When It Doesn’t Pay to Do It Yourself

In real estate investing there is one major expense that eats the most money in a rehab project--the cost of holding the property vacant. This cost goes up directly with the length of time the property is vacant.

The key to successful rehab is quick turnover. You do not have time to do the work yourself. You do not have time to wait for any one person to do the work. It needs to be done as soon as the property becomes available, and as quickly as possible.

Most properties needing work will not sell or rent for the maximum amount unless they are clean. It is a rare buyer or tenant who can visualize the potential and will count on you doing the work that you say you are planning to do.

So in most instances, you must get the work done before putting the property on the market, and this means it must be done fast.

This usually means getting it done by a professional. Pros take far less time to do the job. They also should have the right tools, and should do it right the first time without needing six trips to the hardware store.

For many jobs, such as painting, drywalling and general cleanup, the professional is likely to have help. This will speed the work. And the pro will have liability insurance and workman’s compensation, so that damage to your property or injury to his workers will not be your expense as they may be with your handyman or your friends.

And the pro may even offer you a guarantee that you won’t have problems for the first so many months.

Here’s a typical case study: Ben Beginner decides that the nice little three-bedroom home he has bought needs interior painting before he puts it on the market for rent. He has helped his dad paint the family home once, so he knows how to paint.

Ben is just starting to invest and has a full-time job, but he figures he can start tomorrow after work. If he paints every night this week, he will have put in four hours an evening. If he gets his buddy to help him next weekend they should be able to finish it up.

Ben hurries home from work the first night, wolfs down dinner and goes to the paint store. He buys a roller, a roller tray, a roller tray liner, a drop cloth, a stepladder, a brush and, of course, some paint.

He gets over to the rental home and discovers that there are holes that need patching and dirt that really should be washed off before he starts. He also will need a screwdriver to take off the outlet covers and the vent covers.

Back to the paint store. He buys spackle, a sponge, a sanding sponge and TSP. The screwdriver will have to wait until tomorrow as he has one at home.

He gets back to the rental house for the second time at 8:30 p.m. He takes nails out of the walls and does the spackling, and then starts washing down his first wall. By 10:30 he is getting tired, so he heads home.

Day 2: Ben again hurries home from work, wolfs down dinner and scurries over to the rental home. He washes some more walls and then decides that it is time to get started painting. Tonight he remembered the screwdriver, so he starts painting the first room.

Things go pretty well until he gets to the trim around the windows. He starts to think that maybe he should have bought one of those edgers, or some of that edging tape. Back to the paint store he goes. When he gets back to the house it is 10 p.m. and time to start cleaning up the roller and paint brush. He’ll finish this room tomorrow.

Day 3: At work today, Ben’s boss comments on how tired he looks. He also wonders when Ben is going to get the project finished that was due yesterday. Ben is tired, but decides that he better stay late and get it done. He calls home to let his wife know he will be late, and she asks if he can pick up Ben Jr. at his friends on his way home.

By the time Ben gets home it is 8:30 p.m. It is too late to go to the rental house. He goes to bed early, since he is exhausted.

Day 4: Ben hurries home from work again today. He is refreshed by yesterday’s break. Tonight he gets over to the rental by 7:30 p.m., and starts right into the taping and then painting. He finishes up the first room. With good momentum going he gets the next room started. By the time he leaves for home he has finished the walls and ceiling in the second room. He still has the trim to do, but he’s feeling great.

Day 5: Ben has been getting some grief at home for never being there. He decides that he’d better take the family out to eat tonight. They lobby for a movie too, and he finally gives up on painting tonight.

Day 6: Saturday. Ben’s friend Dave is going to help. Dave won’t be ready to go until 9 a.m.--after all it is Saturday. Ben and Dave make it to the rental house by 9:30. After Dave gets the tour of the house, and the economic explanations, they get to work. They make pretty good progress getting the trim in the second room finished and the third room painted by noon.

Ben takes a break to go get lunch and more paint. They are both back to painting by 1:30 p.m. and get the fourth room finished by 3:30. They discover in surveying their work, that the orange walls in the second room are visible through the paint. And that water stain on the ceiling in the living room is showing through just as if it had never been painted.

Time to go to the paint store and complain. By 4:30 they are back at the house with a can of primer and are busy putting a second coat on the orange room.

Dave has to be home by 5 p.m., and by this time Ben is beat anyway. He isn’t in bad shape but does have a desk job, and this physical stuff is hard work.

They agree to get going tomorrow at 11 a.m. after church. Dave calls at 8 p.m. to let Ben know that he can’t help until 1 p.m. He needs to get his lawn mowed and the wife wants him to fix the yard light.

Ben picks Dave up and they are ready to paint by 1:30. They redo the living room ceiling and walls, and move on to the kitchen. They manage to get the kitchen taped, and sanded to cut the gloss. The paint store man had warned Ben about this when he bought the gloss for the kitchen.

Ben figures that he is in pretty good shape. All he has left is painting the kitchen and the bathrooms. He’ll finish this up next week (actually it takes Ben until Saturday next week to finish), and then he’ll get on with laying the new kitchen flooring.

Ben’s story should sound very familiar to many of you. Ben is actually more dedicated to the task than many investors are when family, job and friends start conflicting with the work. Let’s look at what all Ben’s work saved him.

Expenses:

--Tools--Ladder, brushes, sponge, roller, roller extension, paint tray, tarps, $100.

--Supplies--Paint, paint tray liners, masking tape, spackle, primer, $175.

--Thank you dinner for friend and his wife, $60.

--Holding cost for half-month rent, $500.

--Gas and mileage to house, 10 extra trips, $15.

Total cost: $850.

Joe Experienced buys the house next door to Ben’s rental about the same time. Joe knows that it is very important to get his turned rental around as quickly as possible. Before closing, he gets some bids and arranges for ProPaint to do the job.

Monday and Tuesday of Week 1 the painters are there. They are finished by 4 p.m. on day 2. Here is the breakdown on the expenses:

ProPaint, $1,000.

Holding cost, 2 days, $66.

Total cost, $1,066.

The hours Ben and his friend spent have saved him $216 of tax-deductible expenses for which he and a friend spent 52 hours. He and his friend have been working for just over $4 an hour.

As an investor, Ben should have been able to make far better use of his time looking for other property, studying new techniques, going to open houses to get a better feeling for comparables in his market or even just spending some time with his kids.

By doing his own work he has left his family feeling neglected, his boss wondering about his dedication and worn himself out.

Look at the economics of it before you set out to do the work yourself. Ben was far more efficient than most of you will be, and I am just assuming that he did as good a job as the professionals. Usually there is more than just your time and money to lose.

There are some exceptions:

If you have nothing better to do with your time (i.e. you would otherwise spend your time as a couch potato) you may do the work, but only if:

--The property is occupied, or sold or rented but not yet occupied.

--You are not going to louse up the job and end up hiring a competent professional for more than he would have done it for to begin with.

--You are a masochist, a professional with a crew or you truly enjoy the work.