Real Estate is the way to go!

Good Luck!



I’m NOT suggesting that you use a contractor/handyman OVER you doing the job yourself. If you like doing the work and are good at it, great. This is not a debate over whether you should be hiring the work out or doing it yourself.

All I am pointing out is that IF you are NOT paying yourself a wage to be the laborer, then you are not getting everything out of the deal that you should. You can’t say that you made $20K in profit because it wasn’t all profit. In fact, most of it was labor.

IF you’re doing your rehabs this way, if you ever do get to the point where you don’t want to be the laborer, or that you’re doing more deals than you can fix yourself, then you’ll be in for a rude awakening on the true costs of doing rehabs.


When I do use a contractor, I always go to a select few people that I have worked with time and again. I know what to expect from them and vice-versa. But my time is “free” to me and even though I am not paying myself upfront I do recoup that money in the long term.
Unless it’s a “time is more valuable than money” scenario, then I agree with Mike that you’re better off to “get in, get done and get out”. But in most cases I prefer to do it myself. and doing so gives me a better understanding of what things cost, how things work ( or don’t) and how i can change them. It makes me a better investor. You learn by your experience. Keep in mind that I am not taking on mutiple projects here, just one at a time and with down time in between.

It’s kind of funny when I talked to my CPA about the thought of paying myself he brought up an interesting question. Why would you want to pay an income tax and a capital gains tax at 15%. When I sell I will pay the capital gains or I can cash our Refinance and not pay any tax. This year I will probably do my first 1031 exchange to avoid the capital gains.

My long term goal is not to flip properties but to hold properties as rentals and allow them to appreciate. Right now I only own 4 properties and by the end of the year it will be about 10. Once I control about $1Milllion in properties I should be able to make (on paper) about a $100K per year. Appreciation rates are expected to continue at about 10% for the next few years in my area.

The median income in my area is only $35k per year and if I can earn $20k in a two or three month project then I am happy. Granted I would be much happier making $800 an hour.

Raj why don’t you tell us about your typical deal so we can learn from you?

Well I have to go earn some money and I won’t be back on until tonight.


Wow, I love it when I start a good discussion!! I actualy DID most of the work, but I am in position now to have a contractor do everything so I can be freed up to be on the buying end. At this point I have $100,000 capitol to play with (which in Indiana I can buy two deals at a time), and at the end of July my investor is going to free up another $150,000 for me. So we all know what that means. If I have 3-5 deals going at once there is no way I am doing any of the work. My contractor will charge between $4-8,000 per house, depending on the amount of work. I know that this is going to be my process of working, and I think everybody else has to figure out their best way of doing it.
good luck to all!!! Thanks for your comments!!! :slight_smile: