Everyone else on BiggerPockets is wrong.

That’s right, you read it here first.

Everyone. Even these guys:

“Personally, I prefer the 30-year mortgage, not only due to the flexibility, but also because I’m able to cash flow better with the lower monthly payment. Since I’m financing rental properties, my tenants are basically paying off the property, and I’m able to keep more of the cash flow due to depreciation.” Dave Van Horn, BiggerPockets Blog, January 5, 2017

“Go with the 30-year mortgage, and especially so in this current market of low interest rates.” Scott Trench, BiggerPockets Blog, July 28, 2018

With one exception I will discuss in a moment, new and intermediate investors are better served by shorter amortization loans. There are several reasons.

First and foremost, most investors should make an effort to build relationships with smaller, local banks. These banks generally only loan 15 or 20-year money and offer:

  • Quicker turnaround
  • Flexibility on credit score based on personal relationships
  • Knowledge of local markets
  • Networks of local attorneys, real estate agents, contractors, insurance agents, and other professionals
  • The option of cross pledging
  • Ability to keep money local

Private money and hard money sound great, but aren’t all they are cracked up to be. We aren’t talking about friends-and-family money, but companies like CoreVest, LendingOne, Visio, or a brokered loan. Based on my recent experience, some of the challenges for this these loans include:

  • Funding can take as long as 60-90 days
  • Rigid processes
  • High expenses and/or broker fees
  • No cross pledging
  • Extensive documentation requirements
  • Requirement for excellent financial records

Competitive Advantage

Every single item I list for small bank relationships has been a competitive advantage at some point. Quick loan turnarounds let me ink deals that others ponder on. Having a loan officer who knows how to get things done in town is invaluable. That might be getting a repair made or knowing the best agent for flood insurance.

If an investor chooses—or maybe more accurately has to choose private money—the disadvantages can be significant. A partner and I are trying to buy a 6-plex right now and are over 90 days trying to get the deal closed. The private money processes have been arduous. We have had an appraiser back out, a requirement for a property manager’s policies and procedures book, lease reviews by third party legal specialists, and other issues.  Not saying that these are necessarily bad—just that local banks don’t have these burdens and are easier for the new or intermediate investor.

Related: What’s Better Financially: Paying Off Your Home Mortgage or Investing That Money?


Lack of reinvestment profit is the basis for most objections to using 15 or 20-year loans. An investor doing a basic analysis might rationally opt for 10-15% real estate returns with a 30-year loan over the alternative 5% mortgage interest savings or 8% stock market gains. But there is a fallacy in this logic—it implies that the cash flow disappears. That cash flow is not available for reinvestment. False news!

That investor has another option. They can use the equity in one property to buy another. This is called cross-collateralization and is possibly the most valuable advantage to using a small, local bank. Cross-collateralizing has two main benefits:

  • Additional investments can be made without any money out of pocket as long as you meet the bank’s loan-to-value requirements. These are typically 75-80%.
  • Reinvestment of both appreciation and loan principal reductions can be made in short turnaround times. New properties can be bought as often as a buyer likes.

This is exactly the method that I have used to grow to a $11M, 160+ property portfolio in small-town, slow-growth communities. I mentioned above that a partner and I are working with private money right now. That will be the first and only loan of its type that I will have—and it has been an absolute pain. Everything else is financed through a total of four small local banks except a single loan with a larger regional bank.

In December I purchased 24 units in my hometown for $1.6M. Eight units were from one seller, and 16 were from another. Because of my 10+ year relationship with a small local bank, I could close this somewhat complex deal 45 days after the offers were accepted with no money out of pocket.

Other Benefits

Shorter amortizations have additional benefits. The first is that it is an automatic savings plan. It is difficult to go out and buy a new Jeep with money that is not in an operating account somewhere. This will help significantly when I am ready to retire. My plan is to sell a portion of my portfolio, pay down debt, and create the cash flow I will need.

Related: 3 Reasons to Consider NOT Paying Off Your Mortgage

The second benefit of this equity-build method is to provide a buffer in the event of an economic downturn. If any of the local economies in which I am invested swoon, I can refinance properties to longer amortizations, lowering my monthly payments.

