Common Rehab Mistakes, cont'd - Posted by Pat

import · December 15, 2005, 7:40pm

Posted by Frank Chin on December 18, 2005 at 06:12:19:

Sailor:

Godd points. One of the advantages of being the boss is doing what you want to do, even if its NOT cost effective.

I guess Pat’s original point was its more cost effective for him doing deals, and in my case, consulting. We all seem to agree on that.

Your story reminds me of one when I was a kid, and there was an apartment building a block from my house, and every other month, a slab of the sidewalk would get chopped up, concrete poured, and replaced. The sidewalk was immaculate. Asked my dad, he laughed, and mentioned the building owner was a retired “concrete contractor”, who paces the sidewalk everyday looking for cracks, always finds one, and the next thing, the sidewalk is chopped up again.

My thing is running video cable, phone cables, stereo cables in walls in units that I occupy, and occasinally rental units. I get blank electric plates, and make my own video, stero, and phone outlets that I then install on the walls.

Sorry, I have to run off and run a few ethernet, cat 5, wires thru the attic again.

Frank Chin

import · December 15, 2005, 7:40pm

Common Rehab Mistakes, cont’d - Posted by Pat

Posted by Pat on December 15, 2005 at 20:40:10:

I was going to post this next week but I’ll be in Vegas so here it is now.

A common mistake made by some rehabbers is that they try to Do It All Themselves. Let’s face it, no one is an expert in all aspects of REI. We all have strengths and weaknesses and we shoud recognize them and operate accordingly. The main reason some try to do it all is to save a buck. Unfortunately it usually results in costing more than the few dollars you think you’ve saved.

Rehab requires a number of skills including but not limited to: locating and financing properties; estimating and getting the work done, marketing your product and of course looking out for your next deal. Let’s look at just one aspect …the actual rehab work.

From the posts I’ve been reading, it’s obvious that most projects involve more than a little paint and cleaning. You may be dealing with water damage, fire damage, electrical issues, plumbing problems, roof repair, foundation problems, trash and debris left behind. animal stained flooring …and the list goes on and on. While some of these items can be addressed by anyone, others require skilled workers to effectively correct the problems.Concerning the skilled labor, ask yourself: Do I have the skills to do this work in a timely manner? Since time is money and you’re dealing with a profit margin that shrinks with each carrying cost payment you make, you might take a good look at how to get this done as efficiently as possible; and it’s probably not going to be your efforts that will accomplish this. Of course, if you have the skills in one or more of these areas then you may accomplish your goal to a degree. But then, you’re one person and time is of the essence. Added to your other responsibilities, this coud keep the place off the market or empty weeks longer than necessary and eat into yur profit.

What about the unskilled labor involved? Can’t anybody do that? Sure. But ask yourself this question: If I’m trying to avoid paying someone 10 to 12 dollars an hour to haul this trash away, doesn’t it mean I’m now working for 10 to 12 dollars an hour? Aren’t we trying to get away from those types of wages? This question also applies to the skilled labor we may do. If we’re willing to settle for tradesmen’s wages, we’re missing the point of this business. Not that there’s anything wrong with tradesmen’s wages; but I believe there is more money to be made. And again the time factor plays a role. Additionally I’d rather be looking for my next multi-thousand dollar deal than saving 10 dollars an hour hauling trash myself. Bottom line…We need to learn to Run the job rather than try to do all ourselves.

Wish you all well on your projects.

import · December 16, 2005, 7:48am

Re: Common Rehab Mistakes, cont’d - Posted by Sailor

Posted by Sailor on December 16, 2005 at 08:48:55:

Pat said “If I’m trying to avoid paying someone 10 to 12 dollars an hour to haul this trash away, doesn’t it mean I’m now working for 10 to 12 dollars an hour?.”

Not quite. Consider: (1) To pay someone else $10-12 per hour I have to earn MORE than that w/my time. The total amound depends on my tax bracket. (2) I still have to hire & supervise the job, which may take more time than doing it myself. (3) If the job isn’t done right, it is going to cost me more, now or later. The previous owner of my MHP has the worlds’ worst handyman, which increased my costs by about 1/3 in a recent rehab. (4) OJT is extremely valuable, & unless you know how to do things yourself, you can’t adequately supervise many jobs.

The above said, I think there are no hard & fast rules. What is best for one investor or one deal is not necessarily the best next time. I don’t do much physically myself, other than painting & cleaning, planning & writing checks, but I spend almost as much time on the job as anyone I hire. I also have REALLY good help. However, I haven’t found a really good way to be hands-off @ my level of investing. I know there are folks for whom an arms-length approach works, but guess I’m not one of them–

Tye

import · December 16, 2005, 7:06pm

I’m not even good at Painting & Cleaning - Posted by Frank Chin

Posted by Frank Chin on December 16, 2005 at 20:06:42:

Sailor:

Once I thought that painting and cleaning is one of those low value chores I can do myself, and save a few bucks, till I compared how slow and inefficent I was compared to skilled professionals.

As an example, it took me four days to get a 2 BR apartment cleaned and painted. That was when I used painter here in NYC costing me $700.00 per apartment, taking them two days. Then I found a guy doing it for $400.00 all by himself, for $400.00, and doing a nice job. His day starts before 8:00AM and worked till 9:00 PM though.

But when I do it, I usually find that I can’t exactly get started on the 1st of the month after the last tenant vacates, since I got so many things on my plate, so a few day goes by, then I get to paint, and by then, 7 to 10 days are gone for the month.

But when I hire a painter, I make sure I get this guy there on the 1st, or maybe one or two days before if the tenant cooperates, and I can show the place by the 2nd or third, and have it rented by the 15th. This compares to me renting it out the first day of the month after!!

As apartments rent for over $1,200 a month here, I make $600.00 more on half months rent, paying $400.00 to the painter, versus losing half a months rent of $600.00 and knocking myself out saving $400.00

As you said, there’s no hard and fast rules. I had to roll my sleeves up, get moving sometimes when I can’t find a painter by the first, so if I get started, its better than waiting for someone to get there by the fifteeth.

And then, one year, I bought new rentals, had a few renters move, so I cleaned, painted, rented, spending around 8 months knocking myself out. I neglected my computer consulting business, giving it up eventually, since I lost so much momentum as no one heard from me in months.

I’ve always wondered if I spent some money on some cleaning and painting crew for less than $10.00’hour, whether I would’ve made a go of the business, where consulting fees run over $100.00 an hour in my area.

What eases the pain is properties had all appreciated greatly over the last 15 to 20 years.

Frank Chin

import · December 17, 2005, 2:25pm

Re: I’m not even good at Painting & Cleaning - Posted by Sailorg

Posted by Sailorg on December 17, 2005 at 15:25:43:

Frank, I know you have a LOT more rentals than me! I’m supposed to be retired. If I spend time hands-on I’m not decreasing me income @ all, as I no longer have a job. I agree, if you can make more $$$ doing something else, then all-hired help is the way to go. I’m not a volume landlord, so what works for me isn’t for everyone. Besides, I get a kick out of fiddling around w/paint & tools (I have a particularly fine German scrollsaw that has been known for the past decade as “that saw-you-won’t-tell-me-how-much-it-cost”). Around here, anything that stands still long enough gets painted or upholstered. Besides, @ my age it makes me feel useful–whether or not it is true!

Tye