I’m looking into taking carpentry, or heating or painting or something but I’d like to know the most valuable trade when it comes to buying and rehabbing properties so I can start in the right direction.
I’m looking to flip one or two in the beginning and then get into a steady pace buying and selling.
I’ve heard of people taking the Home Depot Classes, but the best thing to do is develop relationships with reliable, qualified professionals. As someone in here said: do what you do best and outsource the rest.
I agree with ctguy, focus on what you love to do. If it’s one of those skills you mentioned, great. If not, there are good people out there who do good work, it’s all about forming relationships with them. In the end, you don’t want to be doing all the work anyway. Don’t limit yourself by what only you can do. Success comes in teams.
thank you both for your responses
I totally disagree with the other posters. It is very difficult to buy properties; pay others to do all the work; and then sell them at a profit that is sufficient to make a living. Don’t forget all the real world expenses that the gurus always forget - such as holding costs and TAXES. The argument for hiring everything is that you can do more deals. On the other hand, a lot of these people work like dogs finding deals and managing the contractors only to make less than they would if they just did the work themselves. Obviously, when you hire out all the labor, your costs are greatly increased and your profits are greatly reduced.
I think that you have a great plan. Learn as much as you can about rehabbing and do as much of the work as you can. Even if you eventually plan to hire contractors, knowing what should be done is essential to managing the contractors and ensuring that you’re receiving quality work. You really need to know a lot of tasks and I’m not sure that taking classes is really necessary. Why not hire an experienced handyman and have him teach you as you work. When I started a few years ago, I knew very little about rehabbing. I bought a big home improvement and repair book at Lowe’s and literally just followed the instructions. Now I can do everything except HVAC.
If you were to start with just one or two skills, I would recommend plumbing and carpet. These are two of the easiest skills but also expensive to have done (relative to the work involved).
Good Luck,
Mike
When you plan to hire out the labor, you have to drop down into another scope of properties. The TLC cosmetic rehabs don’t apply anymore unless by a stroke of luck you get the property at auction for a song. I think that’s what Mike was talking about when he said it’s difficult to make a profit when hiring contractors.
Now if you do the work yourself on a major rehab, you’ll be working from sun up - sun down for 6 months to a year on a single project. That means major holding costs and significant financing costs. If you prefer to just do cosmetic rehabs, you may be able to do 3-5 per year and make an above average income. You’ll make more money per property and live happily ever after, except when you retire. The alternative is to double your rehab costs per property and increase the number of properties you do atleast ten fold. Instead of doing 3-5 a year you’ll do 3-5/ month or 3-5/ week.
Let’s say the average profit for a DIYer is 60k per property. He does 4 a year and makes 240k gross every year. If you hire out contractors your rehab costs will double so you would only make 30k per property, but you do 4 a month (which is not as many as it seems) and now you make 1.44 Million gross every year.
If you allow yourself to be stressed out over dumb contractor issues then your already in the wrong business. If you can handle a little extra responsibility, want a little extra money, and a full fledged business that will operate even after you die, it may be worth it for you to hire people. I guess it all boils down to how your willing to spend your time.
I’ve done it both ways and both ways work for the right property.
Example #1, I did a big rehab myself (about $20k in materials) and yes it took a long time doing it (about 14mn) on the weekends, but contractors it woudl be $100k probably in cost and taken 6 months. Dealing with contractor is a big hassle and they usualy work on their schedule; not yours. I used contarctors for a few things on that job and they actually delayed the finsihing of the project by almost 2 months. I made a bundle but was also really helped by a rising market (in Calif). I figure I put at least $60k in my pocket for my troubles.
Example #2- just did a quick, fairly light rehab where I had someone do everything (not close to my home). I paid about $6k for the work (took 7 weeks); I could have done it for $1.5k and probably about 6-10 weekends. With that said, I’m got a sales contract in place where I will net about 27k after all exepense, comsissions, etc.
The limitation on how many flips you can do at once is not the work, managing contractors, etc, but how much cash/financial resources do you have and/or how much do you want to extend yourself. Also, if you are doing tons of deals at once, you are probably doing a lot of marginal deals and have a higher potential losing money. I perfer to only do clear winners and leave what looks marginal to others.
I do quite a few at once and they are probably better deals than the average DIYers. I operate all over the state and have to support a full staff, there’s no way I could afford that doing marginal deals. If I happen to come across a marginal deal, I’ll hand it off to a DIYer who can afford spending time on a small deal.
Because I do many deals at once, I can afford to rehab larger houses, commercial properties, or a number of medium houses. It’s really all about how you choose to spend your time. I’d rather manage people than be a highly paid construction worker.
I’d rather manage people than be a highly paid construction worker.
That’s about the best saying I’ve heard on this subject for awhile now.
The DIYer’s I’ve run into always like to tell me how much money they made on their deal and how much they saved by doing it themselves. If I’m in a particularly humorous mood, I ask them to break it down for me and let’s compare numbers. The last I did, the guy made a whopping $4.47 an hour after taxes working on his rehab “doing it all himself.” Personally, I’d work at Wendy’s before doing that. I’d earn more.
If you want to do it yourself and you’re good at it, fine, go to it. But you need to pay yourself for your time, as a laborer, to get a true profit from the deal as an investor.
If you want to do it yourself and you don’t know what you’re doing, then, fine, go to it. But be prepared to spend alot more money having a professional come in to fix your mistakes than it would have cost you if you had let them do it before you messed up.
Raj
DO WHAT YOU DO BEST OUTSOURCE THE REST.
There is a big difference in making a living and making a life. Are you looking to do this for a Living or a life change?
I have also done it both ways. I live in an area where the average price of a house is $225-250k I have do deals starting at 80% L.T.V. so there is 20% equity in the house at least. Now if I rehab the house myself saving say $10,000.00 TOPS and I am there for two weeks and not looking for the next deal that $10k savings just cost me 30-40k in profits on the next house I lost because I was my own Handyman and did not focus on finding the next deal.
So I guess the question is do you want to be a handyman or do you want to do you want to invest in Real Estate?
Sure you can do both just watch your profits either way.