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Best use of time from strictly financial perspective
Old 05-23-2011, 07:01 AM   #1
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Best use of time from strictly financial perspective

I have been a real estate investor for just over two years. This question centers around “opportunity cost.” I ALSO own and work in a lawn care business, own and run a small web design business, as well as own and manage several single family and multi-family apartment buildings. (43 units)

When I’m actually earning income in the lawn care business, my gross hourly rate is $60-$70 per hour before expenses. (and expenses are pretty high in that business – fuel, equipment, insurance, etc.). In my web design it’s hard to say. I don’t make ANYTHING “running” it on a per hour basis, but when I’m doing a paid task, it’s $50-$100 per hour with VERY low overhead.

Now, in my rental RE business, because I’m not trained in carpentry, handyman stuff, etc., I tend to be fairly inefficient in those areas so I hire out. In addition, my cracker jack painter gets $20 per hour (and he’s good, and he’s FAST). My two handymen get $16 per hour. I have a “higher end” carpentry team that gets $25-$30 per man-hour. I want to make an intelligent decision on where to spend my time.
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Old 05-23-2011, 07:06 AM   #2
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whoops .. forgot the last paragraph ....

Where I’m “stuck” is this: When I “avoid” paying my handyman $16 per hour, I’m “making” $16 per hour by “saving” $16 per hour. (A penny saved is a penny earned) It’s very black and white. (let’s forget for now the fact that it will take me 1.5 hours to do whatever they do in an hour!). When I’m working in my lawn care business, earning $65 per man-hour … am I REALLY making $65 that for comparison purposes? Or do I want to find out my “after expense” hourly rate? I know the answer is simple but I’m just STUCK! I usually bring my lawn care business income down to "zero" becuase I sub much of it out, and pay ourselves a salary, but I know my "time value" in that company is worth more than the "before tax zero" bottom line...Thanks to any of you wonderful numbers people out there who can bump me in the right direction.
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Old 05-23-2011, 07:13 AM   #3
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Spend your time developing your business(es). You may "save" $16 an hour if you do your own carpentry but might have better spent that hour (and a half) doing sales development for the lawn care company or shopping for that next multi-unit.

Focusing on cost cutting isn't going to bring in new money.
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Old 05-23-2011, 08:56 AM   #4
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Which one do you enjoy more?

Depending on where you live, lawn care might not be year round where as web design and landlording is year round. Can any one earn enough to cover your living expenses and allow savings for retirement?

If you sub everything out, what can you make?

If you did all the work I would guess web design assuming you can get 1000 or more billable hours.

I've recently increased my rental units and feel the income is very nice, but know it's a part time job/business for me while maintaining a full time job. What type of cashflow do you have with 43 units? Depending on the cashflow, I think I could retire on that alone.
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Old 05-23-2011, 09:51 AM   #5
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Originally Posted by hotwired View Post
whoops .. forgot the last paragraph ....

Where I’m “stuck” is this: When I “avoid” paying my handyman $16 per hour, I’m “making” $16 per hour by “saving” $16 per hour. (A penny saved is a penny earned) It’s very black and white. (let’s forget for now the fact that it will take me 1.5 hours to do whatever they do in an hour!).
I guess what I'd say, then, is that you are valuing your time at $10.67 per hour since you would be working for 1.5 hours to save $16. I guess from a "strictly financial perspective" (as you wrote in the subject), this can be a trade-off worth making but frankly, unless I enjoyed the DIY handyman work, if I could afford it I think I'd value my time a little more than this, bite the bullet and "pay the man." And from a strictly financial perspective, if you could be using your time in ways that would net you more than $10.67 per hour, again it would make financial sense to do the "more value added" work and pay someone else to do the things that provide a lower return.
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Old 05-23-2011, 10:16 AM   #6
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Originally Posted by hotwired View Post
whoops .. forgot the last paragraph ....

When I’m working in my lawn care business, earning $65 per man-hour … am I REALLY making $65 that for comparison purposes? Or do I want to find out my “after expense” hourly rate? I know the answer is simple but I’m just STUCK! I usually bring my lawn care business income down to "zero" becuase I sub much of it out, and pay ourselves a salary, but I know my "time value" in that company is worth more than the "before tax zero" bottom line...Thanks to any of you wonderful numbers people out there who can bump me in the right direction.
Yes, find your "after expenses" hourly rate. Take the cost of the equipment and divide it by the number of hours it will last. Figure out how much per hour it costs for fuel and oil, insurance, etc. Add up all the hourly numbers and subtract them from your $65 to get your real hourly rate. I suspect it's quite a bit more than $16/hour. Also, if you work more hours per week, your hourly rate should go up because the fixed expenses remain the same and are divided by more hours.

Try to max out your number of web design jobs as that seems to be the area where you make the most money per hour.

After that, I would take a look at spending as many hours as possible in the lawn care business (assuming you net more than you pay the handyman) during the peak lawncare months, then use the "spare" time from decreased lawncare responsibilities during the slow months to do the "handyman" tasks myself. Also, when you do the handyman tasks a few times you will become much more efficient at them and will get them done in less time, increasing your "hourly rate" for those jobs.
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