“If a building looks better under construction than it does when finished, then it’s a failure.”
Douglas Coupland
When taking on a renovation project, you will invariably need someone to do the actual renovation part. As the owner of this property you have a few options: 1) you can do the work yourself; 2) you can hire employees to work with you; 3) you can hire sub contractors for the different trades; 4) you can hire a general contractor to make everything happen.
[Editor’s note: In case you missed recent updates in Kosen’s real life real estate investing project. Get up to speed here.]
There is only one right way to renovate a property. That way is as quickly and inexpensively as possible so that you can get it back on the market (or rented, or whatever) thus limiting your market exposure and maximizing your return. Now, whichever option you think is the best for doing that, you should probably use.
Over my years in renovating real estate, I’ve had quite a few direct employees and hired a lot of contractors. In there are upsides and downsides to both. In general, the less organized your work force is, the more they will need direct day to day supervision. Think about it this way, if you hire yourself and maybe a few buddies to renovate your house, if you aren’t there things probably won’t get done.
Going up the stream, you can hire employees, but in my experience, even if these guys have construction experience you pretty much need to be there holding their hand to make sure things get done right. Oh, and remember all those times you complain about how lazy, unsympathetic and tyrannical your boss is? Well if you’ve never had employees before, be prepared to find out why your boss is the way he is real quick when it’s your money is on the line.
Hiring subcontractors or a general contractor for a project manager is really the best balance for getting your job done on a reasonable timeline. Unless you want to be a contractor and get into the construction business, these guys will generally get things done faster, better and yes more inexpensively than you can hope to.
There are a lot of down sides to dealing with a contractor, but cost and time shouldn’t be among them. (More on the downsides later.) A common misconception when hiring a GC is, they will be too expensive and well, you can do the management yourself. That can be true if you get a bad GC. But consider this, for permitting and dealing with the city, I am a licensed California general contractor and I prefer to sub out everything and don’t really care for supervising a work crew on a daily basis. I’ve tried this, it’s really tiring.
Here’s one of the most important things to ask yourself if you think about either doing the work yourself or hiring someone to do it for you. How much is your time worth? You can hire someone to hang drywall or lay tile for between $8 and $20 an hour depending on how skilled the trade is. If you want to do the work yourself that’s fine, but if you need to pay yourself $20 an hour to make more money on this house, you didn’t have enough margin in the project to begin with and shouldn’t have bought it. Are you trying to buy yourself a job, or are you trying to run a business? Either one is ok, but one makes you a lot more money than the other.
I’ve lost money on projects before, but it was never because I would have made money had I done the work myself. It was because I bought a bad project.
So, when renovating your project, consider how long things will take first and what they will cost as a close second when figuring out how you are going to make your little diamond in the hood ummm I mean rough shine.
Here’s the listing for Tudor if you’re interested in buying.
