Newcomers to real estate investing too often squander both time and money when trying to save money on their projects. Savvy investors know from experience where to spend their money to both save time and enhance quality.
Looking for the ‘best price’ (again and again)
The newbie’s first mistake is spending too much time sourcing their materials in search of the best price. They will spend hours–sometimes days–going from supplier to supplier to save 10-15% on their cost. More experienced rehabbers will do their “comparision shopping” once and pick the product that best serves their purpose. Then they stick with it in the interest of effeciency in future projects; they don’t go shopping each time out.
Treating Each Project as Unique
In the same vein, new investors assume each project is unique, requiring rethinking every step of the way, every product and finish. Well, this is only true up to a point. Bungalows are different from hip-roofed 2-story frame homes; brick is not frame. But, to be successful, old timers appreciate that, after the first couple of projects, they’re all the same. Which lends itself to a standardized approach to the work. Find a furnace you like and install it– again and again; a floor tile that works for you and install it again and again (and, yes, any left over just goes to the next job). In the business we call it a “standardized Scope of Work”. Put one together early on and make it work for you too.
Saving $$ By ‘Doing It Yourself’
So maybe you know tile work, or how to hang cabinets. So, you’re thinking, “I can save by doing the work myself”. Is that really the case? What about your ‘day job’? How much an hour does that pay? Is that what you’d be willing to pay to get the tile work done? Not very likely. Your strength is that of a Project Manager, marshalling the efforts and skills of others. For most savvy investors, the emphasis is on timely completion, not saving every last dime on the project. In this case, Time Is Money. Hire the work, supervise for Quality, and move on to the next one.
Savvy Real Estate Investors Avoid False Economies…
You will be ahead of the game when you avoid the False Economies of inordinately focusing on finding the best prices, rethinking each project, or doing it yourself. The goal is an effecient, standardized approach that builds on the skills of others while honing your project management systems and tools. It’s a win-win business model for all concerned.
© Philip Elmes