Lastly, financing with shorter amortization loans imposes financial discipline. Buying only properties that cash flow to your personal target with a higher monthly payment ensures that an investor is not “reaching” for marginally profitable properties.

 An Important Exception

This is advice to my 25-year-old self: If possible, a new investor’s first purchase(s) should be a house hack using agency (FHA, VA, etc.) money. Buy as many units as you can this way, up to a 4-plex at a time, up to the loan limits. Low down payment, 30-year amortization. Lather, rinse, repeat every two years.

Summing Up

Are shorter amortizations right for ALL situations? Of course not. But for the vast majority of the BiggerPockets non-expert level community, they are the right choice, and everyone who tells you differently is wrong. Even Dave and Scott. Work with smaller local banks and reap the long-term rewards.

We’re republishing this article to help out our newer readers.

Your turn to weigh in: What do you think about the 15-year vs. 30-year debate?

Comment below!

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While most of the market attention tends to be focused on Class A multifamily buildings, new research from CBRE suggests that there is another class of multifamily housing that represents a much larger opportunity for investors – workforce housing. And going into 2019, market conditions are positioning workforce housing for continued return on investment.

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Under President Obama and Education Secretary Arne Duncan, billions of tax dollars have been spent “reforming” public education. Their efforts include the Race to the Top ($4.35 billion all by itself), charter schools, the Common Core State Standards, the Common Core-related online assessments, charter schools, Teacher Improvement Grants and on and on. The result: Student performance still lags and teacher morale has plummeted.

Meanwhile, not on the reform agenda are the effects of poverty, inadequate parenting, rampant absenteeism, and truancy on schooling. And, although September was Attendance Awareness Month, it went pretty much unnoticed.

The bottom line: Kids can’t learn if not in class, and absences, in turn, negatively affect grades, standardized test scores,behavior, graduation rates, and more. As the Center for American Progress puts it: “Education has long been seen as the means to prosperity, but that only happens if students attend school.”

And apparently large numbers of them are staying away. In fact, of the some 50 million kids enrolled in our country’s public schools, 5 to 7.5 million are “chronically absent.” In other words, they miss 20 days or more every year.

Writes The Washington Post‘s Emma Brown: “The nation’s large and persistent achievement gaps are rooted in a largely hidden crisis of chronic absenteeism from school, especially among low income and minority children.”

Moreover, it starts at a surprisingly young age. As Attendance Works reports, about 10% of kindergartners miss at least 18 days of school. That translates to almost an entire month of their first-ever public school year.

That same report found that, “Poor attendance is among our first and best warning signs that a student has missed the on-ramp to school success and is headed off track for graduation… “

Seems the powers might have missed such reports.

Meanwhile, in addition to impacting poor academic achievement and the dropout rate, the American Bar Association’s Youth at Risk Commission finds that truancy is associated with:

  • Increased odds of first-time substance abuse and middle school drug use starting with marijuana.
  • Higher rates of daytime crimes, such as vandalism and assaults.
  • The likelihood of nonviolent and violent offenses by the young.
  • Teen pregnancies

Such findings have now prompted superintendents around the country to join forces and sign Attendance Works’ Call to Action. Acknowledging that up to 7.5 million children miss nearly a month of school every year, they say they are:

  1. “Prioritizing Attendance: We are making reducing chronic absence a top priority in our district from the superintendent to the teachers, from the school staff to the families.
  2. Mobilizing the Community: We are making student attendance a broadly owned and widely shared civic priority. That includes engaging families and tapping civic and elected leaders, local businesses, health providers, housing authorities, clergy members, and more.
  3. Driving with Data: We are using data to determine how many and which students are chronically absent in each grade, school, and population. And we are intervening to ensure absences don’t add up.”

Unfortunately, in Pennsylvania, so far only Ken Cherry, head of the Dover Area School District, and Pittsburgh Public Schools’ Linda Lane have reportedly joined the movement. That’s right; just two and neither hails from Philadelphia where about 15,000 of its students miss school each day-50% of them without an excuse!

