It's all relative
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It's all relative (by S i d [MO]) Jun 11, 2019 8:35 AM
       It's all relative (by Roy [AL]) Jun 11, 2019 8:52 AM
       It's all relative (by NE [PA]) Jun 11, 2019 8:58 AM
       It's all relative (by WMH [NC]) Jun 11, 2019 9:09 AM
       It's all relative (by S i d [MO]) Jun 11, 2019 9:32 AM
       It's all relative (by Homer [TX]) Jun 11, 2019 10:49 AM
       It's all relative (by WMH [NC]) Jun 11, 2019 11:19 AM
       It's all relative (by Robert J [CA]) Jun 11, 2019 11:32 AM
       It's all relative (by S i d [MO]) Jun 11, 2019 11:38 AM
       It's all relative (by Homer [TX]) Jun 11, 2019 12:25 PM
       It's all relative (by WMH [NC]) Jun 11, 2019 2:12 PM
       It's all relative (by BRAD 20,000 [IN]) Jun 11, 2019 5:21 PM
       It's all relative (by 6x6 [TN]) Jun 11, 2019 6:47 PM
       It's all relative (by NE [PA]) Jun 11, 2019 7:29 PM

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It's all relative (by S i d [MO]) Posted on: Jun 11, 2019 8:35 AM

Jerry's post about the $150/hour electrician sparked some thoughts I really want to share, especially for cheap-skates such as me.

There is nothing wrong paying someone $150/hour, if by doing so you are able to focus your efforts and make $300/hour or more. That's the name of the game in business. The guy/gal at the top pays someone to lift a burden off his/her shoulders that is limiting their time to specialize on doing X, where X is the most productive use of their time.

When I was a newbie, I thought I'd "save money" by doing all the cleaning myself. Cleaning a rental is a $15/hour job here, and that includes the cost of purchasing cleaning supplies. So I'd have a move out on Tuesday, couldn't get around to the job until Thursday after work, didn't have time to finish, my family wanted to go out and do things on Friday, and I'd spend all morning Saturday finishing up. 5 lost days of rent more than ate up and $15/hour "savings."

The above statements aren't rocket science. We all KNOW intellectually we shouldn't have a problem paying someone $1,000 for a job if we can net out $2,000 or more after paying him/her. But in our hearts we get stuck on paying someone else a lot of money and can't follow Princess Elsa's advice to"let it go..." even when it means denying ourselves a much better, more profitable use of our time.

Sure, if you're just going to sit around watching TV, then go ahead and demo that house...paint those walls...wire that circuit. But I think most of us watch only a little TV, and if we do it's something we truly value: cheering on a favorite team in a big game, a movie that profoundly impacts us, etc. What I'm talking about is wasting time searching 400 channels when there's nothing good on anyway.

Anyway, it's all relative. Why shouldn't someone make $150,000/year, if by doing so I can make $250,000 net profit after all expenses paid? That's business. That's capitalism. That's why I love owning real estate in America.

It's all relative (by Roy [AL]) Posted on: Jun 11, 2019 8:52 AM

Great Post Sid, usual.

My attorney charges $150.00/hour to do Title Searches and close a RE deal. Is there any reason a Master Electrician or Plumber should charge any less?

People ask me why my rents are higher than most LL's. I tell them to go look at my houses and the answer should be obvious. Plus, people will pay more for a Caddilac than a Chevrolet.

It's all relative (by NE [PA]) Posted on: Jun 11, 2019 8:58 AM

But ARE YOU making double to triple what you're paying ALL THE TIME?

A good example of that for me is on a current flip house I'm working on. I had an estimate from a contractor hanging the sheet rock on the ceilings and a second for do the ceilings and the walls. $1,800 for just the ceilings and $3,500 for everything. He won the bid for the ceilings only.

I can make way more "per hour" banging out the walls at the end of this job when the property sells than I can justify paying him.

So I'd say, it all depends. --174.201.xx.xx

It's all relative (by WMH [NC]) Posted on: Jun 11, 2019 9:09 AM

We just had major water damage at a rental. All flooring must be removed, all the crappy particle board sub-floor removed and replaced with plywood. This requires at least two guys, a dumpster, lots of tools and probably a week or so of work. It's going to be over $6k. Ouch.

In the past, DH would have tackled the job himself, maybe roped in our sons for a couple of weekends if they could make it (hours of their drive time alone, let alone actual work) probably had me holding some boards while he sawed them...Plus of course seventy-eleven trips to Home Depot and the dump. And other things that inevitably come up. Who knows how long to actually get it done?

In this case, though, the place is already rented for July 1st so we couldn't take that time. It rents for $1250, so about half a year's rent in repairs.

Oh well. Because it IS rented, at least all repairs are deductible. And DH doesn't have to do the work, which is huge. What price freedom?

Wait...we ARE going to lay the Allure ourselves LOL!

It's all relative (by S i d [MO]) Posted on: Jun 11, 2019 9:32 AM

@Roy, thanks! To be clear, I do still negotiate and try to get the best deal, but at the end of the day sometimes the best deal means I pay more.

@NE, great comment. There's obviously a difference between how I factor the value of my time vs. an electrician. I add up all my profits at the end of the year and divide by my estimate work hours--which btw I am tracking much more closely now due to the 250 hour safe habor QBI rules--and that gives me a "per hour" rate, although some hours I made nothing at all and other hours I made $1,000 or more. You do the same thing is my guess. Think back to when you bought your last auction house that you cleaned up and flipped for a $20K profit. You probably spent hours looking at other houses and attending other auctions and made $0....but that's not the right way to think about this. It's the end result that you only know later that counts. That is far different from a tradesman who bills out at a set rate per hour. So yes, we should be conscious of that: but I invite the alternative perspective. You and I have less time to be out scouting that next awesome $20,000 profit if we're always busy swinging hammers, brooms or paint brushes.

