The value of hustle

[Liam Goble]

I've been investing in real estate for a little over three years now.  Many of my family and friends say I'm crazy to be investing, especially with the time I spend working on my properties.  I sub out some of my work, but keep most work 'in house' and utilize my own oatmeal power (ie: elbow grease or hustle).  

Quantifying the value of my hustle can be difficult, but I'll give it a try.  

I currently own seven units.  Over the past three years, I estimate I have spent 2,500 hours in the field and an additional 1,000 hours behind the desk to build my business.  I actually enjoy the time I spend in the field and behind the desk, so it's not a grind, but this time spent is why my friends think I'm crazy.  They don't want to spend Friday nights sanding drywall - they prefer drinking around a camp fire.  They don't want to spend Saturday afternoons painting or laying tile - they prefer to watch the Nittany lions.

At this point, I now cash flow $1,217 per month and pay myself $364/month to manage the properties, for a total net income of $1,681 per month.  If we assume that I actually spend time each month managing tenants, then I 'earn' the $364 per month just as I would at a job, so that money shouldn't be counted in my hustle income.  

The $1,217 is cash flow, or additional profit from my units after accounting and paying for OpEx, debt service, and reserves (vacancy and repairs/CapEx). I consider this $1,217 my 'hustle' money.

Now, at this point, only three years into my investing career, my hourly hustle rate isn't great, a total of about $1,217/month x 12 months x 1.5 (fudge factor for variable lengths of ownership) = $21,906 / 3,500 hours = $6.26/hr.  Not great, less than minimum wage.  

Let's consider five years hence.  If I don't change my rent over the next five years and assuming any additional time I spend in my properties is paid through my management and repair reserves, then I will have earned $1,217/month x 12 months x 5 years = $73,020 / 3,500 hours = $20.86.  This is a compound annual growth rate of 27%.

Real estate is about the long view.  Today, my hourly rate isn't great, but compounded over time, the work I put in today is worth significantly more than the value of that beer around the camp fire or the ability to watch the game.