In fact, in the 2014-15 school year, more than 11,700 Philadelphia students were truant, with 37% of them (4,332) in grades K-8.

Meanwhile, research conducted by the Philadelphia Education Fund and Johns Hopkins University, in conjunction with the district, found that kids who attend less than 80% of the time stand only a 10% to 20% chance of graduating on time.

And here’s another Philly fact: 40% of all of its students drop out, and, currently, it’s on-time graduation rate stands at just 65%, up from 2008’s lowly 58%.

Plus, more bad news awaits. That’s because, back in 2008, then Governor Rendell called for Graduation Competency Assessments-actually ten of them. These ultimately morphed into the three Keystone Exams covering biology, algebra I, and literature. Implementation kicks in as a graduation requirement in the 2016-17 school year, with a recent district report suggesting that only 22% of the Class of 2017 will, therefore, graduate on time.

No wonder, then, that Philly schools are “expected to make significant and sufficient efforts to curb truancy” by:

  • Conferencing with caregivers after no more than three unexcused absences
  • Engaging all of a school’s social and academic supports along the way to the tenth unexcused absence
  • Having ten unexcused absences lead to Truancy Court where children and their families appear before a Master and ultimately before a judge if attendance doesn’t improve, every 60 to 90 days to review and report on progress.
  • Having truancy case managers, together with community-based providers, try to discover the causes and develop an improvement plan with the family using multiple resources to address and remove the barriers to good attendance.

Truth be told, however, although Philly’s is now one of the country’s “most sophisticated truancy response systems”–the problem still persists. That’s why District Attorney Seth Williams now wants to step in and send letters to the families of kids with ten or more unexcused absences threatening criminal charges unless things improve.

In a recent interview, he explained, “I want the District Attorney’s office to be the hammer for [Superintendent] Hite or the administrative judges in Family Court or [the Department of Human Services].” He also said that he doesn’t want to prosecute or criminalize parents, just motivate them.

Looks like he might not get a chance, however. District officials say that, because of federal privacy laws, they are prohibited from sharing certain student information. According to Karyn Lynch, head of student support services, “If we could find a way, we would certainly do this.”

Stay tuned but don’t expect schools and concerned politicians like Seth William to do all the heavy lifting. It all starts at home and knowing your obligations under Pennsylvania’s attendance and truancy laws, such as:

  1. Children between the ages of 8 and 17 must attend school; in Philly, the start age is 6.
  2. A child’s caretaker-parent, guardian, relative, or foster parent-is legally responsible for ensuring a child’s attendance.
  3. Most districts excuse absences for illness, emergencies, a family member’s death, medical/dental appointments, school activities, and approved educational travel.
  4. A parent note is required for even one day’s absence; when due to illness, a doctor’s note is to be sent, if possible.
  5. A request in writing to the school principal is required to excuse a child for a religious holiday or instruction.
  6. A max of 10 cumulative excused absences is permitted in any given year; more than that requires a doctor’s note.

Then, on the home front, make schooling everyone’s top priority, and…

  • Make sure all homework gets done accurately; if frustration is noted, contact the appropriate teacher(s)
  • Set a reasonable time, keeping in mind that teens need about 9 hours a night.
  • At bedtime, keep all electronics in the kitchen. Screen light can suppress the hormone melatonin, key to falling asleep. Have them book it, instead.
  • Delay wake-up time as long as possible and have a quick but healthy breakfast at the ready, packed school bag waiting by the door.
  • Accept only illness as a stay home excuse, not tiredness or unpreparedness.
  • Insist that all family members get their flu shot and required vaccines.
  • Schedule all dentist, doctor appointments, and such after, not during, school hours.
  • When sick, have your child ask a friend to collect all missed work and drop it off or leave it in the main office for pickup.

In other words, be part of the solution instead of the problem.

Source by Carol Josel

Renters Warehouse, a property management company that specializes in managing single-family rentals, is set to expand its SFR business, as the company announced Tuesday that it is acquiring OwnAmerica, one of the country’s largest investment marketplaces for single-family rentals.

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There is more and more talk about a new real estate correction happening. It’s smart to be alert and aware of how the market is changing. But it’s even more important and wise to be ahead of the curve and to have efforts in place to weather the storm.

