Should You Perform Your Own Repair Work on Fix-and-Flip and Rental Properties?
It is practically a cardinal sin these days to say it is an okay strategy to perform the repair work yourself on your fix-and-flip or rental properties. Let alone a great strategy. Why? Everybody is pushing this “passive income" idea, which carries with it the idea that real estate investing does not require work and that you can sit back on a beach in the Maldives boasting immaculate views of clear blue skies, light blue water and tall palm trees all while sipping coconuts and living the life. All without lifting a finger. Why? Well, your rental properties are generously providing you with the cash to live that lifestyle. I hate to be the bad guy here that crushes this beautiful dream, but real estate investing isn’t really “passive income”. At least not the kind we’ve been lead to believe. Real estate investing is a great source of income stream and a great net worth building strategy. It is not something that requires little effort on your part to invest in. Quite the opposite. With real estate investing, you need to work for your investments to work, and a lot of times the success you enjoy from your investment correlates directly with the skill and work ethic of you the investor. So let’s get into the reason why I and a lot of other investors like me around the country take to doing their own repair work on their real estate investments.
If I hadn’t done the repair work myself on rentals and flips I would’ve been wiped out of the game a long time ago.
You’ll hear most other gurus and investors almost unanimously say: “no! You should never do the work yourself. It’s a waste of time and money and your time would be better spent actively finding other deals.”
The justification behind it being the famous “work ON your business not IN your business” mantra. While don’t get me wrong it is a great mantra, it is only true to an extent.
I disagree with a few things from this premise. For one, it is out of touch with the reality of most starting investors and entrepreneurs actually in the trenches.
Here’s the thing…
Think of how most exceptional business leaders started out.. Did they start with a huge infrastructure of employees, crews and capital? No. Most started out wearing multiple hats and learning the trade THEN slowly scaled up.
For some reason with real estate I see a lot of dreamers out there that think they can walk before they crawl. The same principles hold true for a real estate investing business as any other business.
You should be hands on and actively learning. Oftentimes wearing multiple hats until it’s feasible to delegate.
There is absolutely NO SHAME in doing the work yourself.
When I started, I did most — if not all — the grunt work myself. Not the big tickets that needed licensing and permits, but the other specialty work.
“But shouldn’t I be using that time finding more deals?!”
If you’re starting out, I wouldn’t recommend picking up deals right and left anyway. This is setting yourself up for failure. There is such a thing as overextending. It is very real, and happens more often than we’d like to admit.
On your first deal you should be working “in” the business.
That’s right I said it! Spend a lot of time on your first deal. Have realistic expections. Earn your right of passage. Learn from your mistakes, and yes - cut down on unnecessary costs. A great way to do that is insourcing the work.
So what kind of repair work should you do?
Any “grunt” that doesn’t require licenses or permits to do.
Let’s assume this rental house is a standard 3 bed/2 bath house. Around 2,000 TOTAL square ft (not living, total) and 1,600 sf living. Insourcing these items don’t require special skills or permits but will save you big and give you a competitive edge.
Repainting the interior and exterior - saves you an average of $1.20-$1.80 per square foot of the house on labor expenses (already accounting for materials) = 2,000 sf*$1.80 price/sf = $3,600 in savings
Installing non-labor intensive flooring (think wood vinyl planks) not a lot of labor or material intensive. Can save you $1.00-$2.00 per sqft. =$2.00/sf*1,600 sf (flooring only goes in living area) = $3,200.00 savings.
Inside/Outside Trash Clean-outs - Some of these companies can be ridiculously expensive, even the fly-by nighters you’d find on craigslist at “bare bottom prices”. Say, VERY conservatively you can save $2,000.
Tree Trimming - Can save you A LOT of money. Picking up a cheap hedger and a pole saw and some snips from HD or Lowe’s and you ALREADY made the money back in savings from the first job. Conservatively, saving you $2–3,000.00 here.
Light fixture installation - Very easy to do. Usually can learn everything from the instructions and a Youtube video. At bare bottom prices the average is $80/light to install. The average house has 10–12 lights. Let’s be conservative and say you save $960 here.
Plumbing Fixtures Installation - These are an easy fix, but expensive to outsource. Bathroom and kitchen faucets, usually run anywhere from $80–100 per bathroom in labor per fixture. Around $200 for the kitchen faucet. Average bathroom has two plus you’ve got the kitchen sink so three. Let’s put it at $400 savings. This is just for labor keep in mind. Plumbers are expensive with their time. You’ll be paying for the extra trips to the store or any other runs that need to be made.
Appliance Installation - Just for the labor component this can run you at least $1,000.00.
I could go on, but you catch the drift. For things like new roofs, new A/C’s, new windows, you’d need to outsource.
These items need a permit. Don’t try doing them on your own, as it is both unsafe and illegal.
*ALL IN ALL* - Just from the items above I’ve listed, you’d save $14,160.00 doing the work yourself.
That’s not chump change. And contrary to what everyone else out there is saying that’s the strategy that actually OPENED up deals for me rather than limit them.
When I started buying rentals and flip houses I was competing against other seasoned investors with way deeper pockets than I had. These are the “cell phone flippers” the ones who don’t touch work.
I also was up against hedge funds and big money.
You know, the ones that pushed out most investors from the foreclosure auctions because they were bidding to 4–5% returns..
The only reason for my SURVIVAL is I did the work myself
That’s why I am writing to you today as a house flipper and not doing a different line of work. I was able to buy deals that were unfeasible for hedge funds and any of the “cell phone” flippers because my cost structure was much much lower.
Now that I have the business under control, funding sources more abundant and less of a problem as before, I have scaled up and hired subcontractors to handle a lot of the grunt work I used to do.
But keep in mind, that was years after I was doing it all on my own, and instead of it being 1–2 houses per month, I outsourced when I was ready to scale to 4–5 per month and then reached the current scale of 10–15 at a time.
House flipping, buy-and-holds and any other kind of real estate investing is a business. It is not a hobby. Treat it like a business, work your a** off to build it, then scale it up.
And yes, do the work yourself if you are able! If not, budget accordingly for outsourcing the work.
Peace and happy flipping!