What I Learned by Quitting My Job to Start a Real Estate Business 24 Years Ago

by | BiggerPockets.com

It’s hard to believe it’s been 24 years since I quit my day job and started my first business.

I had worked for a painting contractor while working my way through college, but when I finished school, I couldn’t really find a good job. So, I continued on for a total of 13 years, working for “the man,” before I started my own painting company.

I strongly believe that preparation is the most important step, and so, here are some of the things I did before giving my notice.

First off, I started doing part-time work on the side, in order to line up future accounts. I even subcontracted work from another contractor, just in case I didn’t have enough of my own work.

In the meantime, I saved up approximately $5,000 in cash, and I had just over $30,000 in a retirement account in case I needed it.

I lined up credit with all of my future suppliers to ensure that I could have good credit and have access to all the materials I needed. I set up a shop, bought a truck, got my insurances, and gathered most of the equipment that I needed to start out.

Related: Quit Your Business Now Unless You Can Answer “Yes” to These 3 Questions

I didn’t burn any bridges when I gave my proper notice. To tell the truth, I’d rather go on welfare than go back to my old boss, but I wanted a backup plan. (By the way, my old boss was worse than Danny DeVito in Ruthless People.)

And finally, I went out on my own right at the beginning of the busy season.

As you can see, I was prepared, and I had a very successful business for the next 10 years. Eventually, I seriously injured my back and was no longer allowed to lift anything heavy.

The biggest problem, though, was that the business revolved around me. I hadn’t yet read the book The E Myth by Michael Gerber.

Cash is King

The good news for me when I got hurt at age 42 was that I owned enough cash flowing real estate that it didn’t really matter. I just started working, using my brains instead of doing physical labor. I was fortunate that I had a real estate license and a degree in business, so it was relatively easy to go into real estate full-time (not just as an agent but also as a real estate investor).

As a full-time real estate investor, everyone knows cash is king, or at least access to cash is, especially when you need to move quickly to purchase “as is” properties from distressed sellers.

For me, the best tool to access cash at first was credit cards. Then later, it was lines of credit (HELOCS), and then eventually it become private money. Today, it even includes assets that can be quickly liquidated or borrowed against, like my note portfolio.


Shortly after I had gotten my real estate license, the company I went to work for made me shadow a seasoned agent. I felt so privileged to be mentored by the number one agent in the company at the time, and this guy was a real hustler. Not only was he at the top in sales, but he had 23 rental properties on top of that to boot. I’ll never forget when he was telling me that I should be like him and start buying rental properties too. Shortly thereafter (approximately 24 months later), he proceeded to lose all 23 properties to foreclosure and ended up filing bankruptcy.

You see, he had bought most of these properties with very little money down, and he had no reserves to use when the maintenance and vacancies quickly built up and snowballed out of control. He got to the point that he couldn’t even do the FHA repairs on the yearly inspections, and then HUD would cut him off. You can imagine what happened next.

It was this lesson early on that taught me if you want to do real estate, you need reserves. At first, I set aside approximately $2,000 to $3,000 per property. Later on, I still made sure I had access to cash, just in case I got hit with an uptick in vacancies or repairs. Just to prove a point, last year I got hit with approximately $50,000 in expenses due to termites ravaging one of my buildings. You just never know when something might come up.


It really comes down to having the cash available when you need it. Like I said at first, I used credit cards as a cash reserve, and over time I built a couple million dollars in equity that I was able to access via lines of credit. In the beginning, I used the lines to buy more real estate. I continued to do so until after I took an asset protection course at my local real estate group, where the attorney teaching the class pointed out that although the rate was lower, it was still too risky. It was then that I switched over to only using private money to fund my real estate deals, and I’d use my HELOCS for other high-yielding, more liquid investments, like short-term rehab loans or institutional notes.

Related: 5 Ways to Make Enough Side Money to Eventually Quit Your Job

What I liked about notes was that not only could I borrow against them (collateral assignment of note and mortgage), but I also had the ability to sell them for quick cash if I needed it. Notes can be sold much more quickly than properties, and yet they’re still backed by real state and require very little maintenance.

Let’s face it: Real estate is an illiquid investment, and what one does to maintain liquidity is extremely important. After all, real estate is a business, and all businesses need cash and cash flow to stay afloat — and any business can, at times, become cash-strapped.

So, for those of you on BiggerPockets who treat their real estate investing like a business, what rules does your business follow for maintaining some form of liquidity?

Weigh in with a comment!

About Author

Dave Van Horn

Since 2007, Dave Van Horn has served as president and CEO of PPR The Note Co., a holding company that manages several funds that buy, sell, and hold residential mortgages nationwide. Dave’s expertise is derived from over 30 years of residential and commercial real estate experience as a licensed Realtor, a real estate investor, and a fundraiser. As the latter, Dave has raised over $100 million in both notes and commercial real estate. In addition to his investments and role as CEO, Dave’s biggest passion is to teach others how to share, build, and preserve wealth. He authored Real Estate Note Investing, an introduction to the note investing business, helping investors enter the “other side” of the real estate business.