They say that the Manhattan property market has been in a correction for a year already. Some think that will keep spreading—though there are many others in the media saying we won’t face another crisis like 2008.

Whether or not you’ve experienced a correction, there are things you can do now to mitigate risk when it happens. Here’s what I do personally so I don’t have to worry as much when I hear news of a possible market correction.

5 Reasons I’m Not Worried About the New Real Estate Market Correction

1. I buy on cash flow, not appreciation.

My real estate investing model is to acquire income properties. I’m not counting on flipping or gambling on appreciation. That seems especially dangerous right now. The numbers have to work up front, and I have to be able to hold it. More recently, I moved up to multifamily apartments, which are even more resilient during tougher economic times.


Related: With Markets Shifting, Should You Invest in Real Estate Now—Or Wait to Buy?

2. I focus on growth markets.

There may be some housing markets and cities that have peaked or even surpassed their recent peaks already. Still, there are also markets that are growing and have plenty of room for growth. Even within these cities, it is best to make sure not to be investing in the worst neighborhoods, which have poor performance and crime rates that bring down values. Initial cash flow projections and returns on investments in those lower income neighborhoods may look good on paper, but the longevity is not there. That is why they frequently change hands to different owners in short time periods of time

3. I’m selective.

ATTOM Data says that only just over 30% of houses flipped in the first half of 2018 were bought as distressed properties. That means most investors are picking full-priced properties (or higher) off of the MLS. They are gambling on appreciation to sell them for more or are putting little rehab work in to them to sell. You may want to be more selective. I probably now look at 175 to 200 properties before pulling one down to work on.

4. I stick to the numbers.

The numbers have to work. It’s still hard not to fall in love with properties, but you can’t afford to. You aren’t going to live there. It is far more profitable to just buy on the numbers alone. That’s why I often say my best deal was this 118-unit apartment complex I didn’t do.

If you let yourself fall in love with a property, you can be tempted to stretch numbers, make excuses, add in hope instead of facts, and generally sell yourself on a property you have no business buying. It helps to have a great partner who underwrites the deals on the math and always keeps you in check.

Related: How I Found & Financed My Second House Hack in the Hot Market of Denver, CO

5. I focus on service and long-term value.

When it comes to management, I’m focusing more on service and making apartments “communities.” So, if or when rents drop, then that can give us the upper hand. If another community has lower rents or is marketing special deals, but our service is better with the rent rates a little higher, that is value we offer, and folks will see that.

People have been burned so badly and frequently in so many aspects in this day and age that they just want a business that will do what they say. It’s interesting that this basic level of honesty is so rare—and that’s good for us. It’s sad to see what will happen to so many other brands and jobs because they are trying to squeeze every dime out of people with sneaky tactics. People know they can trust us. They will stay. They will tell their friends, family, coworkers, and people they meet in the coffee shop or gym. That means lower turnover rates, and it adds far more net profit to our properties.


There may or may not be a housing correction at play. No matter when it comes or how deep it is, there are smart adjustments investors can make now to avoid risk. If you think bigger and longer term and aren’t drawn into stampedes in either direction, you should be OK.

What do YOU do to sleep well at night despite talk of market corrections?

Comment below!

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One of the biggest reasons I ended up overweight was because I couldn’t stop stress eating! As soon as I encountered stress, I would immediately start craving all kinds of bad stuff! This didn’t help me any since I live in Philadelphia (think Philadelphia cheese steaks and Philadelphia pretzels), and there are plenty of quality delivery restaurants within a few mile radius of where I live (lol)!

The good news is that I was finally able to overcome stress eating… and down below I’m going to show you how I did it and I hope these tips can help you as well with overcoming this dangerous habit!

Quick Stress Buster

One of the things I learned in a stress and anxiety relief program is that you should always have some quick stress busting exercises to go to whenever you encounter stressful situations.

Now, these types of exercises must be able to do instantly and at any time. The one exercise that I went to almost every single time was simple deep breathing exercises.

