Crunching the Numbers:
On May 3rd, Mark received the job estimate from the property inspector and felt the total cost was too high. The total cost of his rehab was $5500.00. This included new carpet, complete interior paint, and cleaning of the home. Of this $5500 total, labor cost was $2500.
On May 4th, Mark called our office and stated that he wanted to do the work himself to save on labor costs of the rehab. After all, he had just gone through an eviction of $15,000 and he needed to recoup as much money as possible. As we talked we broke down the “true” numbers.
Mark works full time, a daily pay rate of $127 a day. The daily rent rate of his property is $86.67 ($2600/30 days). Since Mark works during the week he will only have time work on his rental property on the weekends. Mark indicated that he would need 30 days to complete the work. Thus, his property would not be ready for the new resident to move-in until June 8th at the soonest. Keep in mind his property was already re-rented at $2600 a month.
* Marks’ time = 8 hours a day for 8 days (Saturday and Sunday for 4 weeks) = $8128
* Monthly rent rate= $2600
* Repair costs= $3000 (remember he saved on Labor costs of $2500)
Clearly, Mark’s time alone exceeds the labor costs of the subcontractors. However, our perception is our reality. Mark felt that by doing the work himself he would save on labor costs, not taking in to account that his time is valuable as well.