I’m so sore right now. My hands hurt, I have bruises and cuts all over the place, and my back is killing me. This is all from doing something I haven’t done in a long time: I’ve been framing on a house.
Sometimes I get asked if having a contractor’s background has helped us in our investing career.
To begin with, it did. When it was just Ashley and me, I could do most of the work myself, and we would save what felt like a ton of money.
But that method of rehabbing caused us to hit a wall because I was working on our rehabs instead of finding the next deal. So in order to grow bigger, I now need to stay off the job site.
So what the heck was I doing over there framing?
I didn’t want to. I tried to hire people to do it, but I couldn’t get any contractors to get back with me on a bid. This house sat for over a month while we waited for quotes that didn’t come. The consensus was that the contractors wanted to meet with me personally on site before they felt comfortable giving a bid.
We have a lot going on right now and to drive out and meet individually with multiple contractors would take hours I just didn’t have. So we devised a solution. We made a video explaining in detail what we were looking for, uploaded it to YouTube, and sent it to the contractors.
We finally got a bid.
The contractor called and said he could do the job for “thirteen fifty,” but that we needed to provide materials. I thought that bid was a little low, but I was willing to try him out since I could tell he knew his stuff and speed was one of the things he was proud of.
When I hear someone say “thirteen fifty,” I hear $1,350. When I got the formal bid, however, it said $13,050. And that was just labor.
We couldn’t afford that.
I’m used to basing our rehab budgets off of man hours. Because of that practice, I don’t know the going rates for things anymore.
Knowing that we would be hiring contractors out, I understood prices would go up since they would need to cover their overhead, plus make a profit. But I wasn’t expecting an astronomical number like that.
Truthfully, I thought $5,000 would be the right price. But since I couldn’t get anyone to do it for that, me and my crew knocked it out.
Was this a wise decision? Let’s investigate. I paid $2,000 for the man hours my crew put forth, and we got it done in the same time frame the other contractor quoted. Based off his numbers, I made $11,000 in two weeks.
If the right price was $5,000, I still made $3,000, but I possibly missed out on finding the next deal because I was tied up on a jobsite for two weeks.
I would have gladly paid the $5,000, but because I have a contractor’s background, I may have missed another deal for somewhere between $3,000 and $11,000.
Was this a wise move? I can’t answer that because I don’t know how big of a deal I may have just missed. This is called an opportunity cost. It is a real figure and something you need to factor in when you decide to do all the work yourself.
As I came crawling home, Ashley said, “I wish we had a general contractor who could coordinate all of our projects so you don’t have to anymore.”
We haven’t found one yet. That’s because our experience with contractors tends to put them into two categories. No. 1 They live so hand to mouth that they often need to get a paycheck just to have enough gas to finish the job. No. 2 They are priced for retail and booked for months in advance.
There has to be a middle ground between these two. I have more houses than I have people to work on them. And once we find the right person who can coordinate the rehabs for us, they’re going to stay busy and make plenty of money doing it. I just don’t know where that person is yet.
Joe and Ashley English buy houses and mobile homes in Northwest Georgia. For more information or to ask a question, go to www.cashflowwithjoe.com or call Joe at 678-986-6813.