Get Rich With: Carpentry and Home Renovation

Ahh, Building Things.

It’s a hobby I have talked about many times before, but a recent experience has completed the transformation of carpentry from “enjoyable pastime” all the way up to “Lifetime Religion” for me – something that deserves its own article and its own place on the bookshelf of Top Ways to Be a Happy Early Retiree. Not everyone is born with the urge to build or create physical things, but a surprising number of people do have this desire, sometimes hiding unused beneath the crispy exoskeleton of consumerism that has been burned onto most of us by the Crème Brûlée blowtorch of modern marketing.

It was about 1:00 AM sometime last week. I was alone in an under-construction cottage sitting atop a steep hill overlooking a peaceful and almost mirror-smooth lake. The full moon’s reflection shimmered just slightly in the tiny surface ripples. All windows were open and the cool midnight forest air streamed into my bright work area where I was carving out the hinge recesses on some new pine doors to be installed into the bedrooms and bathroom. I had been working feverishly for about 8 hours at this point, and hours felt like seconds, and thirty-seconds of an inch felt as big as the universe, I had become so thoroughly sucked in. Great music played nonstop from my construction radio, which I keep stocked with about 300 albums worth of mp3s. The only interruptions were the occasional pauses to roll up and eat another burrito and input/output another quart of water.

At long last,  after finishing an enormous swath of flooring, cabinetry, door installation, and miscellaneous side projects, I started to get somewhat delirious and ready for some sleep so I unbuckled the toolbelt, and surveyed the day’s accomplishments.

“Holy Shit”, I said, “I sure do love building things.”

And then I passed out on a mattress and slept for about 9 hours before beginning the cycle anew.

Some budding Carpenter Retirees among you have picked up on my love for the craft and asked me questions in private emails asking how I got into it. The question comes up often enough that I thought it would be worth sharing here.

Personally, I became hooked as a kid building my first science fair project somewhere around age eleven. It involved a wood and glass terrarium with a hinged lid which was far more fun to build than the ensuing experiment involving growing bean plants.

From there I moved on to start building various pairs of speakers in the tragically small and cramped cellar of my parents’ old Victorian house. (I think this trauma is what caused my current love of big, clean, open rooms – especially basements and garage  workshops).  Later I renovated the attic of that same Victorian house to create my Teenage Bedroom, which provided years of fun. All of this early work would look flimsy and ridiculous by adult standards, but it sure did get me hooked.

Then there were the Dark Years – four years of getting a university degree, and an additional four of living in apartments and shared houses, moving frequently, and focusing mostly on being a normal office-working engineer.

But in the year 2000, I bought my first house. A comical 1978 fixer-upper complete with brown wood paneling, leaky aluminum windows and plenty of vinyl and carpet flooring throughout. Over the next five years I spent most of my free time ripping out or refinishing every single visible surface inside and out, and scrapping all of the unnecessary walls as well. I got to learn most of the construction trades by rebuilding it to meet my own fairly modernist/nature-inspired tastes.  My wife and I loved it there. There were  frequent house parties in those childless twentysomething days and it was fantastic to get to give tours of the house and all of the finished projects.

From there the hobby grew further, when in 2005 I started a small housebuilding company to build modern Earth-friendly houses in a local neighborhood called Prospect New Town, and did most of the carpentry work on the two houses built by the company. I had hired this great old carpenter to do the framing on the first project, and I worked side-by-side with him from the sill plates right up to the last pieces of fine wood trim on the interior, an experience which really gave my skills a boost.

The building company died a painful and unprofitable death in the housing crash of 2007-present,  but the desire to build lived on. Since then I have become a freelance carpenter and specialized in the field of Anything Interesting – kitchens, fancy bathrooms, full remodels, and plenty of projects on my own house and rental houses of the past and present.

Overall, this hobby has contributed somewhere between $200,000 and $400,000 to my current ‘stash, between value increases on houses before selling them, higher rental income, free renovations for myself, and getting paid to build things for other people.  But far beyond money, it has provided a foundation for self-sufficiency. It is so reassuring to know that even if my house sank into the ground tomorrow morning, I could be out there by lunchtime beginning the enjoyable journey of building it back better than before. In an existing house, if I want a new window or a door somewhere,  anywhere, I can just grab the toolbox and start cutting and framing. If I need extra cash (at an hourly rate that is at least four times what I’d get for working at Home Depot), I can just do these things for other people. In any town in the country! Thank you, carpentry, I love you.

Finally, I will reveal my Ace-in-the-hole carpentry moneymaking technique to you. This is the way you can combine a whole spectrum of skills to make a six-figure income while rarely leaving your house and legally paying no income tax. Check it out:

You buy a very dated house in a great and hip neighborhood. The more expensive the ‘hood relative to your Dog House, the better. You will be buying the place all the wealthy yuppies are skimming over, because they want something that is “move-in ready”.

