Hello everyone and Welcome once again to another episode of Selling Greenville your favorite real estate podcast here in Greenville South Carolina I am your host as always Stan McCune and as you guys know I am a realtor here in Greenville happy to help you guys with any of your real estate needs anything at all that you would have in the Greenville or the the surrounding greater Greenville area my contact information is there in the show notes you can text me call me email me do whatever you need to do to reach me I am reachable I will not ignore you I pretty much respond to everything as timely as possible and I feel like I have a pretty good track record of that so please reach out to me however it's most convenient for you I even get Facebook messages sometime not my favorite but anyway you guys can do whatever you need to do in order to reach me additionally if you like or love this podcast which I hope you do please leave it a rating or review make sure you subscribe so you don't miss future episodes download episodes do all of those things not only do I notice that and appreciate it but it just helps the podcast helps me to keep going helps me to to reach more people and I appreciate when you guys do that today we are going to be doing part two of seeing time from a value standpoint seeing time as money assigning it a certain amount of value in our house flips in particular but just in real estate in general and I think that again to reintroduce it I think that this is really important because there are so many different formulas out there for determining whether a property is worth it to purchase just based on how much you're buying it for what the repairs are what the after repair value of the house will be etc etc there's the very famous 70% rule that says that if you take the after repair value of a house let's say that's 300,000 you should be paying 70% of that minus any repairs that you have to do to give yourself a 30% margin to sell the house and make a profit that can be a useful rule thumb but I like to to think as well and I think it is very important to think as well and if you listen to my last podcast you already know this to consider time into this equation somehow we have to factor for time in the equation and this is where sometimes I have to decide whether when I purchase a property and sometimes I I purchase properties off market and I might purchase a property off Market or maybe maybe I have a rental property that that you know that I purchased originally to rent it out and then I decide you know what I'm just going to just sell this property I have to determine whether I'm going to go the quick route of just selling as is doing what some might call a wholetail or whether I'm going to go the retail route of doing a full flip in order to get the full value now going the retail route almost always will get you more money but you also have to take into account and I also very strongly believe you have to take into account the time element of it because you know what time is money and time is more valuable in a lot of ways than the money it can be you have to determine that for yourself how much time is worth how much money to you but there are sometimes where I have done some what I might call a quick flip that's not not even really a flip more of a wholetail type of deal where I take a property and that I purchase you know from someone that just wants to dump it off and just doesn't want to have to deal with it and I can offer them very quick terms all cash etc etc buy it from them there's enough margin in it that I can just turn around and just sell it to someone else and make a little bit of money is it worth it to do that what is the the best way to assess that whether that is a good route or whether the better route is to go ahead and just flip the house and go through the process of actually doing all the work so I determined a I I devised I should say a formula for assessing all of this this is a Formula if someone else came up with this I'm sorry I came up with this all on my own so hopefully it doesn't overlap with something else that's out there it may who knows but this is my formula and it's very simple to be completely honest I twe tweaked around tinkered with it to try to get it to be as accurate as possible but you take the net profit of a house your anticipated net profit for a house and you divide it by the number of hours that you will be spending doing anything with regard to the house the the total number of hours that you will be spending with regard to that house okay you get that number now you're going to take the number of days that you will own that property the total number of days from the time that you purchase it until the time you sell it and multiply that number times three and by the way I'll put this formula in in the show notes multiply that number times three and then subtract that from the number number of hours all right your head is probably spinning so let me give an example here let's say that you well I I'll give a a personal example this this one actually this is one that actually happened to me there was someone that was out of state that had a burned out duplex that was just it was awful it was 7ft ceilings half of it was burned out it had all sorts of all sorts of issues and they they just wanted to get rid of it it was the kind of thing where they didn't want to mess with it anymore they they were out of state they didn't want to list it you know because of the condition that it was in they had all sorts of other issues that they were dealing with they just wanted a quick transaction they sold it to me this is years ago they sold it to me for six ,000 roughly speaking I turned around and I was just like you know what the dirt that this thing is on is worth more than $6,000 I just put it on the market for 20 nowadays I would have put on the market for even obviously more than that again at that time in place $20,000 was for a half burned out duplex was actually a a pretty high number relatively speaking but I I knew I could could get that or something pretty close to it I had someone that bought that property for that full amount within about 10 days 10 days was the full time that I held that property so when it was all said and done I made Let's just call it $133,000 in 10 days the amount of hours that I spent doing things with regard to that property was like nothing I spent like almost no hours over there I I had to drive there a few times I had to go there a few times I had to deal with a few different things let's just call it 5 hours so 5 hours that's really all you need to look at you need to look at your hours and your days the hours spent at the property and the number of days that you hold the property total so and then of course the profit so I made it roughly $ 13,000 $113,000 profit and I spent roughly 5 hours doing things you know going to the property taking some pictures dealing with people that were interested in it and then I held it for it was again roughly 10 days so I take 13,000 and divide it by five and then subtract from that 3 time 10 10 days times three and the number that I get is 2570 and so you're