There are different types of residential real estate investors deploying different strategies to make a profit from their investments. Each type is an opportunist and has expertise in certain areas, one may never attempt a DIY repair, while another does DIY repairs as often as possible. For the handyman type looking to use their skills to make a profit, let's discuss when DIY repairs aren't worth it when flipping homes.
DIY Home Repairs When Flipping Homes
All real estate investors are business-minded people, but some either have a background with construction trades or are simply interested in learning. For sure, having plumbing, electrical, construction, roofing, painting, and business skills are beneficial for residential home flipping. Buying residential real estate for cheap, fixing them up for cheap, equals a nice profit in the end.
Whether the investor is planning on investing in residential real estate to flip and sell or to rent them out long-term, having trade skills will give them an edge over other investors. Essentially, they're getting paid for doing the DIY repairs by saving the labor cost. Yet, when does their time start to be worth more than the savings?
When Time is Worth More Than DIY Savings
At first, the DIY repair real estate investor has plenty of time to fix up their investments. They may only have one or two properties they're working on at once, in order to fix and sell within a years' time.
For instance, one home needing a new roof, painting, bathroom remodel, and landscaping – takes three months to complete. From buying to selling, the flip time is less than a year, and the savings of labor from this one house is at least $10,000. The profit from the property, after the repairs, is as much as most people make per year working full-time.
This is a good scenario for the DIY residential real estate investor flipping homes, but when an investor picks up the pace, time begins to be worth more than the savings in labor. An investor may be OK with only doing one project at a time or only has the finances for one at time at first, otherwise: the time spent on DIY repairs could be better spent on rustling up new investments.
For instance, say the labor savings makes an investor $100/hr, which is a great hourly wage, yet the three months spent doing repairs could be spent finding other distressed properties to invest in. During the same amount of time a number of other homes could be invested in, which in terms of an hourly wage could be more like $1,000/hr.
Other Reasons to Delegate DIY Repairs
Investors with the funding needed to invest in multiple projects will make more money by delegating the repairs to professionals, because at a certain point their time is worth more than the labor savings. Yet, there are other reasons to delegate DIY repairs as well:
For real estate investors desiring to grow their business to flipping more than one or two homes a year, delegating most of the DIY repairs becomes necessary.
For those who enjoy DIY repairs, there's always work to be done when flipping houses. Yet, generally a certain amount of delegation is necessary because of the expertise required for each trade. Not only the expertise in the work, but also the local and regional building code regulations and permit requirements.
Flipping residential real estate homes as an investment strategy presents opportunity for the business-minded person. Investors with DIY repair skills have an advantage when starting out, but when multiple investment projects need to be managed, learning to delegate repairs is necessary. If an investor has the funding, the time spent finding and managing new properties is worth more than the DIY repair labor savings.
Center Street Lending is a private lender specializing in residential real estate financing. Investors with or without DIY repair skills can partner with us to find favorable loans to finance their investment projects, including any repair costs. We offer asset-based financing on qualified collateral in as little as 24 hours, and since 2010 have helped real estate investors find financing solutions when traditional lenders won't help. To learn more please contact us today.
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