More time, more money or less time, less money?

Question

I'm on the tail end of a flip right now that should net me about $25k from a $100k investment. I work a full time job and am doing all the work on my off days and in between 12 hour shifts. This wasn't my original plan, but my contractor ended up in jail for child support (again). I looked for a reputable replacement without any luck so I decided to tackle it myself aside from HVAC and the roof. I've saved a ton of money, but my summer was consumed by the house and it's taken twice as long as I originally planned for the reno. I wanted a 90 day flip and I'll most likely be 6 months instead.

My question is this; Am I better off maximizing my profit at the expense of a longer flip, or is the quick turn/less profit the better route?  I've enjoyed working on the house, but I'll admit, I'd like to actually have a day off soon. I also missed out on an excellent flip last week because this one isn't done yet. Our market isn't seasonal like it used to be. Houses are bought and sold regularly year round so I'm not worried about the old philosophy of not having anything on the market outside of April to September from days gone by. Either way, it's almost done. More net profit on this one will be nice, but had it already been done, I'd have been able to but the one I missed out on which would have made another $25k-$30k net. I suppose I'm also looking for reassurance that the lost summer fun of 2015 will be worth it in the long run.  Thanks for reading!

Manolo D. · Answer

25x2 < 15x4.

Darrell Shepherd · Answer

Ha, yeah, to each their own.  I do none of my own work, but sure wouldn't mind not having to deal with the contractors going to jail and cars breaking down and everything else that happens.

Personally I'd rather manage 3-4 jobs than do the work on 1, but if you enjoy it, knock yourself out.

I would say, though, that if you are doing the work yourself, you bought yourself a job more than an investment.  If you are doing work you can pay someone $15/hr for, you are basically doing the same thing as going and getting a weekend job for $15/hr.  Are your weekends worth that money?  Up to you, but you need to analyze the profit with that expense in there.  You didn't "save" that money, you worked a job for it.

Christopher B. · Answer

I got tired of picking up the hammer after awhile and hire it out now. I ran into an investor friend at Home Depot today that was dirty and had a cart of tile to lay, some people just enjoy it. You can be very successful either way, don't let anyone here or anywhere else tell you there's a right or wrong way to do it. Decide what's important to you and model it around that. Good luck and congrats on that $25k.

Doug W. · Answer

I have had lots of 2x4's and tile give me plenty of grief. And just wait until the plumbing, roof, and electric all gang up on you at the same time.

Derek Hutchison · Answer

Thanks for the replies! I actually find working on the houses therapeutic. My W2 just is a Police Sergeant and it's nice to have the thing you're dealing withave such as a 2X4 or pice of tile not giving you grief at every turn. The timing wasn't the best for this deal as I value my free time much more in the summer than any other time of year. Ideally, next month is when I should start a DIY flip and have it ready to roll at the first of the year. The end game is to secure 2 multi unit rentals (18 total between the two and expandable) in the near future and try for 2-3 solid flips a year.  After a couple years of that, I plan to hang up the badge and gun and enjoy working at my leisure. I'm not looking for pockets of money as much as I am the flexibility to enjoy life on my terms.

Sean Parkes · Answer

Whatever works best and is most scalable for you is the direction that I would head. My personal and professional opinion: while 15x4>25x2. I would take the 25x2 all day long. There is more buffer room in a deal that could potentially net 25K than a deal that could net 15K. In addition it traditional takes just as much time and effort on my part to purchase, quote, rehab, resell, close a house that should net 15K or 25K. Therefore the 25x2 makes things much more scalable and duplicatable moving forward.

We all have different philosophies. Advice is always good to digest but figure out what works best for yourself and then apply accordingly.

Best of luck to you!

On a completely different note, I am always looking for private money lenders to work with my deals here in FL. Perhaps you may want to consider some potential JV opportunities that would eliminate the necessity for you to have to deal with anything outside of funding and collecting your profit after closing.....

Alex Applebee · Answer

Your time is worth money. You have to calculate what you are worth per hour, and then did you really save money? On my first flip I picked up construction materials myself to save delivery fees (and learn the actual cost of things). After about 45 minutes in traffic and another 40 minutes sweating in the 110 degree heat in phx while my husband and I unloaded 16 bags of quickrete, I decided that it was worth the $75 i'd have spent on delivery. Or just making my subs go pick it up. I of course had to relearn this lesson about 5 more times, and vow going forward just to pay people to do it, no matter how tempting it is to say "oh, I can do this for free no problem."

Like they say in one of the podcasts, do you want to work on your business, or in your business? My guess is that you are not flipping houses with the dream of being a construction worker.

Doug W. · Answer

I was like you on my first flip. I did most of the work. I wanted to be in and out in 3 months and it took 6. My interest rate was low so it wasn't a huge hit to my wallet but...... I also lost out on a lot of free time that I could have been doing other things with.

Similar to what Manolo said -- if you can get $25k each for two flips vs. $15k for four flips is that $10k difference worth it? It depends. I could say "no" because with that extra $10k there is a much larger risk associated with four houses vs. two. That risk could be house #3 ends up having foundation issues that you missed during your walk-through, for example, and that eats up that extra profit.

But playing devil's advocate: you won't be able to scale your business if you keep doing it all yourself. At the rate you have been going you will never do more than two hours per year. So by leveraging your money across three, four, five, etc. houses you can potentially make more money.

Finally, what's that free time worth to you? In other words; what is your opportunity cost for doing all the work yourself? What are you giving up during that 6 months?

I got into this business so that I could better dictate how my hours are spent. I wanted to spend less hours behind a desk making someone else rich and more hours making myself rich and spending more time with my family doing fun things. I hope that you find the answer that works for you and that you are satisfied with both the income and the opportunity to do fun things like ride your Harley.

Derek Hutchison · Answer

Thanks!  I lucked into a financing deal that hope I can continue. I got 100% purchase and reno costs for a flat 6% for 6 months so the interests for the extra 3 months on the flip is still less than labor would have been. I think the biggest thing is not riding my Harley once this year and only getting to the lake twice. That's just an unacceptable summer to me ha ha.

Christopher Brainard · Answer

@Derek Hutchison

The only person who can really answer this question for you is you. It really depends on what your time is worth vs the money you can save vs other opportunities that are out there vs how much you're paying for your money.

For me, I'm not borrowing any money, so taking a bit longer to make more money makes sense. It also gives me something to do during the day, since I seem to be going stir-crazy since giving up my W2 job.

If you're paying high interest rates on the money, its probably going to make more sense to pay someone to do the work and get it done as fast as possible. Mortgage Interest is evil.

-Christopher

P.S. Any month where I make a 25% profit is a good month. Congrats on that!

More time, more money or less time, less money?

Most Popular Reply