The Value Distribution

I recently finished a project, rehabbing a mobile home in Renton (see under portfolio for numbers). It was supposed to be an easy quick in-n-out deal. It turned into anything but. While I only made about $10k in profit (still a 14% ROI), the lessons this deal taught me were invaluable. But I started thinking about the work that had gone into the project, the value added.. my payout had turned out to just a little over a $100 per hour. (My target is to do about $350 per hour). So where did all the added value leak to. Why was I not able to capture more value on this project? As I did a dive deep into this, this is what I found:

Wholesaler made $60k

Lender made $34,700

My GC probably made $23k

I made $10.5k

Ohhhhh.. reallyyy.. Guess who took the largest risk, but made the least money.

This is the nature of the business. If certain things had gone differently, the 10.5k number could have been $60k+. You win some, you lose some. Every person above added a lot of value and they got their due. On this deal they all did better than me. On another deal I will do better. Together we all make money for each other, while also taking the worst looking house in a 10 block radius, maybe more and converting it into the best mobile home in Renton area at that time. Now isn’t this the best part of capitalism. Work hard, take the risk, add value.. your reward will follow.

My wholesaler spent over a year chasing the deal, they spent over $30k clearing the cloud on the title, probably 20+ seller calls and 5+ appointments at the whim and fancy of the seller. Not to mention that they had to drive out squatters. I wouldn’t take a penny away from the money they made. My GC is awesome (he’s on a TV show), the $23k+ he made is due to the experience he brings to the table, advising me on many things as things went wrong and executing the project quickly. I wouldn’t take a penny away from him. Without my lender this deal, the $10k I made, or the lessons I learnt wouldn’t have happened. Why would I take away a penny from him.

The value is well distributed…