I have been investing with my own money for the past 4 years, and have built a pretty healthy portfolio of cash flow properties, and once my 1031 exchange is complete, I'll have 17 units, mostly free and clear, paying me a good sum every month. I don't know anyone else that has quit their well paying job to invest full time...so I was hoping to talk to someone who has. It seems as through my business is ready to grow; I have built a great network and experience to go full time investing...however, would like to hear from someone who is a couple years out from where I am now. If anyone who is in this position has a few minutes to chat, I would greatly appreciate the time and perspective.
Well, only you can really answer that. Have you been relying on income from your investments to live on, or does it all get reinvested? If the answer is all reinvested, AND you make enough from your rental income to replace your salary I think you are ready.
My goal is to do just that. Build up my rental income to match or exceed my W2 salary then make the jump. I have been disciplined and always reinvested all income from the investment properties. Once I quite the job, I will simply begin using rental income as salary.
Whatever you choose to do, make sure your health insurance and all that will be covered, as well, not just your salary.
Best of luck!
You are way ahead of me, so I cannot offer any good advice here - I am on my first rental and see a good four more years ahead of me (which closely mirrors your timeline) - but would like to hear more about how you managed to get to 17 properties free and clear. Do you have a very high paying job? Did you reinvest all income into buying down the loans? Were you purchasing with cash?
I had a high paying job and worked from home for a good portion of the time Alex...most importantly very few expenses and the freedom to go through a lot of properties when they were still cheap in my market. I had some good connections to get me started in the renovations as well. I bought everything cash, and financed a 3 unit that I added a 4th. I am managing my new units myself...I copied the system to manage those from a colleague I have that manages 80 of his own...so far so go there. If you have any questions for me Alex, feel free to shoot me an email and I can talk.
To add some context to some of the prior responses in my post...my net rents cover all of my current expenses x3 at my current lifestyle, and x4 if I cut some back. Of course there are variations in those figures when a water heater leaks or pipes freeze (I am in Michigan), so I have a little trepidation as I have never exclusively lived off of my rental income...kind of like going out on a trapeze wire without a net for the first time.
I have a good network that send me deals (usually 3-5 a week) to look at...and have roughly $450,000 in free and clear equity. I am working on getting a working line with a partner for $125k-$250k. To specify my initial post...I am looking for context of living on my rents, while still saving and utilizing equity/experience to build a business.
@Jake Kozul I'm not in your position yet, but that is my goal as well. I noticed you didn't mention any reserves or savings and I wonder if that would help ease a bit of the trepidation you have with jumping out of the rat race for good. I have been taking this approach myself, both saving to pay cash for deals as well as a personal reserve that I'm hoping will both pay off for me in a couple of years when I too can be taking that first step onto the wire. :)
I'm very excited to hear about people like you actually doing this and hitting the "can I quit my job now" mark, it's very inspiring to a newbie. And while I'm not there yet, would you be willing to talk more about the system you've used to manage your properties while working? I'm planning to manage myself too and am looking for suggestions on how to best set that up.
Otherwise, it sounds like you're well on your way! Congrats!
Thanks Emily, I still have some cash saved up...enough to get me through 6 months outside of what is saved up for investment, which I could use if needed as well. Feel free to reach out if you have any questions.
Being that I recently quit my job to go full time into investing, I can offer a little advice as to what should be considered.
1. Can you support your current lifestyle with your investment income.
2. Is there something in your life that you would rather devote your time to other than your full time job.
3. Do you like your job.
4. If all of your properties go vacant tomorrow, Do you have enough money in the bank to support yourself for at least 3-6 months until you get tenants again.
5. Can you make more investment income by being full time?
and Finally and probably most important.
6. Where/When are you the happiest?
If your answers look like this
6. spending time in my investment business.
Then you are ready to go full time.
This is totally a subjective decision by you but, these are the questions I used to decide to go full time.
Hope this helps. Just my thoughts.
Thanks Mike...that is a good line of questioning and criteria...definitely helpful.
@Jake Kozul think it depends on how you personally feel about it. Wen I quit there wan't any doubt but I was already 59 so no comparison. One downside, however insignificant, is not paying into SS for the rest of your life might not allow you much in retirement, but if you are talking about having lots of income then maybe it doesn't matter.
It blows me away you could live on 450k of equity AND add equity. Amazing.
You are considering taking on debt. That does change the dyamics.
There are huge threads on here about this subject.
The debt is only for expansion...looking at a 50% line on the existing homes and unsecured at anywhere from $125k-$250k to handle any fix and flip projects or opportunities that come across to acquire distressed or desperate properties. All of those funds would go back to clearly pay off the debt incurred and purchase more long term holds with the proceeds.
this is something I am shooting for as well (although a few years behind you) so I am interested in some of the responses. Best of luck Jake!
Wow, you're 10x more prepared than I was! I was really depressed and unhappy at my job though so for me it was a personal decision as well as a financial one.
I gave up a six figure income, company car and expense accounts but I gained a month with my parents in North Carolina and a month exploring South America. It was the best decision ever.
