Don't quit your day job?

60 Replies

Let me start by saying that I discovered this forum a few weeks ago and can't get enough. I feel like I have gained about 100 mentors overnight, and all I wanted was one.

My question is for seasoned investors who, at some point, quit your day jobs and jumped in with both feet. I know the experience will vary widely from case to case, but I would like to know how long it took each of you to feel you could count on your RE investments to support you and your family.

Honestly, I would love to quit my day job in 2 years. I know this is a lofty goal, but I am ready for a change, now! I have a lot to learn, but I am extremely determined and and eager to know all I can about the industry. Is my dream completely unrealistic?

Thanks. Brandon

Originally posted by "maynard76":
Let me start by saying that I discovered this forum a few weeks ago and can't get enough. I feel like I have gained about 100 mentors overnight, and all I wanted was one.

I'm going to skip the question at hand and respond to your comments above. We are so happy that you feel this way. There are so many great people on site helping one another out and it really makes it inviting to others. I hope anyone reading this sees the power of helping one another and are all motivated to participate more on site.

Welcome new members. Participate. You are making a difference!

Sorry about the interruption to your question, but I just had to comment!

Two years isn't as lofty as it seems if you do it right. What I did was build several different income streams so that I wasn't overly dependent on one. Residual income is the key, most people just trade money for time. You can make more in real estate than just about any day job. Read some of the many books out there on the subject just and get started.

8)

For most people, it takes time, money and great credit to build a portfolio that has enough cashflow to support them and their family. I think a great way to go at it is to learn how to wholesale deals... find, negotiate and get under contract, then assign (sell) for a fee. Then look for the best deals to keep for yourself and earn your way out of your job.

I was forced into becoming a full timer. My J-O-B went away right after I purchased my first house in Las Vegas (2003). I took on a couple of short term contracts (I was doing investor relations for publicly traded companies) to carry me through, then focused on learning everything I possibly could about real estate investing. I sold my house 14 months later at a huge profit, and used that to live on and get me going with my investing, which has worked out well for me.

I do mostly wholesale deals that I make $3-$10k on average, then look for the "cherries". My most recent "cherry" was a great townhouse on the 18th hole of a golf course, that I was able to take over "subject to existing financing", that cashflows $200/mo. Then there's the rehab that cost me $44k all in that rents for $750...

The wholesale fees are my ongoing "paycheck" while I build my portfolio.

kygregor,

I had about 30 rentals at the 2 1/2 year point. Of course, I was not only getting the positive cash flow but also earning the managment and maintenance fee for these properties. In addition, I wholesaled a few properties during that period when I accidentally had too many deals come together at one time (too many to rehab at once).

Mike

I started out doing wholesale deals. There is an art in finding them, but it is far from impossible. With the money from wholesale deals, you can build some cash reserves to buy your first property with (relatively) little down. I personally wouldn't quit my day job because it provides a foundation to get my entire investment program off the ground.

I found a book that can help you get started on AMAZON.COM

The New Path to Real Estate Wealth: Earning Without Owning
by Chantal Howell Carey, Bill Carey

"Decide on your goals before you invest in real estate..."

Good luck. There's $$ to be made in wholesaling.

Anything is possible but it took me 8 years before I quit my six figure corporate grind job. Here's one approach: Get your feet wet by puchasing a rental property. One to four units will qualify for conventional financing. Forget all the "no-money down real esate guru" stuff for now. You'll need 20% for a down payment. If you don't have it in cash, consider a HEL, HELOC, or maybe borrow on your 401K. Run the numbers to make sure you'll have at least a small positive cash flow. Manage it yourself and learn the ropes. You'll soon know if you have the stomach for the rental side of REI. In my mind, rental property is the foundation for REI. By managing your property, you'll get a feel for some of the basic maintenance skills involved in doing cosmetic property flipping, which is my other REI income source. It's no picnic coming home from your day job and dealing with a tenant who called to say that the water heater is leaking and soaking the ceiling of the unit below but the benefits far exceed these occasional headaches. If you've got a young family, its important to note that health insurance coverage and other benefits at a major corp disappear when you're self employed.

Originally posted by "MikeOH":
kygregor,

I had about 30 rentals at the 2 1/2 year point. Of course, I was not only getting the positive cash flow but also earning the managment and maintenance fee for these properties. In addition, I wholesaled a few properties during that period when I accidentally had too many deals come together at one time (too many to rehab at once).

