A couple of months ago I had to turn over one of my rental units. It is a small 1 bedroom home. It had been occupied since the time I purchased the property and there was deferred maintenance that needed to be done. I decided to save money and do it myself. Most of the work I did was well done (aside from a small section of paint). Ultimately, a great success! I did it myself and did not need to pay someone else, AND it was quality work! Money saved! Look at me go, forcing equity and being amazing!
But was it really a success? I took a day of vacation (a $400 value) and spent 3 days doing the work. Over that weekend, I did not spend any time with my family, which has a non-cash value. I also had to delay a consulting job that ended up coincidentally starting that weekend. That cost $600 in lost side income. The tasks were all pretty simple and I could have found a low/mid-range handyman to do them in about the same amount of time. If he charged $35/hour for 3 days of work, I would pay $840. That means I lost $160 by doing the work myself, plus the extra $40 in gas money from the back and forth ($200), my whole weekend, hours with my family, plus additional side consulting work based on solidifying that relationship right away.
Okay, so I didn’t really lose that much money, but the lesson demonstrates the point I am trying to make. Many people think that the only way to win in real estate is to find the off-market deal from a distressed seller, acquire it, do a bunch of work yourself to save money and force equity, then tenant it and refinance (or sell to another buyer). With this strategy, you may be able to pull some or all of your initial capital back out and acquire the next deal more quickly. The problems with that method are time, opportunity cost, strategy, and desire.
The method just doesn’t work for everyone. I can make good money by doing my regular job, side consulting, and other income producing opportunities that I enjoy. Spending all of that time doing it myself means I am not spending it doing something else. I could spend a month to acquire an off-market property for below value, spend 2 months rehabbing it, then finance out to realize those gains. In those same 3 months, I could probably have earned that same amount that I gained in real estate doing other things that I enjoy more. Did I mention I hate painting? The first method, the one I did in the example, is a job. The second method is to treat this as an investment and continue doing your life activities as you normally do.
The point is, what is your strategy? Don’t just look at a deal, look at the opportunity cost of the deal. Does it take too much of your time? Will it drain all of your investing capital and prevent you from a deal more in line with your desires? Is there something that aligns better with your future vision? Are you looking more for a job, or more for an investment?
Those are all important questions with different answers for everybody. I do some of both depending on where my properties are located, how much time I have available, and what my income looks like; your personal strategy can be different for many different reasons. If you have not spent some time figuring out your strategy, it is past time for some personal introspection to determine your own path! You will be much happier for it.