Time Value of Money for the Investor

By
Real Estate Agent

Many investors take pride in having a strong sense of “do it yourself” when it comes to maintenance tasks that pop up in their investment property.  This isn’t necessarily a bad thing, but when does the amount of time required of the investor outweigh the cost of having a contractor come in and do the work for them?

First and foremost, there are some tasks that should be tackled by a contractor without hesitation, either due to job difficulty, licensing requirements, permit requirements, or hazardous nature of the work.  A good example of this would be upgrading an electrical service.  In many areas, a certified electrical contractor has to pull a permit from the municipality, and the work can not be completed by the investor or just a handyman.

Figuring the actual time value of money for the investor can be challenging, because there are many variables.  Is the unit occupied, and it’s just a minor task that needs to be completed (perhaps a leaky faucet)?  This unit is still generating income, and the work isn’t preventing the unit from being rented, so this may be more worth the investors time.  The exception would be if it is cheaper to have a handyman do the job while you concentrate on another task, such as seeking a new investment deal.

Another example would be a unit with a bad hot water heater.  Some areas require a licensed plumber to do this work.  However, many areas do not.  If the unit is vacant, the tank needs to be replaced prior to tenant placement.  Assuming it can legally be done by the investor, this work could be done in his “down time”, if he was so inclined.  However, if the unit is occupied, the tank needs to be replaced as soon as possible.  In this instance, unless immediately available to do the work his/herself, the investor is better off hiring a contractor to get the unit back up to par.

Lawn mowing is another prime example.  Some investors have tenants mow their lawn.  Other investors hire it out because it takes too much time, and would take time away from other activities.  I know another investor who always mows the lawns, because it gives him an opportunity to check on the property and he finds the work relaxing.  Im this instance, he finds it worth his time to be a presence at the property, even if he is just doing a quick mow.

Every investor needs to decide at what point it is better to let someone else handle the job, so they can work on other tasks.  It isn’t always an easy decision.  However, in some instances, it needs to be done because of time constraints or money lost completing the task that could be generated completing another task.  Taking the time to decide what you can and can’t handle, and not getting in over your head, will save you a lot of headaches, as well as time and money, in the long run!

Andrew Schultz is a real estate agent and property manager located in the Western New York area.  His articles on real estate investing and property management can be found at www.andrew-schultz.com.

Comments (1)

Jim Cheney
Saint Francis Property Santa Rosa, CA - Santa Rosa, CA
Rincon Valley Realtor 707.494.1055

I believe in doing what I do well, and paying other people to do what they do well.  I do real estate sales well, and would rather pay a handy man to paint my rental.  It might take a handy man 3 days to paint, but it would take me a week and it would look worse! 

Mar 25, 2009 01:01 AM