  1. Douglas Skipworth

    Another great article, Dave.

    We treat our real estate as a business and since the overwhelming majority of it is still leveraged we have to maintain some liquidity as you mentioned above. Our primary tools for liquidity are as follows.

    -Cash reserves in our business account
    -Cash reserves in our personal account
    -Personal lines of credit
    -Business lines of credit
    -A strong network of other investors who would gladly buy some of properties if we were in a pinch
    -A strong network of local lenders who help if we needed to refinance the terms of the some of our loans
    -A strong network of business people who would gladly make an equity contribution to buy into our properties

    We also work diligently to make major capital improvements to the properties when times are good (eg, replacing roofs, upgrading plumbing, electrical, and HVAC systems, replacing soft surfaces with hard surfaces, etc.) so that we could defer some maintenance in the future if we had a liquidity crisis.

    We also pay our vendors promptly so that if we ever needed to stretch out our payments to them over a longer time period they would be willing to work with us.

    I’ve never written this out before so thanks for challenging us to create rules for liquidity. We definitely need to be more intentional about it.

    • Dave Van Horn

      Thanks Douglas!

      Glad to see you have more rules than I do! 🙂

      Really like the “paying vendors promptly” rule. I know from my experience as a contractor, that’s very important with building relationships (especially in cases where the person using contractors need more time or need to stretch payments).

  2. Garrett May

    Very good information, Dave. I plan to one day quit my day job. Right now, I purchase my first buy and hold property in mid-2105. My plan is to purchase more in the future, do some rehab, and learn more about notes, too. Thanks for the information.

      • Dave Van Horn

        Hi Andrew,

        That’s an article in and of itself! But to keep it brief, in the course, what I learned that made me switch to private money (when necessary) was how to use HELOCs but also how not to use HELOCs. The best way to explain this would be to tell a story of what happened later in life to one of my best friends. A plumber by trade, as well as a contractor on many of my rentals, my friend was a newbie Real Estate investor wanting to utilize the equity in his home. So he took out a HELOC on his primary residence and purchased a property he hoped to rehab. He did this because the rate was lower than private money.

        Low and behold, as he began renovations, he suffered from a heart attack. This put him out of work for 9 months. Since he didn’t use hard money, he couldn’t just hand the property back to the lender. Instead, because he wanted to save a couple of points, he almost lost his family’s home because he nearly defaulted on his HELOC. Fortunately he had the help of friends and family that kept him afloat. If he had done it the other way around, he would have only had to hand over the hard money lender the keys and he could have lived off his HELOC while he was recovering.

        Or if he took the HELOC out and purchased a more liquid asset, like notes for example, where he could have lived off the cashflow or quickly liquidated the notes he wouldn’t have to worry. The moral of the story is, know when to use HELOCS and when to use private money. Also it’s important to consider where your assets are held and how they are titled. Are they being protected by debt? And in terms of private money, investors also need to look at not only how much their money costs but also the overall risks and repercussions of how they use it. Liquidity needs to be an important consideration when investing with your equity.


        • Andrew Oladipo

          Thanks for the brilliant respond and the real life experience you shared!
          Recently, I have been mounting pressure on myself to pull trigger on the next property, then I read your article (Perfect timing in my opinion).

  3. paul thompson

    Good article. This is probably my greatest fear… becoming cash strapped which can make otherwise sane business owners start to make desperate moves. Leverage cuts both ways!

    Another strategy I’ve heard some businesses use for extra cash reserves is to take out “key man” cash-value life insurance policies. It’s a long term strategy but it’s a way to stash cash in a highly liquid, safe-place for a liquidity crisis while still earning decent returns in the form of policy dividends. This is a strategy used by businesses from all sectors but could potentially work for real estate investors also. Has anyone else explored that option?

  4. Kim Tucker

    Many people had the same issues in the downturn from 2008 to 2010. They had great investments, but they over paid, or overleveraged and when the values dropped they didn’t have the ability to go refinance to pull out more cash to make repairs. No repairs, no tenants, no tenants – no income and eventually the banks kicked in. So maybe leverage, but not over leveraged and cash reserves for emergencies.

  5. John Murray

    Any investor that buys a turn key rental at full market value is either not smart or has huge cash reserves and writes off passive losses like Picasso used a brush. Most successful investors that are full time are very smart, motivated and risk takers. The risk matrix is where success is made, the formulation of the big picture and then right down to the details. I was talking to very seasoned landlord and he told me I was on the right track, he also told me don’t think you have it all figured out because I don’t.

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