BiggerPockets

This question is for those of you that do this as a living, and as a supplemental income.

What is/was your initial primary source of income? And if you've since gone into doing REI as a primary source, how secure did you make your position before switching?

Also, for people that have a primary day job, did you still invest into a companies 401k (past the matching % since you want to make sure you get the free money), or did you take that extra income as take home pay and invest it into your REI ventures?

My position is that I'm currently holding a well paying day job, and want to build my capital to the point where I can become a landlord of at LEAST 1 rental unit. I'll be starting off gaining knowledge of the markets by trying out some Wholesaling to help expedite the creation of the capital for the purchase of a rental unit (really to help build the down payment).

I ask the questions above because I plan on keeping my primary source of income, and do not plan on doing REI full time, but do want to have a nice structure to have a steady revenue stream. Yet, I find myself reluctant to stop my contribution to my 401k (currently doing 11% 401k and 5% ESPP) to help expedite the gathering of capital towards purchasing my first rental unit. I am 28 years old, and currently have about 60k in 401k, so I think I am up to par with my age group.

So my second question is, what do most of you do that hold day jobs as your primary source as income when it comes to capital gaining? Do you keep 401k? ESPP? Or do you use that for using to build capital for your real estate ventures?

Thanks for taking the time to read, and thanks to any answers.

Primary income stream (only income stream) for the first 20 years was salary.

I bought and sold land and reinvested all the profits into more land.

Then it all got converted into rentals and I live off the rental income.

I like land a lot better. No tenants but, unfortunately, no income, either.

I have a FT job and invest in RE on the side.

I used to contribute to a 401K but stopped the contributions a couple years ago. With my current employer, I contributed into a 401K for over 10 years, as it stands I have less in that account than I put in, so it has not been a very good investment. Employer has no match, so there is really no incentive to participate.

I have accounts with a couple on-line brokerage firms that allows me to 'dabble' in individual stocks. In over 10+ years my gains there are just a tad under 10% annually. These are taxable accounts, but I've been able to offset the gains with deductions somewhat related to my RE investments, so I'm OK with that.

I left what I had in my 401K account, and with my 'dabble' brokerage accounts I do keep a certain exposure to the market. Nothing excessive, but I do want that exposure so if/when the markets take off I won't miss that ride.

At this time I'm hoarding cash - the goal is to either pay off all my holding at once (personal residence and investment properties). Along the way, if a no-brainer deal comes along I'll jump on that, but barring any really exciting deals, 0 debt is my goal, then more RE.

Hey Ben,
I'm in a similar situation to yours, just a little further along - well paying day job, one rental, we close on our second soon, and have our primary residence paid off.
We don't invest in my day jobs 401(k), for a few reasons -
1) The match is terrible.
2) The restrictions that come with being able to contribute tax free. In particular, we don't like the idea of having to wait until normal retirement age in order to have access to the funds without penalties. Our goal is to achieve financial independence ASAP (not necessarily retirement from the day job, just getting to the point where we can pay for our basic essentials without it), so investments that produce cash flow now are more in keeping with the plan.
3) Philosophical - we want more hands-on control over our investments.
That said, I think everyone should evaluate for themselves to see how the possibility of contributing to a 401(k) fits with their particular plan - for example, my point 2) above wouldn't be as big a deal to an individual who planned to work until normal retirement age anyway.

I was, and still am, a General Contractor. Aside from doing the usual GC stuff, I also did a bunch of flips with investors as well as helped develop a small apt building. When the market out here went south, so did my construction business. I was fortunate in that my wife was a pharma rep and did pretty well, which allowed me to focus on REI.

We rolled her 401k into a SD IRA and use that to do more REI as well as provide small figure transactional funding to wholesalers. We have some buy and holds and have launched a rehabbing business this year as well.

Its possible to roll money out of a 401k into a SDIRA. Very employers offer this, though. If you leave you job, then you can roll it over. Keep in mind that if you do that, you still have some pretty significant limitations on what you can do with the money. There are a number of posts here about that topic.

We started investing in RE in 1982 with a single family residence. In 1994, we sold our 2 single family residences and used the proceeds to buy a 27-unit apartment bldg. We have been full time REIs since July/Sep 1994 and have really enjoyed the freedom of choosing own work schedules. We never used any retirement plan as the rules are constantly changing and you cannot touch the money until age 59.5. We used CDs back when banks were not using all the proceeds to give themselves bonuses. For a period of about 20 years regular passbook savings accout paid 6% interest and a CD paid 8% interest. Try to find that now without having to lock up your money for 50 years. We felt we were the best person to manage our money and it seems to have worked so far!

I just heard that there is a way of acquiring the title of homes that are facing foreclosure in your desired area and no credit check. unsure if it works or not. If recently you're gonna invest or buy a house for yourself, why not check this out. http://goo.gl/MdUT

As far as what my plan is; I don't know. I am going to keep stacking money and buying periodically until I either figure out what I want to do every day, or it becomes a moot point.

Best of luck.

Tom K,

Thanks for the outlook, and some feedback on how you've managed your returns with REI. I also decided to stop 10 of the 11% I had been putting into 401k. But am still currently putting the 5% into ESPP. Stopping the 10% really made me see the tax savings (boy it's 200+ / month). Not to mention, it's going to be interesting to see how close it puts me into another tax bracket. If I am within 5k of the bracket below me, then I'll be dumping into an IRA.

I, like yourself, and using this as another diversification towards long term financial stability, and have a buy & hold mindset, with a near term goal to do some wholesaling, to fully understand the markets and to interact with some people to get a better deal on a buy & hold propert(y|ies).

From what I've calculated as my needs for retirement (without collecting social security, since I still feel that's a wildcard when I'm of age to collect), I'm 6 years ahead of my target, which is why I've decided to stop the 401k contribution to raise capital to purchase property (Although keeping the 401k and moving into a self directed ira and using that for investment has also crossed my mind). I also know that I need to dump a bit more into my sons 529 (right now I'm at the pace of 1000 / yr).

I'm pretty young (29.. as of a few days ago) and feel that the amount in my 401k (62k in 401k, w/ company doing 5% w/o requirement to contribute) was enough to allow me to now diversify.

Once I get up front capital to purchase, then I fully expect to start re-contributing into 401k (my goal is to go from 1% to 3%, then 3% to 6% then 6% to 9% then back to 11%).

I should note that the above capital raised would be outside of a buffer for emergency expenses and is inline with me not getting help from my GF, who is currently unemployed and whose unemployment may soon end.

But yes.. I really just want to get out of the rat race, and looking forward I want to secure my future while keeping my full time job (since unlike most, my full time job is something I'm in love with, and I love doing).