Mike

Sorry for the delayed response, I have been out of town, but I am interested in how you obtained financing for the 30 rentals in 2 1/2 years. That is my biggest fear right now. I am pulling in about $55,000/year and that doesn't leave me a lot of wiggle room after my mortgage pmt, at least through conventional financing. Care to share your method?

Originally posted by "Rehab702":
Two years isn't as lofty as it seems if you do it right. What I did was build several different income streams so that I wasn't overly dependent on one. Residual income is the key, most people just trade money for time. You can make more in real estate than just about any day job. Read some of the many books out there on the subject just and get started.

8)

I am currently reading Robert Irving's "Buy, Rent, Sell" and feel like I have picked up a lot from it. "Rich Dad, Poor Dad" is next on the list.

If you buy an apartment building you could afford to retire literially overnight. So here's what you do.

Do a home equity line of credit.
Add that to whatever savings you have to invest
Liquidate all other non essential assets and investments
Put all your funds together and start looking for an apartment building to buy. The more units the better.
10% down buys you a building so 100k buys a 1m dollar building any day of the week.
But try to stretch your money as far as possible. ie: get a first and a second mortgage and then your down payment all combine to purchase the largest building you possibly can. That way you can retire.

I don't know why more people do this. I know so many people who could do this and retire overnight, but the fear and what they don't know holds them back. But by simply putting your money to work for you, and then getting a huge mortgage which is all good debt working for you, all that money working for you means you don't have to work. All you do is manage the odd issue that arises with the building which might take up 2 or 3 hours a month at very most. I have 1 residential manager that deals with everything in the building. For that he gets a 80% discount on his rent. But I don't have to lift a finger. On average all I do is talk to the guy for about 5 minutes once a month. Plus mailing off perhaps 1 letter a month to pay for a carpet cleaning or some small bill. It's ridiculous how much time it actually takes to maintain the building once you got someone in there running it for you.

That way you have all the free time in the world to travel, stay home, do what you want, spend more time with your family, work on more apartment deals and the list of benefits goes on and on. Then once a month watch as you get a big fat rental deposit go into your account.

For example:

On one 48 unit apartment I have the monthly gross income is $35,000. After all expenses I'm left with $10,000 Liquid spendable cash. Plus I'm making $10,000 per month in asset appreciation, plus I'm making $3000 per month in mortgage pay down, and I haven't factored in tax depreciation. So in total I'm making at least $23,000 per month on that building.

You can go out right now and do this too. Just buy a building using a 1st mortgage, a seller 2nd mortgage and whatever you can put together. Because once you have one you'll no longer have to work if you don't want too.

Think about, this is not rocket science. I didn't even graduate from high school. So what's stopping you from doing it? My brother works in IT which he had to study for years for a degree to get into. And the amount of knowledge, effort and work he has to put into that to make just $70k per year is crazy. Plus taxes must kill the average person who end up paying 1/3rd of that in taxes. With a building in a corporation you only end up paying about 18% on your net profits.

The alternative is that you go on working 40 hours per week plus commute time until you die. Man that does not sound very attractive to me. Unless your job is like giving back rubs to Pamela Anderson then how could you love your job that much? I just don't see it.

And buying a building is easy too. It's gotta be about as easy to do a learning to drive a car. And if you've bought a house well then you already know the process, so what's stopping you.

One last thing...most heart attacks happen on Monday morning between the hours of 6am and 9am. That's the time that the alarm clock goes off to start the week at jobs people absolutely hate going too. But they're literally slaves to their jobs because they don't know any other way of making a living. When infact by simply putting their money to work for them, they wouldn't have to slave away anymore. It's just sad how uneducated about the power of money and leverage most people are.

Anyway good luck to you.

Maynard,

I don't have any secret or creative technique to buying a lot of properties. In fact, I just run a traditional, boring rental property business. I simply borrowed the money for my rentals from two small local banks. The key is that you must buy right so that your income increases with every rental you buy. It also helps if you know the bank officers. I deal with the President at one bank and the Vice-President at another. If you don't know these officers at your local banks, ask at your local REIA. Obviously, excellent credit is a MUST!

