I went to school with a lot of people that were good at math. Walking home to my apartment one afternoon of my senior year I noticed a for sale sign in front of a house. It was a three family house like almost all of the others in the neighborhood. Very similar, in fact, to the one I was renting an apartment in at that time. When I got home I called the number on the sign just to see how much a house like that cost.
Being good at math myself it was easy to understand that rent from one of the apartments was probably enough to pay the mortgage, leaving one to live in and another to live off. I didn’t buy that house but it wasn’t long before I was on the path to becoming a slum lord in a college neighborhood. Early in my real estate career I didn’t have a lot of disposable income and spent a lot of time shopping in discount stores following the save a buck style of accounting popular with slumlords and accounting departments at companies around the world. A box of six light bulbs for a buck, you bet that was in my cart.
After 15 years and at least 100 tenants I’ve divested myself of all of my residential rental properties and would never consider buying a cheap light bulb again. Why you ask. What’s the cost of changing that cheap light bulb? I can tell you from experience it’s a lot more that the $0.17 I paid for it at the discount store.
The cost of changing a light bulb is the cost of the interruption of dinner with friends and family when you get a phone call from an angry tenant who cannot see to put their key in the lock. They are especially angry because the light has been out for weeks and you haven’t done anything about it. There is no point reminding them that you don’t go visit them every evening and if they don’t tell you they light is out you don’t know.
This interruption that ruins your mental peace is not the only cost though. There is additional cost. There is the cost of the trip to your barn to get a ladder and put it in your truck. There is the cost of the cost of going to the home improvement store to get light bulbs because you can never find the ones you got at the discount store. There is the cost of leaning the ladder against the railing of the stairs to reach the offending non-functioning bulb. And of course, there is the cost of sweeping up the glass from the bulb you dropped from the top of the unstable ladder. Not to mention the cost of putting the ladder away and figuring out where you put the original discount bulbs so you can put away the ones that are left over from this job.
At the peak of my rental management business it was really a sideline business for me as I was spending most of my time traveling and consulting for companies like General Motors and Goodyear not to mention the federal court system. For the type of work I was doing I could bill upwards of $2000 per day. Even if you divide the day into 24 hours that’s still almost $85 per hour ($250 per hour if you manage to work only 8 hours.)
Depending on how you do the math it cost me between $170 and $500 to change a lightbulb during those years. The only comparison shopping I do when looking at light bulbs is to find the ones that last the longest.