By doing deep breathing exercises, you will decrease tension, stress, and anxiety. Also, another benefit is that deep breathing will directly help in decreasing cravings as well!

The type of deep breathing I always did was very simple. All you do is breathe in through your nostrils slowly for 3 seconds, and exhale out your mouth for 6 seconds. Repeat for one to two minutes. You should feel a warming sensation followed by an amazing feeling of relaxation and inner peace! Not to mention, you can do this ANYWHERE at ANYTIME!

Prevention Snack

Another tip to help overcome responding to stress with food is by identifying common times of your everyday life when you may encounter stress (such as coming home to your spouse… JUST KIDDING!), and ensure that you have had a high protein and high fiber meal or snack prior to this time.

Protein and fiber are 2 quality nutrients that aren’t just great for weight loss, they also help in keeping you full and satisfied… which of course will help decrease craving urges.

Some examples of these types of foods I would personally choose would be a Whey protein shake and an apple. Simple!


This trick combines 2 problem solvers in one! The first problem solved is keeping bad foods out of reach to begin with and the second of course is decreasing craving urges. This trick is to have alternatives to your common go-to craving foods!

For example, one of the things I LOVED to have when stressed out was cereal. Give me a box of Cinnamon Toast Crunch and the I.R.S. could come knocking at my door and I wouldn’t care one bit (LOL)!

So, what would be a smart healthier version of this specific craving I had? Easy: Get healthier bread (such as Ezekiel bread), lightly brush some olive oil on it, sprinkle some cinnamon on it, and pop it in a oven or toaster oven until toasted! Healthy, delicious, quick, satisfying, and oh yeah, did I mention: HEALTHY!

Source by Avy Barnes

I’m totally serious! A lot of people that think that Staging costs too much money, but, honey, there are so many free and low cost fixes that will make your house look super fab for its photo shoot and make buyers swoon when they see your house in person.

And, honestly, Staging your house for your online listing is just as important as hiring a great Realtor and setting the right price these days.

Based on all of the Staging Appraisals that I have done over the years, I’m going to share some of my favorite decluttering specifics and give you a few more (nearly) free ideas that you might not have thought about.

1. Declutter your walls

Small photos, family photos, dried flower arrangements (especially on the top of your kitchen cabinets!), shelves with small knick knacks… gone! Pack ’em up. They will make your photos look distracting and your house dated.

2. Remove any religious symbols you have on display

3. Clear the shelves:

Your shelves should have 1/3 open space, 1/3 accessories–they should be the size of a football or larger–and 1/3 books–only pretty, hardcover books.

4. Show Buyers the way:

One of the biggest mistakes people make is how they arrange the furniture in a room. There is science behind how we feel in a space called Proxemics–crazy, right?!? Not really, you have probably been somewhere where you didn’t feel comfortable but couldn’t figure out exactly why it didn’t feel right. More often than not, it is the furniture arrangement in a house and, if this is a problem in your house, buyers will sense it too.

5. Let your generosity pay off:

Donate or sell your clutter to save money on the cost of moving and to make a little cash to treat yourself to something nice once you have sold super fast; ). ‘Nough said!

6. Take advantage of a free commodity… sunlight!:

Take down old dusty window treatments and open the blinds or shades all the way. Remember sheers don’t let all of the light in so take those down too if you have them. If you are concerned about losing privacy, remember that if you follow my advice, you will not be living in your house for much longer. It is a short term inconvenience for a HUGE long term gain.

7. Replace your light bulb duds:

Please not with those twisty fluorescent kind, thought! I am on a personal crusade to banish these from people’s homes! The light that they give off is too harsh and not flattering at all. Honestly, though, this is an area that people overlook and it seems minor. A buyer is thinking, if they didn’t even take the time to change the light bulbs, how well did they maintain everything else in the house? You wouldn’t go out on a date knowing that you had lettuce stuck in your teeth, so don’t show your house with burned out bulbs over your bathroom sink!

8. Clean, clean and oh, did I mention, clean?:

Scrub every inch of your house, especially your bathtubs and showers. Whatever it takes to get those areas clean, you should do it. In a buyer’s mind, cleanliness is a reflection of how you have maintained your overall property. If you want to get the highest possible list price when you sell, you should give a thorough scrub before you have any meetings with Realtors. Here is a real life example of how an obscene amount of cleaning helped to add 80,000 to the value of a house.

