Hire a General Contractor or DIY?

How do you decide to use a general contractor or do-it-yourself (DIY)? Many small investors use the DIY method when repairing or rehabbing their rental property investment. The pro's who are involved in flipping real estate usually use a general contractor or at least act as a GC and sub-contract most of the work. Time is money and if you spend six months rehabbing a property that is six months lost income as well as holding cost expenses (PITI).

Sometimes the decision to use contractors is made by default if you have no time or no skills. However, if you use contractors and don't have time to watch what they are doing be prepared for them to not show up or to screw it up. On the other hand if the quality of work you do is really poor, it's going to cost you money in potential rental income or sales prices. Rent to own buyers will have lots of time to discover poor quality work.

Let's assume that you are buying no more than 2 houses per year. Investing in more rental properties per year and you will have to use a general contractor due to time limitations. However, if you buy 2 or less properties per year I think that you should consider doing some of the work yourself.

Typically a general contractor will cost you 20%-30% on top of the money a sub-contractor will charge you. But a good contractor should be able to co-ordinate sub-contractors so that they arrive in the correct order and when needed.

Your skill level and speed are also important. I've had enough experience at certain jobs that I can do them as well and as fast as many specialized workers. I can solder copper pipes quickly and paint as well or better than most contractors. The first time I installed replacement windows it took me 4 hours per window, but by the twentieth window I had my installation time down to 20 minutes. At that rate, my hourly wage (in savings) was pretty high.

How many items on the list of best home improvements you want to do is also a consideration. If all you are doing is painting, planting a few flowers and replacing the toilet seats, DIY is the way to go. If you think that a major kitchen remodel or a new roof is needed, a contractor would probably be a better solution.

Assuming you can do the work well enough and have the time a simple formula is to calculate how much your rental loss and carrying costs are and compare that to the premium you pay for someone else to do the job. I think that it is useful to learn a lot of skills but that is not always the best for everyone.

One final piece of advice when hiring contractors is to know your local and State laws. What do you need building permits for? If you hire a contractor, is he insured? If an uninsured contractor gets hurt at your job are you liable? Know the law.

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