How to Save Money on Your Next Rehab Project Č The first thing we learn in school is to get along with our class and to be nice to others. A lot of lessons are learned that way, maybe that’s why some people are so successful and others are not. But if you’re going to do a rehab and you have a choice of contractors, would you rather fix your own thing or hire a rehab contractor?
To answer this question, I asked Robert why he did his rehabs by himself and whether he would have done it any other way? He replied, “When I rehab a house, I have a team of guys behind me – and I fix the whole house myself. There’s no shortage of labor.” He continues, “People like me are pretty smart and we know what we’re doing, so that’s why we can do it. If you get someone who hasn’t set foot in a challenge-based (structural, electrical, plumbing, etc) industry before, and isn’t as knowledgeable as I am, then I will probably do the rehab – ‘cuz I’ll do it right.”
Sounds logical, right? Now we’re going to see why this might not work for a lot of people.
Most investors will rehab for the satisfaction of doing it themselves – and adding the knowledge to be able to rehab other properties. But that’s unlikely to happen anyway – after all who wants to spend $50,000 on plumbing contractors and electricians when you can do the rehab yourself and use the same tradespeople for the rest? Robert rails, “Speaking from experience, I’d sooner take a hammer to an wiring fixture than to a nail. I know how to cut pipes and I can identify a breaker with aritten head.”
Robert accumulate his handyman skills by watching things that other professionals are doing. He says, “The real handymen out there are people that look after houses. If they get a job on a house, they still get the house. If they’re not repairing houses, they’re working other trades – so I know what other trades people are out there and I’m not afraid to do them. You do the work and they get paid, that’s how it works.”
Now, let’s drive back this conversation somewhere in the past. We’ve got the first of our rehabs. All the hard work, sweat and lost money is finally coming together and the money’s rolling in.
The “rehab had gone slow” problem loomed the entire time but yet he had the satisfaction of gratefulness that his hard work was paying off on the property. For this reason he wondered, “How am I going to do this next one?”
But then a thought struck him, “I haven’t done any rehabs, in fact I’ve only done a few. I just want to get this thing off my plate and move on to new things.” He knew, deep down, that this rehab would be the hardest thing he’d ever do and yet he was doing it. He didn’t have to ask himself, “Which is the hard part in rehabbing? Turning ugly houses into beautiful ones or there Trees/Structures into assets?” He just winged it. That’s what we call burning to the point ofbecoming reality.
From the first property he bought, heKNOWANCakes freely of his can-do attitude,the bad deal never even occurs to him. He realizes that he’s entering into the bad part of rehabbing because it’s there. But, once he takes possession of the house, it’s too late to start over. Once he takes possession he accepts it as real, it’s his. No feelings, no remorse, no Madrugation. He accepts rejection, as a reality because he’s already made it. Consulting his team, Robert offers, “The idea here is to maximize shifts.” Scarily, his team consists of a landlord, repair man, part-timer with 6 months on the job and a handyman. He knows his team’s limitations and does his own work. Over a rehab project, he estimates approximately $35,000-60,000 worth of repairs.
Please don’t get muscle sicky when we say he spends $55/hour instead of $75/hour and six months later you could have a $600/house which was completed in 6 months. That’s a cool $200,000 profit! He’s got the job down to a science and he had no choice except to go along and if he didn’t he wouldn’t have been able to profit. Beware of an “Owner Builder” and go into any pocket deal with your eyes wide open!
You can be part of the 1/56th of the 1/56th. Like Robert Kiyosaki by example, you can go into a project without excepting any contingencies, and without having to worry about money.