9. Air the place out:

Now this is more for your in person showings since smells aren’t communicated in your online listing but can be a total turn off in real life. In my own home search years ago, I wouldn’t even go past the front entry in what looked to be a lovely home because I couldn’t stand the smell of the pet odors. Studies have shown that people respond best to citrus scents so put away the cinnamon or fresh linen and break out a lemony fresh scent! Here is a great resource for helpful tips if you are a smoker or have pet odors.

10. Don’t let ’em in on your beauty secrets:

Put away all grooming supplies and toiletries in bathroom, on countertops and on tub surround. But, please, put them into storage in an organized way–with baskets or lined up neatly. It is acceptable to leave shampoo and shower gel for your in person showings, but please, take them out for your online listing photos. It goes back to the whole idea of visual clutter. Ya know what I mean?

Bonus Tip! Let Buyers think that they are sooo organized!:

Every nook and cranny really counts when you are selling your house. Yep, even your cupboards and closets. I had a client once who had her house on the market 3 times without offers who did not want to spend the energy cleaning out her closets because she didn’t think she would sell and didn’t want to pack away all of her sweaters since she would need them come winter. Guess what, I nudged her lovingly to do the work and her house had a bidding war in the first two weeks on the market!

I hope that these tips will help you with staging your home!

Source by Lori B Fischer

Recognizing that your time is valuable is the first step toward building a highly successful and efficient business or real estate portfolio. The second step is to figure out how you can build systems that remove you from low value tasks and allow you to focus solely on the high value tasks. Investors who focus on the tasks that bring in the most value will build the greatest empires.

Everyone’s time is valuable, but to varying degrees. Today’s article will show you why knowing the value of your time is important, how to measure it, and how time savings can come into play. We’ll also touch on non-monetary value.

Discussing these topics will allow you to gain great insight into your own perception of the value of your time. You will be empowered to say “no” when low value opportunities come up. You will look at cost versus value-add completely differently, and you will begin to focus on automating the lowest value functions of your business.

Why You Should Care How Much Your Time is Worth

Understanding how much your time is worth is crucial for any sort of decision making, whether business or personal in nature. If you know that the value of your time is $50 per hour, you will say “no” to opportunities that offer $40 per hour. Similarly, if the non-monetary value (discussed later) of an activity or product is less than the value of your time, you can easily say “no.”

Knowing the value of your time aids your decision-making process and allows you to focus on activities that bring in higher value than you’ve determined your time is worth. Knowing the value of your time also allows you to effectively price your services, negotiate salary, and engage in high value activities, even if we can’t assign a monetary value.

Great examples of people who may not understand the value of their time are those that stand in line for free stuff. For instance, I once saw a very well-known chicken sandwich chain giving away free sandwiches. All you had to do was show up. People came in droves, lined up, and stood there for an hour waiting to be served their free sandwich. These people inherently valued their time at $3.99 an hour.

People who understand the value of their time will not be caught in that free sandwich line unless there is some non-monetary value to be gained, such as socializing with friends. If they are craving a sandwich, they’ll just pay the $3.99 rather than wait in the long line to get it for free.

Another example is one that I’ve used personally in my business. I know what my time is worth today, but I also have goals on what I want my time to be worth in the future. This not only allows me to price my services more effectively, but it also allows me to be more selective with the clients I choose to take on.

Related: Financial Freedom: 14 Steps to Stop Relying on Your 9-5 Job’s Income

I’ve moved away from “taking on anyone and everyone” to defining a target client and only taking on that type of client. This is because the type of client I’m targeting will place a higher value on my time.


How the Value of Time Applies to Real Estate Investing

Knowing the value of your time can help you in your real estate investing as well. For instance, if your time is worth $50 per hour and it’s going to take you four hours to fix broken pipes at your rental property, you may be inclined to pay a plumber $150 to fix the problem. Or you pay a plumber $45 per hour. Both outcomes result in you monetarily gaining from your decision to outsource the work.