You move into the house, and start fixing it up. Use your skills, use great design principles from library books and even HGTV shows. Use Craigslist and recycled building materials shops to get the materials at a steal. You take your time and do a good job, and lead a real life on the side. After two years, you finally finish the job.

The house is now worth $230,000 more than you paid for it. You only spent $30,000 on the materials, meaning you earned $200,000 for your work. But because the US government does not charge ANY income tax on capital gains you make on a primary residence if you own it for 2 years or longer (up to a profit limit of $250k), you have just made $100 grand per year with ZERO taxes!

You can repeat this trick every two years for as long as you care to keep making money. If the cost numbers are different in your neighborhood, feel free to adjust them for your own situation, but in most prosperous cities, there is still great profit to be made from renovating your own house with your own hands in the more desirable neighborhoods. And this situation will only improve as the current foreclosure hangover inventory from banks clears out, which is artificially depressing current prices, making now a better starting time than usual to begin such a scheme.

So there you have it – the long-awaited Carpentry article. It may not be for everyone, but for some of us, it can be Everything.

 

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17 Responses to “Get Rich With: Carpentry and Home Renovation”

  1. Matt Faus July 20, 2011 at 7:48 am #

    My wife and I are contemplating executing a plan exactly like this in the next few months. We have looked at a few houses and even put a bid in on one that was stripped of everything, including the kitchen sink!

    It is a bit overwhelming to plan and think about all the work just to make a place like that livable. What general carpentry books would you recommend so that I might dispel this darkness of ignorance?

    I have also thought about submitting a contract without a Buyer’s Agent to negotiate at least an additional 3% off the sale price. Does anyone who has done this have horror/success stories?

    We live in Dallas, TX.

    • MMM July 20, 2011 at 1:17 pm #

      Kevin is right: any simple book from the Depot or library will teach you what you need to know. I also have a secret plan to open a side branch to this blog that is sort of an “ask the builder” deal. It would be quite fun. My first tip to you: learn to do your own plumbing, and do it all with PEX (flexible indestructible plastic pipes). Between this and the black ABS drain pipes, you gain infinite power over sinks, kitchens, and bathrooms, and never have to pay an $80/hr plumber. The stuff is as fun and easy to work with as LEGO.

      I have also bought two houses using that “no buyer’s agent” deal. It worked great. As long as you know your area so you can recognize a good deal when you see it, I see few drawbacks – and I say that even being married to a licensed agent!

  2. Geek July 20, 2011 at 8:30 am #

    This sounds awesome! I always used to help my dad around the house, and he’s retired (at ~50+) and become a handyman. He’s not doing the primary residence fix ups, but my mom doesn’t like to move.

    If I can get enough to buy that fixer upper this path sounds awesome – I’d learn so much!

  3. mike crosby July 20, 2011 at 8:55 am #

    Real estate has made more millionaires than anything else. And MMMs idea is the best idea to experience real wealth. One of the benefits of having your own property is not having an inspector constantly looking over your shoulder.

    The one big necessity in this scheme is to have a spouse that is willing to believe in your dream. I’ve done well in RE, and my wife and I moved into a house for $400K. It’s value rose to $900K and I told her it’s time to sell the house. She refused. The house is now worth $450K.

  4. B July 20, 2011 at 10:27 am #

    So does that mean you would like to help me put in a Swamp cooler?

    • MMM July 20, 2011 at 1:02 pm #

      Hmm, there’s not much room for creative expression in that project, I may have to pass :-) . If you had said “solar-powered zen waterfall garden in Hawaii, or something similar, the answer would be yes.

  5. Marcia @Frugal Healthy Simple July 20, 2011 at 12:02 pm #

    My aunt and uncle have been doing just that for decades. Oh, the beautiful things they have done.

    Sadly, if you time your house-buying incorrectly, you can go bankrupt. We bought a fixer in an up market. We’ve done much of the work ourselves (rebuilding the kitchen, for example – new home built cabinets, tile, etc. – by “we”, I mean “my husband”.) But, the house is still worth hundreds of thousands less than we paid for it, because of the housing crash.

    Now, this is my home, so I’m not selling or moving. But there are at least a dozen houses in my hood that were foreclosed upon – some because people got the idea of living there for 2 years, fixing up and flipping – but the wrong year or two can really bite you.

    I’m an engineer in semiconductors and I love making things. I’d learn how to do woodworking (kinda want to), but for now, I resign myself to cooking, mommying, and quilting (which is still making things!) Next up: trying my hand at patching the 5 pairs of jeans that my 5 year old has with holes in the left knee.

    • MMM July 20, 2011 at 1:24 pm #

      Yeah, many people lost money in the current crash. But that makes it a good time to get into housing. Be fearful when others are greedy, and greedy when others are feeling fearful. If a house can easily rent for more than enough to cover its carrying costs, that is one indicator that the market is no longer overvalued. Another guide I like is “is the house priced at less than structure-only construction costs, assuming a land value of zero?”. Deals like that simply can not last forever in our country’s healthy economy and growing population.

