Should I become a realtor

Question

Hi everyone!

I am at a crossroad! I have my real estate license and plan on being a full time realtor. However, I also want to get back into investing and switching to a career that is 100% commission might delay me being able to get financing, since most require 2 years of income history on commission jobs. Do you have any advice on how I could start investing sooner?

I do own one rental property that has some equity in it.

Kevin Akers · Answer

@Russell Brazil

Thank you sir

Kevin Akers · Answer

@Steve K.

Thank you very much sir

Steve K. · Answer

@Kevin Akers I would talk directly to your preferred lender about this and see what they say, as everybody’s situation is different. They may be able to give you some advice on things you can do and options you may have that we don’t know about. From what you’ve told us, Russell Brazil is probably correct though, it could be a few years before your income level from being a realtor is sufficient to have 2 years of solid enough commission income history with which to qualify for a loan. Your rental income from your one property should help as well as any other streams of income such as interest and dividends from stocks, investments, part time employment/side job/gig income (must be reported on your taxes obviously and the longer and more consistent the better), social security, disability, alimony, etc (not saying any of this applies to you just naming some forms of income that lenders consider). The rule of thumb is they like to see your expenses and debt coverage below 43% of your average monthly income. One thing I did before leaving my W2 in 2014 was load up on high dividend yield blue chip stocks. You’ll still need to show a few years of consistent dividends though. Lenders will usually average the investment income that you earned during the last two years. Don’t set your hopes too high though as it will take a few million invested in blue chip stocks to spin off enough dividends to replace the income from a low six figure salary. Banks like lending to people who don’t really need a loan.

Russell Brazil · Answer

Realistically, your income will be very low in the forst 2 years as well....so to borrow anything, your really looking at a borrowing gap a lot longer than just the 2 year self employment hurdle. 3, 4, 5 years, till you have 2 years of returns that look good.

David M. · Answer

@Kevin Akers

Uhmm...  Haven't you answered your own question?  You know it takes 2 years of 1099 income (that assumes you have sufficient income, too) to qualify for a loan.  Unless you want to and are amble to pursue more exotic lending options, you need to have income.

There are plenty of "sales pitches" on doing real estate investing with "no money."  But, lets face it.  It called investing for a reason.  You need to have a primary income to fund/finance the investing.  I wouldn't call a professional stock trader who makes a living trading stocks a "stock investor..."

Good luck.

Kevin Akers · Answer

@David M.

My question is if it would be wise to switch to full time real estate if my goal is to buy a duplex in the near future.

David M. · Answer

@Kevin Akers

Oh, so if you still have your W2 job, what's your question?  Start your real estate agent work part time and once you get that going you can switch over.  Or, at least use your W2 to get the loan to get you house hack going.

Kevin Akers · Answer

@David M.

I do still have my W2 job

Kevin Akers · Answer

@David M.

Thank you so much for the information. I figured that switching g to real estate could mess delay things a bit.

David M. · Answer

@Kevin Akers

well...  Do you still have your W2 job?  Can you purchase something first?  If not, I think you are kinda screwed since you will have a break in your W2 income (I guess unless you can explain it away with COVID-19).  Otherwise, it sounds like you need to use "other people's money."

I suppose your current rental doesn't cash flow enough?  Don't forget, lenders recalc on 75% of your rent schedule.