I'm not basing it on financials though, I'm basing it on do I want to wake up and be truly happy. I live simple and it feels great to be free.
Freedom is why most of us got into this...or at least us it seems.
I very carefully track my expenses each year (actual vs ideal...there's a difference!). My "quit" number is rental cash flow of at least 150% of my actual expenses. So say you're expenses are $50,000/yr my goal would be $75,000/yr rental cash flow before calling it quits.
Adjust to your personal scenario.
That is a great point...I started really paying attention to cutting expenses this past year, getting better insurance rates and cutting out some of my management. I have been tracking them the past 6 months (since I have tightened things up) very closely to bring me to this point. At what time frame did you feel you had a good handle on your net cash flow Kurt? That is one thing I'm struggling with...I have well more than enough on my ideal, and even if I have some off months, I can should still be ok, but as I am sell off properties, and acquiring more, it is hard to nail down those figures.
I always look at this question as "if you have to ask 'can i quit' you probably aren't ready". even if you are pulling in the right amount of capital like you say, something is holding you back either mentally or emotionally or this would have been a "I quit my job today" thread.
Working my way towards it...easier to see the cash come in as an appetizer and think I can get full than trying to make it the main course...I have a good sized appetizer, but may be being overly cautious.
While your W2 gives you less time for real estate, it will be helpful for leveraging. If you have fully leveraged your W2 income and are cashing flowing on it, then you may be pretty close. It is a lot easier to increase your leverage if you have non-rental income.
In addition to financing you may find it easier to recover from setbacks if you have income outside of your real estate investments.
Is part-time(either reduced hours or projects with breaks) or a leave of absence an option?
There's never going to be an exact time when you're "ready". You can always be more ready if you work and save one more year etc....unfortunately you can end up spending you're entire life waiting to be "ready".
Run your numbers and if the numbers tell you that you can quit your job and you want to quit your job then do it. You have to do what makes you happy though, if the security that your job gives you makes you happy then stick around. It depends on your valuation of freedom vs. security.
I quit my job about a year ago...it's been amazing to say the least....no stress from work, no boss, traveled to NYC to see friends for 10 days , to Cali for a RE meetup and to see friends and drive up and down Big Sur for 14 days, just got back from a 5 day trip to New Orleans to see friends....and Feb 3rd I leave to Thailand for a month or 2. It's only been a year but it's been great. All the free time I got after quitting my day job also freed up some brainspace and I've been able to do some pretty nice deals since I quit that I don't think I would have done if I was working full time. If you have any specific questions feel free to PM me...and we'll see how i'm doing 2 or 3 years out , but so far so good. Hopefully we get a few replies from full time investors that quit their day jobs a few years ago.
No matter what you decide to do Good Luck : )
Goods point Jesse...I am going to stay on for a couple months to finish up another property I am purchasing....have a good relationship with a small, local bank that will at least lend me 50% of my property values for project and a working line. I would like to take on something to build skills in the industry part time.
Congrats on the goals and also the achievements you have made thus far! You are doing well and I am trying to get myself in that position where you are! I would say that when you know it's time, it's time. There is always hesitations about leaving something sound for something that is not as bulletproof; however, you have setup safety nets to make sure that the plan is bulletproof. I hope you the best and I also hope to talk to you when I am in the position to take the step you are about to take!
First off, congrats on your success thus far. You made it there in a short amount of time. I really have no business being in this thread but I am going to say that if you have to second guess yourself on making the jump, then perhaps you should wait until you are 100% confident that you are ready to.
Also, say you go ahead and take the jump.. have you looked at what your worst case scenario would be? Say your business doesn't do that great and you're not doing as well financially as you expected to. At this point, do you think it would be possible to re-enter your current job or even find another with approximately the same pay? I believe you could always re-enter the workforce if you needed to.
Anyways, best of luck with whatever you do and once again congrats on your success!
@Jake Kozul I just turned in my resignation yesterday so I can pursue my investments full time. It's never an easy decision and there's never a "right" time to do it as others have said. I think about five different people have made some great points and covered pretty much everything I was going to say already.
A lot of people would think I'm crazy to do what I'm doing. I have no income from rentals or from any other secure source. I do flips and I have one finishing up in a month and also have about six months to a year of savings/retirement funds I can dip into if needed. I look at it this way, I can continue to work 40+hours a week doing something I don't enjoy and grow my business very very slowly until a time that I feel comfortable leaving (who knows when that will be?), or I can take the leap and put all that time into growing my own business. I'm young, no kids, all the time in the world to devote to growing my business. Worst case scenario is that I completely fail and have to go back to work. Best case, I turn what was a side business into a profit machine and I'm rich before I know it. I think it's worth the risk. What's life without a little risk?!
Most importantly, I will go to sleep every night knowing that I get to wake up and do something I look forward to instead of something I dread. I think it will be the best decision I've ever made. Good luck.
How many years have your rentals produced enough cash to replace your income, 2, 5, 10 years?
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