Mike

Originally posted by "MikeOH":
Maynard,

I don't have any secret or creative technique to buying a lot of properties. In fact, I just run a traditional, boring rental property business. I simply borrowed the money for my rentals from two small local banks. The key is that you must buy right so that your income increases with every rental you buy. It also helps if you know the bank officers. I deal with the President at one bank and the Vice-President at another. If you don't know these officers at your local banks, ask at your local REIA. Obviously, excellent credit is a MUST!

Mike

I have the excellent credit (780) and started in the local REIA last month so I might actually be heading in the right direction! I want to to post something (later tonight when I get near the book) I am reading where the author says it is extremely difficult to use traditional financing for multiple buy and hold properties, unless you already have an extremely high income. I am interested to hear your opinion on what he has to say.

Brandon

I am reading where the author says it is extremely difficult to use traditional financing for multiple buy and hold properties, unless you already have an extremely high income. I am interested to hear your opinion on what he has to say.

Brandon,

I did it and I didn't find it extremely difficult.

Many times, the "gurus" are trying to sell their expensive bootcamps, courses, and mentoring. Who would spend thousands of dollars for a bootcamp that told them to borrow the money from their local bank? On the other hand, newbies by the thousands will pay big bucks to get "insider secrets know only by the rich"! Guru courses almost all have one thing in common, the promise of some "secret" that ordinary mortals don't know, but can be revealed for the price of an very expensive course, bootcamp, or mentoring.

The truth is that operating rental properties is a very simple business. There is no SECRET. If you simply learn the basics and follow those basics, you should succeed. Unfortunately, the majority of new landlords never get the basics and simply don't make it. The gurus aren't going to sell many $5,000 saying that!

Mike

Rehab702

5% is pathetic. Last year here in Edmonton real estate appreciated by 52%. This year we're up 18% so far and everyone is predicting like 50% again. That 5% is out in Ontario where things are just coasting along. So if you can find a market that it's appreciating at a huge rate you can make a fortune. Everyone and his dog in my city has made $100k buy simply buying a home. My friend is on welfare but he bought a home last year and now he has equity of $200k after mortgage.

Originally posted by "MikeOH":
I am reading where the author says it is extremely difficult to use traditional financing for multiple buy and hold properties, unless you already have an extremely high income. I am interested to hear your opinion on what he has to say.

Brandon,

I did it and I didn't find it extremely difficult.

Many times, the "gurus" are trying to sell their expensive bootcamps, courses, and mentoring. Who would spend thousands of dollars for a bootcamp that told them to borrow the money from their local bank? On the other hand, newbies by the thousands will pay big bucks to get "insider secrets know only by the rich"! Guru courses almost all have one thing in common, the promise of some "secret" that ordinary mortals don't know, but can be revealed for the price of an very expensive course, bootcamp, or mentoring.

The truth is that operating rental properties is a very simple business. There is no SECRET. If you simply learn the basics and follow those basics, you should succeed. Unfortunately, the majority of new landlords never get the basics and simply don't make it. The gurus aren't going to sell many $5,000 saying that!

Mike

I definately agree with you about the Gurus; I am very sceptical. Here is the section I was referring to if you care to read it, sorry about the type-o's...

"In addition, to be credit-worthy enough to get an institutional investor loan, as described, you must also have enough outside income. That means that you must make enough money to support the investment.

But, you may argue, the investment is going to support itself,. If I buy a rental house, the rental income will pay for PITI. That's better than an owner occupant who will get no income from the property.

So you say. But lenders say otherwise. They want you to qulaify for the investment property just as if it were a property you intended to occupy. And that gets a little bit difficult.

The reason is that you are already living somewhere and are paying rent or mortgage payments. Now, when you want to buy an investment property and get an investment loan, your home payment became an expense. If the basic qualifying formula is that income must be three times payments(the actual formula is close to this), that means you need to earn much more income to qualify for the investment mortgage. "

He goes on to give this example:

Home mortgage 1,000 month (which is what I pay)

to qual for it at 3x you need 3,000 month income (which I do make)

Rental property 1,000 month

Again you need 3,000 income, but you no longer have it because 1,000 got subtracted to pay for your mortgage. Now you need 4,000 income to qual even though the rental property produces 800 month(200 negative).

However, lenders will only count 75% of your rental income, 600 dollars, leaving 25% for expenses, vacancies, etc...."