like well what does that mean it doesn't mean anything if if just on its own basically this formula I want anything for anything that is a good from a Time Value standpoint is going to be over a th it's going to score over a th according to my formula and so that takes into account both the number of hours that I'm putting into it if I put a tremendous amount of hours into a project or if I hold onto a project if I if I hold onto a house if I just have it for a really long time it's going to score really low on this metric and so there might be a really low margin opportunity that's out there or maybe a mid margin opportunity if a low margin or a midar margin opportunity if I plug in these numbers and it scores over a th000 it's worth it for me it's worth it for me I don't need to hit this 70% rule I don't need to hit this rule or that rule I don't need to have this this much margin or this much profit because the amount of time that I'm spending and the amount of time that I have the property it is worth it now you have to obviously I'm factoring a lot into that because I'm I'm reverse engineering what the net profit will be I have to know what my net profit number is going to be at the end so there's a lot of leg work that goes in prior to me being able to just come up with that score of a thousand or more but that that is what I come up with now what you find is that a lot of the higher margin types of properties ones that hit the 70% rule might score very poorly on this metric and so you have to understand that doesn't mean that those are bad deals that just means you're sacrificing a lot more time for a lot more money and that might be a worthwhile sacrifice we talked about this before there is a Time currency and then there is actual currency someone once said it like this time is money but money was money first and so we need to think about it that way too just because something scores low on here doesn't mean it's a bad deal here's another scenario let's say you have a house that a house flip a house project that you think you can make $50,000 on you end up spending roughly 120 hours of your time at that house maybe you're doing a lot of the work yourself and so you end up spending 120 hours that's roughly you know three work weeks three work weeks of of your time and let's say that in the end you have that property for let's just call it seven months plugging this into my into my calculator here so you spend three weeks of your time doing doing work at this property you hold the property for S months and you make $50,000 guess what you scored really low on this metric because you spent a lot of time working on that property and you had it for seven months so I have 50,000 divided by 120 which is the number of of hours spent working on the project minus in parentheses if you're using Excel 3 * basically 200 200 210 which is roughly 7 months that comes up with a score of minus 21333 so not only are we not near a th we're like in the minuses well that's irrelevant all that that means is that you're having to spend a lot of time in order to get that 50,000 but you know what $50,000 is isn't you know that's not a bad haul for some people that's like well more than their entire year salary you did that with three months worth sorry three weeks worth of work and just having the the property on hand for the equivalent of 7 months like okay I can see how that could make sense there was a house that I flipped last year that based on these metrics I just we just barely didn't make it to that 1,000 point mark but that was because we had some delays that caused us to hold the property for about a month longer than we should have a month longer than I had originally budgeted and really a month longer than it needed to be and that was for a variety of reasons and because of that we just barely missed hitting that hitting that number that was a very important number for me to hit I was really aiming to hit that that time value number of hitting a th000 on it we just missed it because of a few things that didn't go our way but you know what it wasn't that big of a deal I wasn't that that's not something that I'm I'm worried about that those types of things will happen it's probably better to miss out on that as long as you're not super stressed and super you know having your lifestyle completely dis Ed it's probably better to miss that than like Miss on money goals right so because that's where people really get in trouble is when they miscalculate the money part of it and then they end up losing tons and tons of money and it becomes a really big deal but this is basically a just another way this isn't a replacement for the other ways that you assess deals but this is another way to look at it and to say okay am I spending a lot of time relative to the amount that I'm getting for the property or am I not spending a whole lot of time and I'm getting a decent return this a I feel like this is a good formula for lower margin types of projects to determine okay is this lower margin type of project going to actually be worth it for me I'm only going to be making 10 15 $20,000 okay okay where we don't want to be only making 10 15 $20,000 if we're spending a lot of time on the project so let's plug it in here how much time am I spending in terms of my personal hours how much time are we spending in terms of total days that we have this property and then if it comes out to being over a th000 is the score great that sounds like a good opportunity if it's well over a th like that one that I just mentioned before that that I made 13 Grand on in in 10 days you know that one scored 2570 well that's a no-brainer now when I bought it I didn't know it was going to it was going to do that well to be completely honest I was in my mind I was budgeting for something closer to let me plug in the number here I was budgeting for something closer to a score well it's still pretty good of like 2420 2,420 so again using a formula like this can can help you to quickly make a determination okay even though this isn't a big money maker it's not costing me a lot in time that is an important part of the equation now maybe it is going to cost you a lot in time you want to make sure that you're justifying that by the money that you're making in return you want to make sure that okay at that point all right yeah this is going to be a timec consuming project but it will be worth it and so you want to take both of those things into consideration I think way far too often way too much we find everyone is just focused on the money I know you we've talked about this already in this podcast and last one we need to also account for time that's a really important part of the equation and that's it very simple like I said I'll try to remember to put that formula in the show notes if you want to look at it if you guys have any questions please reach out to me I can help you with any of your real estate needs in the greater Greenville area my contact information is also in the show notes and I hope to hear from you guys I hope to see your ratings and reviews as you plug those in and I hope you guys stay safe and have a great rest of the week [Music]