@WMH, glad to hear you and DH still feel up to doing some tasks. Occasionally, I still pick up a broom and sweep a floor to spruce up a place a bit after a week of showings, just like the owner of the restaurant occasionally goes out to pick up trash in the parking lot. But I'm done laying flooring for now. My back hurt like crazy last time I did it. It's good to know that you guys are still going strong. If you enjoy it, why not? :-)

It's all relative (by Homer [TX]) Posted on: Jun 11, 2019 10:49 AM

I will continue to do my own work, until I donít enjoy it. I am not making hundreds per hour like Sid. In fact, I just ran the numbers. I am only making $19 per hour, I took last years income divided by 365 then 24 hours in a day only gives me $19 per hour. I donít think I could find anyone to work for me for less than that. My kids are grown, donít care for sports, donít play golf, have plenty of houses, havenít had a w 2 job in almost 30 years. what else would I do if I didnít work on my houses? For a while I was buying old cars and restoring , but Iíve run out of room. To each his own I guess. I just get tired of the preaching here to get the tools out of our trucks.

It's all relative (by WMH [NC]) Posted on: Jun 11, 2019 11:19 AM

Homer, I think it's all relative. If you ENJOY the work, are physically able and productive, then go for it.

When people start to complain they are spending too much time IN the business and not working ON their business, that's when the preaching starts.

I think to figure out "per hour" wage though you are being pretty aggressive. You don't work 365 x 24. Maybe you are ON CALL that much, but you are not working that much.

To be more realistic, maybe use a W-2 job schedule. 40 hours a week x 50 weeks a year / 12 months = about 168 hours per month. I just did THAT math.

We can afford to pay an electrician.

It's all relative (by Robert J [CA]) Posted on: Jun 11, 2019 11:32 AM

My neighbor just purchased a new lawnmower, his old one sat in the garage for 20 years and he never used it. He was sick and tired paying someone $80 a month to mow his lawn. Each week instead of working an hour or two overtime at $100 per hour, he mow's his lawn. Last month he was so proud of his weeds. Mowed evenly. It only cost him $300 for a new lawnmower and $1000 in lost overtime at work. --47.156.xx.xx

It's all relative (by S i d [MO]) Posted on: Jun 11, 2019 11:38 AM

@Homer, I am coming from the same perspective as WMH. If you ENJOY the work, then do it. I think I covered that in my original post and the follow up to WMH, but if I was unclear then please know this now: your way is great if that's what works for you. I agree with WMH too that you're being aggressive counting your hours: at most, I would suggest 8 hours day * 5 days/week * 50 weeks per year, to account for weekends and holidays. The standard 2000-hours per year W-2 job, in other words. If that's your metric, then you're making around $80-$85/hour, which is pretty decent. No shame in that kind of figure. That's what I typically pay a Master Plumber!

The title of this post is "it's all relative". If you love doing it, then do it. No fuss, no harm, no foul.

The point was to examine the "high" cost of labor that we cheapskates sometimes groan about and encourage us to stop worrying so much and instead ask, "What am I getting for this high $$$ job, and how does that help me achieve my goal?"

It's all relative (by Homer [TX]) Posted on: Jun 11, 2019 12:25 PM

I may average 5 hours a week. Service calls are few and far between. By being hands on on initial purchase repairs I learn everything about a house and make sure itís all taken care of. On a turn over I will spend 2-3 days at 12-14 hours a day to get them ready to go again. I had two turn last year out of 28. I usually have about 5 a year. I refuse though to break my earnings down to the time actually spend working on the houses, since I earn money each and every hour of the day weather I am sleeping at night or one of my daily naps, I am earning income. If the market ever tanks again, Iíll buy more, then my hours will really go up, but itís been over two years since my last purchase.

It's all relative (by WMH [NC]) Posted on: Jun 11, 2019 2:12 PM

AH now I understand what you mean by what you are earning per hour. Interesting take on that!

It's all relative (by BRAD 20,000 [IN]) Posted on: Jun 11, 2019 5:21 PM

W: "Seventy eleven trips"to the store. True Dat!

I did ALL my own maintenance for 20 years. Everything. I really enjoyed it. Learned every trade, everyone at Lowes knew my name because I was in there 2x a day, had a big ring of keys on my belt to show off how many properties I had, and great personal satisfaction getting things fixed with my own hands.

I get it. It's fun and fulfilling.

But after 20 years I hit 2 walls:

1. I was exhausted and frustrated by re-working the same houses over and over when housebeaters were evicted.

2. I had no time to grow my business. Deals were passing me by or I was at a project to work but spent so much time on the phone with the Realtors and closings I was not getting the houses turned. I would miss the sheriff sale because I had to meet the Sec8 Inspector.

I see many LLs quitting the biz because they tire of repairs or they procrastinate and let properties sit vacant rather than repair them, losing money. They usually blame it on lousy renters.

Those whining LLs spent no time on MANAGEMENT - checklists, hiring some help, and knowing their numbers.


It's all relative (by 6x6 [TN]) Posted on: Jun 11, 2019 6:47 PM

Opportunity cost.

Good post Sid.

It's all relative (by NE [PA]) Posted on: Jun 11, 2019 7:29 PM

I can see this working more in an investors growth phase or a phase where they are moving a large quantity of flips. Not if an investor is done and using a handful of rental to sustain or subsidize retirement. Unless you have a TON of units that are paid off and/or totally remodeled, you'll get eaten alive. No doubt.

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