Is performing your own turnover work the best financial option?
We all know someone who loves to tell us about their $2000 jack pot they hit in Vegas, but they never seem tell how much money they lost to hit that jack pot. So are they really up $2000? Not likely. Or, I could use the example of my wife telling me she is going to return product ‘x’ to the store, because she found the same product for a better deal at another store. But what amount of time and resources are going to be spent to accomplish this savings? Will it really be worth it?
Now let’s apply this to rental property. We have investors from time to time who like to perform their own turnover items prior to getting a property back on the market. They do this in the name of saving money. The idea is great, but the results can turn into a loss pretty easily if not managed correctly.
I will use the example of a former client to demonstrate how this approach actually ended up costing this investor thousands, when he actually thought he was saving thousands.
The investor lived in San Diego and would insist on doing the maintenance and paint work on any turnover he experienced on his 4-plex. The turnover would happen and he would let me know that within 1-2 weeks he would drive to Mesa and spend 2-3 days working on the unit. Without fail, he would not finish and let me know that he would return within 1-2 weeks to finish the work, or ask me to then have our vendors finish what he did not. I would then have to perform another inspection to see what was left, then schedule my vendors to complete the work.
Being a full service property management company, I have a list of vendors that are familiar with, and able to get to jobs quickly. A typical vacancy should be turned in less than a week in most cases. With this particular investor, a turnover was taking anywhere from 3 to 6 weeks depending on his schedule and willingness to release any turnover tasks.
What to consider when evaluating actual savings:
Loss of rent. He never considered it and only focused on the $300-$400 in labor cost he saved. On a good turnover, I could have saved 2 weeks down time, which would have been right in that area of savings at the time. On turnovers that took up to 6 weeks he actually cost himself about $900 in lost rent.
What was his actual cost? He was driving a full size pick up truck 6 hours from San Diego to Mesa, AZ. Conservatively, that is $120 just in gas, round trip. Lodging, dining, it all adds up. I’d venture to say all of his savings were actually soaked up in the expense of travel.
What is his time worth? This is the big one that so many times get’s ignored. What did he miss out on in San Diego in the name of saving several hundred dollars? Work? Time with family? What value does he actually have on his time?
As I get older, I begin to realize the value of time. Such a precious commodity that I am not willing to waste anymore. I actually put a monetary value on my time, and if I can outsource something so that I can better spend my time on the big ticket items, then I do it. I could make a strong case this investor did not actually save any money with his expense and loss of rent due to the increased amount of time it took to get his units rent ready. Then when you factor in his actual time, this was a losing proposition every time. He lost and he didn’t even know it. He genuinely thought he was making the best financial decision.
This is one example, many times they are not this drastic. More times than not when a investor gets involved in performing the work, time get’s lost. Whether it’s a few days, or a few weeks, it can absolutely have a negative financial consequence if not carefully thought out and considered.