Now to answer my own question, he is showing the property as negative $200 cash each month, but as you mentioned, you should be making a better decision than that, and having a pos flow. Assumably, enough to make up for the 25% deduction the lender takes for misc. expenses.

Thanks for reading my short novel.

Brandon

r2d2- It's posts like yours that inspire the hell out of me! The 9-to-5ers that I talk to about my REI plans always say, "If it was that easy, everyone would do it." Yeah, everyone with the BALLS to leave there comfort zone maybe. Thanks for helping me rid myself of hestitation!

beekrock,

Well thanks. I really appreciate that!

You know it's not hard to get rich. All you need is a lot of good debt and as many income producing assets as you can muster. That's it, that's the magic formal. I know for most people buying one apartment building would literally solve there financial problems for live and allow them to retire almost immediately. And buying an apartment building is not hard to do. I just bought one with 10% down and that's up here in Canada where we don't have the liberal lenders like you have down there in the US. Down there, frig, seems like everyone and their dog will lend 100% or 110% on a property.

But as a safe bet all you need is like $50k. $50k will likely buy you a multi million dollar apartment building, which again will set you up financially for life. From there the sky's the limit.

All you do is go on to your MLS, or check your commercial real estate papers for apartments that are for sale. And just start making offers. The offers will look something like this....

Here's the letter of intent that I actually use when I'm trying to make a deal with a seller without having to commit to a contract: ( if you use it you'll have to clean it up a little, it didn't paste right on here)

=============================================
LETTER OF INTENT TO PURCHASE

Date: Sept 22, 2006

To: XXXXXXX

From: XXXXX XXXXX
XXXXXXX Inc.

Re: 50-plex residential property located at: XXXXX, XXXXX, XXXXX

The following sets out the basic terms upon which we would be prepared to purchase the Property. The terms are not comprehensive and we expect that additional terms [including reasonable warranties and representation,] will be incorporated into a formal agreement (the “Agreement”) to be negotiated. The basic terms are as follows:

1. Purchaser: XXXXXX Inc or it’s nominee

2. Vendor: Current owner of the Property represented by Realtor: XXXXXX XXXXX

3. Property: 50-plex residential property located at: XXXX, XXXX, XXXXX , free and clear of all liens, charges and encumbrances at Closing, except: [e.g. those recorded on title to the Property as at the date hereof, with the exception of the Vendor’s mortgage(s)].

4. Purchase Offer: $2,000,000.00

$1,500,000 New first mortgage (or possible option of assumption with increase of existing first to 75%)

$450,000 Second mortgage (carried by vendor for 5 years interest only at 8%)

$30,000.00 Initial Deposit
$20,000.00 Balance

5. Deposit: Upon execution of the Agreement, the Purchaser will deposit the amount of $30,000.00 which will be fully refundable if the Conditions Precedent are not satisfied or waived in writing by the Purchaser. Otherwise, the Deposit will be applied to the Purchase Price at Closing. If the Purchaser defaults at closing, the Deposit will be retained by the Vendor as it’s sole remedy.

6. Conditions Precedent: The obligation of the Purchaser to purchase the Property will be subject to satisfaction or written waiver by the Purchaser of the following conditions within 60 days after execution and delivery of the Agreement.

Review and approval of the documentation concerning the property;

Completion of satisfactory physical and environmental inspections of the Property; including suite inspections.

Completion of satisfactory due diligence search and examinations;

Satisfactory review of the title of the Property;

Satisfactory first mortgage financing being arranged for the purchase of the Property;

Satisfactory second mortgage being provided by the Vendor for the purchase of the Property;

7. Additional Items: This letter of intent hereby states the major terms of the agreement that the Purchaser would be prepared to move forward with. This letter of intent is in no way a legally binding agreement between the Purchaser and the Vendor.

Sincerely,
XXXXX XXXXX

_____________________________________

The above terms are accepted this ___________ Day of _______________, 2006

_____________________________________

XXXXX XXXXX
President
XXXXX Inc

Phone:
Cell:
Fax:
Email:
=============================================

All you do is start sending that out to enough realtors and or private sellers who have apartments for sale and you will eventually find one that will be in a situation where they want to deal with you. This is an actual letter of intent I used to start negotiations on a building I bought. Some of the info I modified slightly. But the premise is exactly the same. The deal worked out exactly like this. A first, a second, and my small down payment. Anyone can do this. It's easy.