Are You Making One Of The Most Expensive Mistakes That An Investor Can Make?

Whether you’re brand new to investing or you’ve been investing for a while, you have a number of assets that you can rely on to help you do deals.

For example, you might have money that you use to do deals. Or, you might have a network of joint venture partners who provide capital. You might have in-depth knowledge of your market, renovation experience, or a source of below-market properties. The list goes on and on. Every investor has a combination of some of these assets to help them invest.

There’s one asset, though, that many investors forget about. Whether new investor or seasoned, it’s easy to forget that you have this asset. And when you overlook this asset, it will almost always cost you money on a deal!

The asset is time. Every investor has it. (It’s one of the few assets that we all have in common – no one gets more or less.) How you use your time determines your potential return on your investment. Unfortunately, many investors undervalue this asset. They end up doing work on their deal that they should not be doing.

Here’s a classic example: In an effort to save money on a renovation, an investor does some of the work themselves. “It’s easy work,” they say, “and it will only take a few hours so I’ll do it myself to save a few hundred bucks.” Regardless of whether their work is of equivalent quality to that of an experienced contractor, the question should be asked: “Is this the best use of my time?”

This question should be asked at every stage of the deal – from the moment the investor decides to do a deal, all the way until the property is rented out or sold. Before you take any action, you should ask and answer the question: “Is this the best use of my time?”

To use a simple example: If your time is worth $100 an hour then why would you perform any action that can be hired for less than that amount? It would be better to pay someone else $80/hour while you use your $100/hour time to work on some other higher-value aspect of the deal.

To start valuing your time more effectively, determine what it is worth: If you are employed or self-employed, you might have a per-hour rate that you can use as a starting point. This is the number that you could be earning if you were working for your employer or client instead of on your deal. If you are a seasoned investor, you might know how many hours you put into a deal and the return you get, which will give you the value of your time. (Of course, these are just starting points and your time is probably worth even more than those dollar figures.)

The key lesson is: Most investors undervalue their time and ultimately end up doing more work on a deal than they probably should. When you should be finding new deals or building relationships with joint venture partners, you’re cleaning the floors and mowing the lawn and putting up bandit signs – work that can be outsourced for pennies compared to the higher value use of your time.

Your time is your most precious resource. It’s scarce and it’s worth more than you’re probably valuing it. You can immediately improve the return on your next investment by finding a few tasks that can be handed off so you can recapture some of that value.