But if you don’t know the value of your time, you’ll become the classic do-it-yourself landlord and business owner. You won’t focus your time on the highest valued activities. You’ll focus squarely on your savings in lump-sum dollar terms. This is a bad way to run a business.

Recently, Mindy (whom I greatly respect) wrote about reasons you will likely always be poor. One of those reasons was that you hire out all your work. Conversely, I think that if you are doing it all yourself, you will always be poor. There are many real-life examples of my theory as well.

How many wealthy individuals do you see doing all the work themselves? How many poor people do you see doing all the work themselves? My point exactly.

Her reasoning doesn’t really address the root issue, though, which is how you value your time. If you are able to hire out your work at less than the hourly rate of which your time is worth, then you hire it out. It’s a simple concept, but tough in practice. As encouragement, Richard Branson doesn’t even do his own laundry!

How to Determine and Measure Value

Everyone should know, at least on a basic level, what the value of an hour is to them. A relatively easy way to calculate the value of a work hour is to simply take your gross income and divide it by 2,080 hours. This will tell you the gross value of each of your working hours assuming a 40 hour work week.

I use gross income and 40 hours per week because it’s a very easy and quick calculation that can be applied universally. It’s comparable because virtually everyone works, in some capacity, at least 40 hours a week.

If you want to take it a step further, you can divide your gross income by your average daily “awake” hours. I recommend you run this calculation as well, but keep in mind that non-monetary value (which we will discuss shortly) comes into play, which makes this calculation convoluted. At the very least, it will provide you with a quantitative value that you can always keep in your mind for future reference.

Taking it further still, obviously everyone has a different tax position, and your unique tax position should be taken into consideration. An employee who generates $100,000 will theoretically pay less in taxes than a business owner who generates the same amount. So the post-tax value per hour is an important consideration.


An Example

As an example, a business owner filing single who grosses $150,000 per year, nets $100,000 per year, and sleeps seven hours a day on average will result in the following:

Gross value per working hour: $72.11 ($150,000/2,080 hours)

Net value per working hour: $48.08 ($100,000/2,080 hours)

Gross value per awake hour: $24.17 ($150,000/6,205 hours)

Net value per awake hour: $16.12 ($100,000/6,205 hours)

Post-tax value per working hour: $32.68 (($100,000 – [Federal Tax: $17,888] – [Self-Employment Tax: $14,130]/2,080)

Post-tax value per awake hour: $10.96 (($100,000 – [Federal Tax: $17,888] – [Self-Employment Tax: $14,130]/6,205)

As you can see, the results vary drastically depending on the variables. They can all be used separately in different ways. For instance, if you are a growing business, you may be focused on the “top line,” which means you should emphasize growing your gross values through increased sales. If you are leveling off and focused on building a sustainable business, you should be focused on saving time or money, your “bottom line” or net values.

In business, I use the gross value per working hour to make decisions. This is because most opportunities are presented on gross value terms, making it quite easy to compare the value of my time per opportunity.

On a personal level, I know exactly what my post-tax value per awake hour is purely for motivational purposes. If I know I’m burning a potential $xx per hour, I’m going to be motivated to make something of that hour, even if it’s 10:00 a.m. on Sunday.

I recently read an article that advised readers to remind themselves constantly that they could die within the next few moments, days, weeks, months, etc. The purpose of this practice is to inspire action. If you know a deadline is coming up, you’ll be motivated to crush it.

Related: How to Earn More Money at Your 9 to 5 (So You Can Invest It in Real Estate!)

I take a less morbid view that works better for my financial mind. Since you are a real estate investor or a business owner, my method will likely work for you, too. And that’s to simply understand your post-tax value per awake hour and always focus on gaining more value than your post-tax value per awake hour is worth.

A hundred thousand dollars seems like a lot of money, and it is indeed a solid chunk of change. But when you put it on a post-tax per awake hour perspective, $10.96 really isn’t a whole lot. What would happen if you can increase it by 50%? Double it? Surely it can’t be that hard.

