The Biggest Rental Property Mistake You Can Make
The concept of investing in real estate or even investing, in general, can be foreign. “A penny saved is a penny earned” and other such advice on ‘saving’ money has been deeply ingrained in our psyche. Additionally, we are taught we must work for our money — trade our time for dollars. True investing requires letting our money work to create more money. It requires that we dedicate financial resources to something and then trust the process so that we don’t have to dedicate any time.
For inexperienced investors, their instinct is to keep as much money in their pockets as possible not recognizing the difference between being penny wise and pound foolish. The biggest mistake they make is trying to “save money” by doing their repair work themselves.
Are you considering a similar move? Be careful. Becoming your own contractor is the biggest rental property mistake anyone could make. Here are three reasons why:
Welcome Back to Minimum Wage
How did you come by the money you’re using to get started in investing? Chances are, it came from that decent living you’ve earned doing the kinds of things you’re qualified to do (business, accounting, retail, etc.).
Unless your skillset includes general contracting, you’re going to find yourself knee deep in repairs that’ll take you five times as long as they should. If you do the math on that, you may just decide to give up investment and work a couple of extra hours at the office instead.
Doing your own repair work means you’re back to working for your money. Worse, you’re doing it in the least efficient way possible and you are paying yourself minimum wage or worse.
Have you Counted Your Opportunity Costs?
Successful real estate investors treat their efforts like a business. They know that a strong portfolio is a diverse one. They know great deals are hard to come by, so they’re constantly out there looking for the next opportunity.
Unfortunately, that next deal isn’t magically going to come your way while you’re holed up in an attic spreading insulation. The fact of the matter is that an investor who does her own repairs will simply do fewer deals and make less than money than the one who hires professionals.
Being a General Contractor is Harder than you Think
Some investors try to avoid this rental property mistake by taking the middle road. Rather than doing the work themselves, they decide to play the role of a general contractor. After all, how hard can it be to secure permits, make phone calls, and schedule subcontractors?
Well, it may be harder than you think.
Rehabbing a house isn’t like planning your parents 50th wedding anniversary. Things have to happen in their proper order. Want a surefire way to make sure your favorite drywall guy stops returning your calls? Schedule him to come in before the plumber and electrician have had a chance to do their work. Contractors are busy people. They don’t take kindly to botched sequencing and scheduling mishaps.
It’s not a question of talent or capability. If you’re savvy enough to get into the real estate investment game, then we’re sure you could figure out how to rehab your rental property… eventually. You just won’t be a real estate investor anymore. You’ll be your neighborhood’s lowest paid handyman. If that doesn’t sound like what you signed up for, then do yourself a favor and hire a professional.
You’ll be glad you did.