Listening to podcasts and reading articles, etc. it's clear that investing in real estate while simultaneously holding a full-time job is possible and common. But I'd like to target this question to a more narrow population and I really hope there's some of you out there...
If you are/were self-employed (and have employees under you, and possibly share ownership with partners), how do/did you invest in real estate at the same time and/or ultimately transition into real estate full time? Any particular strategies? What did you find difficult? What did you have to give up/change? How would you do it differently, etc.
I love being self-employed, but my business model (advertising agency) makes it nearly impossible to remove myself without staffing up in a big way... which has it's own challenges. So I feel like I've maybe painted myself into a corner. Anyone else have this experience?
It often seems impossible to escape during (and even before and after) regular business hours, so I'm not sure how I'd go about business on the real estate side.
Right now, I'm rehabbing a duplex nights and weekends (my first property), but that's no fun... so just reaching out for ideas and advice from those of you who have "been there".
I'm not self employed, but a friend who is part owner of his own software and services company is. He used a turnkey property management company that handles finding deals, rehab, leasing, and management. He evaluates the deals and pays cash, but the company he uses can do short term funding for purchase/rehab also. He settles for lower return and less risk (he could increase his returns substantially by financing).
The essence of this approach is to find a partner or partners with the time and expertise to do this with your money - whether you are buying services or sharing ownership with more active partners.
You are in the same boat as many doctors, lawyers, and other professionals.
Hey @Drew Clements I was self employed when I started on my last round of investing, I had my own law office. It was hard to find time. I ended up committing to doing real estate on the weekends as my days were too busy most of the time. I am still not full time in real estate. I also partnered in my real estate business when I started last time and between the 2 of us it worked much better. We would set lunch meetings to discuss things, and weekends to work on things. Two people can do more together than 3 people working solo any day. I found I could always slip in a phone call or two on the real estate when needed. Hope this helps, good luck.
Understand the difference between being self-employed and being an investor (read Cash Quadrant). An investor and a business owner are not actively involved in the investment that makes them money. Most real estate "investors" must work in order for their money to make money. They are not investors, they are self-employed. Every flipper is self-employed. Learn how to truly invest in real estate so that you don't have to work to make money. I can give you more details if you email me.
God Bless You!
I've made the transition you're describing. I've noticed a few things along the way:
1) Real estate investment is a business. In fact it is a pretty big business involving big numbers. Business is a team sport. If it's a solo sport, then that's called self employed and isn't a business any longer.
2) Most investors start with a little investment capital and limit the size of the business based on that small capital. They don't have enough money to do big projects. Small projects don't make enough money to fund hiring a team.
3) Unless you learn how to raise capital, you enter an orbit that you can't escape. The business will stay small. Developing this skill unlocks your growth.
4) Unless you aim bigger and start with a cross functional team, you won't develop the skills in the business to grow.
5) You need 5 distinct skill sets in your team
A) finding deals
B) deal analysis
C) raising capital
D) construction and operating management
E) sales and marketing.
Some people say "I'm a contractor, or I'm handy so I'll start rehabbing houses". Well that may get a couple of projects done a year. But it's only 1 of 5 necessary skills. You need the other skills to grow.
Drew Clements it can be done, with lots of planning and educating. I have a company with offices in the US and a third in Asia. The company sounds bigger than it really is and my sales and margins have been flat for many years. I deal in a sunset technology in the semiconductor industry. I decided to focus my future in RE and not invest in further technology in my current business arena.
To make the transition I did not want to go "cold turkey". I have customers and more importantly long term employees that count on me to keep business flowing. So I created a transition/expansion plan that moved me away from daily activities and placed greater reliance on my team.
My organization is extremely flat, so I had to identify potential leaders and groom them to take over various aspects of my daily "job". Once those individuals were identified, and responsibilities were assigned, I "pretended" to be out of the office. I monitored projects and key team members through emails and from behind my desk. However, I instructed my team not to come to me unless it was "mission critical". I also passed my customers to my team and slowly removed myself from direct contact.
Right now it is hard for you because you are actually trying to handle 3 different jobs on your own: ad exec, RE investor and general contractor. I know this because I did the same thing on 8 units over the past 12 months. I did everything from find the deal to installing kitchen cabinets, all while I was working with teams in different time zones and customer needs in my "day job".
It does get better. I learned a ton about construction and permitting. I know exactly how long it should take to demo a kitchen and install cabinets and pretty much everything else. My knowledge level is light years ahead of where I was at the start of my project and my BS detector in dealing with contractors is extremely accurate.
As a business owner I understand your reluctance in letting go of your existing company. Build your own knowledge in rehabbing and apply the business knowledge you gained in your existing company to your new RE future. I don't expect you want to be swinging a hammer forever, so once you gain the hands on experience and apply your business knowledge you will be just fine in RE.
I may get chastised for what I am about to say next. RE is really no different than any other business. You deal with a product, clients, budgets, accounts payables, accounts receivable, taxes, etc. It is the industry specific knowledge and the application of good business practices that make any business successful. If you believe that to be true, as I do, then the issue of running your current company and the RE is just like a business executive overseeing various business units in a single company.
Sorry for the long reply, but I hope it helps. Good luck with what ever you decide!
Awesome! This is why I love BP! Thanks everyone for your responses!
Here some stuff that stood out to me: REI can be self-employment or and investment as well... so although I would actually love to be self-employed in real-estate, I can see that for my current situation, the best approach may actually be the true "investment" side - partners, teams, etc. where I'm not as hands on.
Again, thanks all for the perspective and encouragement!
Thanks again for all the responses to my original post! Just want to be accountable here (even if none of you read this) and give an update on where I'm at with things:
- Following my initial post/responses, I decided to move forward and transition to a different "role" in my company. I focused on building systems and resources that enabled my team to work without my day-to-day involvement. I negotiated a deal with my partners and transitioned out of active involvement starting in May and completed the transition on June 15th. I know have 100% of my time (no income from the business, but it's a net gain to have full control over my time).
- I've finished remodeling my duplex and have it listed for sale.
- Once our property sells, I'll be moving my family (didn't mention this before, but I have three kids under the age of 5, so having time is doubly important to me/them) to Utah (Logan/Smithfield) where I'll start building my real estate business (wholesaling and flipping).
- Why Utah? We have a family friend that's been in real estate for 30+ years (agent, property manager, contractor). I'll be working with him on his business (financing, sales, marketing... the areas where I have experience) while simultaneously building my own/getting experience.
I know there's a lot of wisdom to the contrary of jumping 100% into real estate without the safety net of a full-time job... but I'm going to make it work :) I'll post periodically on my progress and invite and value your feedback (including your thoughts on the above)!
Again, thanks for the support!
Sounds great, Drew!
I started out investing part time, but it was a real challenge while working in an unrelated field full time. I'm not investing full time now, but getting my real estate license makes me full time in "real estate" and I feel that there are a ton of benefits that come from going full time.
I'm sure you'll do great with your wholesaling and flipping business, there are hungry investors here in Logan that are always on the lookout for deals! Make sure to follow up on here when you move out to Smithfield, there are a couple of investor groups that meet regularly - plus it'll be nice to meet you anyway!
Good luck with the sale of your duplex
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