That’s the mindset I use this for. Instead of saying, “I need to make more sales to hit $100k,” I say “I need the value of my hour to increase by 200%.” This allows me to focus on a smaller, seemingly easier number to manage. It pushes me to work as efficiently as possible to boost that number and only engage in value-add opportunities or activities. Time is money.


Saving Time Adds Value

We can talk in terms of dollars all day long, but the value of your time is also affected by how much time you spend working in any given area. So while I push people to focus on expanding incomes, there comes a point where we should switch gears and focus on efficiency instead.

Remember, in our value per hour equation, the numerator is expressed in dollars, and the denominator is expressed in hours. If we decrease the denominator, we increase the value of our hour.

For instance, a person making $100,000 per year in net income and working 2,080 hours has a value per hour of $48.08. But if that person can implement systems that make the working hour more efficient and save 100 hours per year, their value per hour increases to $50.51.

When should you start focusing on efficiencies? I’m honestly not sure. There is an economic concept called the “diminishing marginal returns,” which essentially means each additional dollar you earn decreases in value to the earner.

This can be best illustrated by the fact that when you eat one cheeseburger, it’s delicious. But when you eat several in a row, the next one you eat is less delicious as your body begins to send signals to your brain that you are getting full.

At some point, earning another dollar will not bring you as much value as figuring out how to save time. At that point, you will want to focus on becoming the most efficient business around. Adhere to the 4-Hour Workweek mindset and figure out how you can outsource as much as possible.

Not only will you decrease the denominator (time), thereby increasing your value on an hourly basis, but you’ll also get to focus on ever-increasing valuable tasks. And one day soon, you’ll be focused solely on the highest value tasks, which will maximize your value per hour.

Understanding Non-Monetary Value

The majority of “things” in this world bring value to someone, somewhere. In your life, even if you can’t quantify the value, it doesn’t mean that such value does not exist.

As you may or may not know, I’m a big proponent for expanding one’s income rather than spending time and energy focusing on living an extremely frugal life. The practice of saving money is great, but people who blindly follow frugality are not only missing out on life, but also missing out on intangible value.

For instance, I frequently visit my local coffee shop and purchase a $5 latte. The latte provides value, such as energy and uplift in mood. It provides convenience. It provides sociability, interaction, and networking opportunities. It provides a change from the daily routine.

Related: 7 Sharing Economy Side Hustles Real Estate Investors Can Use to Earn Extra Cash

If I cut the latte out of my routine, I’d save $5 per trip, but I also wouldn’t benefit from the non-monetary value the latte trip provides. For me, that value is worth more than the $5 in my pocket.

The point is that non-monetary value is tied to virtually every product or service we buy. Common measures can be your change in mood or ability to build new relationships. But quantifying that value is extremely difficult, if not impossible. I haven’t figured out how to quantify non-monetary value, but maybe that’s not such a bad thing.

Which leads me back to the values we were calculating earlier. While it’s great to know what your post-tax value per awake hour is, it may not be that helpful in the grand scheme of things. This is because our non-working hours are chock full of non-monetary value-added experiences.

Hiking, running, swimming, and cycling will all add value to your life. But you’d have a tough time calculating how much value has been added.

So how can you use this in tandem with calculating your value per hour? By shifting your mindset.

If you are clearly participating in a non-value add activity, then not only are you losing the potential to gain non-monetary value, but you are also losing the opportunity to earn the hourly value that you’ve calculated you’re worth. It’s like a negative double whammy.

Success-oriented people think about their lives in this manner. They don’t waste time on non-value add activities, but they know non-monetary value exists and that constantly pounding the pavement looking for deals isn’t necessarily the best way to live.



So now you know why it’s important to understand your value, how to calculate it, and that non-monetary value exists in virtually everything we do.

My hope is that you will use this information to become more productive. I use it to maintain laser focus in achieving my goals. When I start wasting time with a non-value add activity, I remind myself that my time is worth much more than what I’m currently valuing it at.

That mindset has helped me grow a rental portfolio and a business that far exceeds the income I ever expected to earn.

We’re republishing this article to benefit our newer members.

Have you ever calculated how much your time is worth? What are you doing to up your time value?

Leave your comments below!

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