      • bigato August 17, 2011 at 7:02 pm #

        I got one lot with a little house for something around the construction costs. But the neighborhood is not valued. It’s a poor and new place, but I hope that it get some more value from now to 3 to 5 years, that is the time when I’m planning to retire (early). I know that I probably won’t get so much money as I would in a nice neighborhood, but it’s hard to loose money anyway. It can’t get any cheaper than this (two and a half months of my wage). But reading your article made me think, maybe I should have spent more to get more.

        I looking forward to start learning carpentry as soon as a build a room in the back for my workshop. I have an uncle that is a professional carpenter and told me what power tools I should get. But, I’m not convinced yet, as I know there is guys out there that do all of their carpentry job without any power tools. This and some of the machines are quite big and not cheap. How do you work? Mostly power tools or hand tools? What kind of combination? Thanks in advance for your answers and congratulations on one more great article.

  6. Kevin M July 20, 2011 at 12:54 pm #

    Thanks for writing this MMM. I am supremely jealous. Building things and making a living at it is my dream, even if those numbers might be a tad optimistic. Just out of curiosity, what is your favorite project you’ve done? Mine is a full kitchen remodel in our last home – down to the drywall and back up again.

    @Matt – I’ve had good luck with the Home Depot “How-To” books. They have nice illustrations/pictures and examples of several commonly seen scenarios. I’ve used my Wiring book quite a bit and may have glanced once or twice at the Plumbing and Finish Carpentry books while in the store. But really you can probably Google most of the stuff. Doing it yourself you always run into hiccups.

    We sold our last house by owner and had good success. Here in MO the title company does a majority of the paperwork, so it was just a matter of marketing it, negotiating, and figuring out the contract (buyer’s agent can usually provide the standard form). It is definitely something you can do yourself if you take the time.

    • MMM July 20, 2011 at 1:49 pm #

      You’re right Kevin – my $200k profit number could only be achieved in a fairly expensive city – for example, where fixer-uppers cost in the $400s, and nice houses of similar size can sell in the $600s. This does not happen in my city, which seems to have a $400k price ceiling right now, regardless of house quality, but 15 mins away in Boulder, this situation does exist. It would be dead simple in Toronto or Vancouver, Canada (but the current price bubble might pop while you are on top of it, adding danger). Silicon Valley and lots of other coastal areas plus pockets of wealth inland surely still have pricey neighborhoods. But even if you’re only dealing with a $80-100k price swing, it is still a nice living.

      It is hard to pick a favorite project. In general, the ideal is either a full house interior, as I’m doing right now, or a kitchen remodel that involves opening up walls and adding new windows and exterior doors, to create light and space where once there was only crappy 1970s cave-like dinginess.

      • Kevin M July 20, 2011 at 1:56 pm #

        What was it about the 70s? I agree with the opening up walls/creating light comment. My other favorite was tearing out a bunch of walls in our old basement and opening it up into one large room where it had previously been 2 small rooms and a closet. The basement had a huge window and walked out to a patio, so it was a nice place for the family to relax. Man, I could talk about this stuff all day.

  7. Chris November 15, 2011 at 6:49 pm #

    Awesome. I’m jealous. I have a pressing desire to be as self sufficient as possible. The pinnacle of this desire would be be to build my own house. I hope I’m able to do it after FI.

  8. jlcollinsnh January 5, 2012 at 12:19 pm #

    “….hiding unused beneath the crispy exoskeleton of consumerism that has been burned onto most of us by the Crème Brûlée blowtorch of modern marketing.”

    holy crap! what a wonderful phrase!

    and you can build stuff, too. I’ve never had the talent or inclination but I admire those that do. envy even….

    Been spending a few hours today exploring MMM a bit more. great subjects and a pleasure to read.

  9. Patrick January 10, 2012 at 6:57 pm #

    I have a friend who does this to the extreme. He’s married, so they can get a 500k deduction. They buy condemned homes in decent neighborhoods in Arlington, VA for a pittance, demolish them completely, and then build a brand new structure. He does almost everything himself (hires contractors for drywall finishing and painting and stuff) so it’s dirt cheap. He apprenticed for a GC for about a year before doing this himself. I think the last house he bought was for 200k, he put about 250k of materials into it, and it sold for 975k. He had to actually pay taxes on that 25k of capital gains…tough problem to have! He also runs a small handyman business on the side that buys the tools so they’re expenses.

    • Kevin M January 11, 2012 at 8:29 am #

      Curious as to how he claims this as his principal residence (which qualifies you for the $500k exclusion) if he demolishes the house. Does he live there for 2 years after the new one is built?

      • David Cummings November 26, 2013 at 5:09 pm #

        I am curious about this as well. Also, you have to be careful as some cities do not allow homeowners to do certain trade work, such as plumbing.

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