Forced (early) Retirement... What to do
Investor · Grand Rapids, MI · Member since 2012 · 158 posts · 49 votes
Hi All,
I've been lurking here for a while. Finally a post: My company has been bought out and I am facing a lay-off from a narrow field with no competitor to move to in my area. I'd like to stick it out in West Michigan for at least four more years so teens can finish school here.
The question I have is, is it realistic to take $100K cash (life savings except smallish 401k) and turn it into at least $3500/month with a multi-unit? Currently we have excellent credit but without the job we probably are not bankable. I was thinking of buy & manage instead of trying to flip. Maybe a 12-16 unit at $26k/unit. We currently are taking payments on two LCs that will be over in 24 and 48 months (the furthest out has a small mortgage). Any advice.ideas would be appreciated.
Paul, you're in a big town, your skills transfer to banking, investment banks under portfolio managers, not sure if you have any license, but you might consider a Series 6 and 7 in a larger bank. At least you know what a cussip number is. You could still engage RE as well. :)
one day you will look back & laugh about the situation you are in, & we will be here with you.
Good luck you deserve it.
@Paul Jamgotch keep your chin up. I lost a job once too. It played out just like Goodfellas when Joe Pesci walks in the room and sees the plastic on the floor, realizing what's about to happen. Insecure, incompetent bosses suck. Anyway, things have a way of working themselves out.
I wouldn't give up on your multi-plex idea. We bought a 14 plex with about $80k down that will cash flow close to $3000/mo when you include the coin op laundry in the basement. It can be done if you buy it right.
Good luck!
About the job thing - I was without a job in 2006. Best thing that ever happened. Within 12 months I was making more money than at my previous job, and I had more time. I have often sat in amazement at this event in my life, and how many people never pass this threshold.
Being in the position I'm in now, I have the confidence to step out of my current j.o.b. situation before I'm in a heap of trouble and better my financial position. I'm following the @Account Closed
plan. I read a ton of his blog posts (perhaps all of them) prior to seeing him on BP and it makes sense to me. I also have solid business experience. This is an easy decision. If you haven't checked out Ron's youtube videos, I recommend them.
Funny. When I was laid off, I had just purchased my fixer upper for 35k. Its what made me get into real estate investing. Stroke of luck, huh? Things change. I used realestateexpress.com - I thought it was fine. *Hint* if you start a cart, then leave it there, a sales rep will call the next day saying they have a wonderful special going on and will give you half price* gotta love sale!
Im glad you have some financial cushion to shelter you through this adjustment.
Now, with 100k, i could comfortably get 2-3 cash flowing properties in working class neighborhoods paying for themselves in 3-6 years, bringing in 1600/mo after property taxes. Boy oh boy, That would be lovely!
@Lisa Phillips thanks for the tips and sharing your story. I'm glad you landed on your feet
@Wade Sikkink thanks for the advice and I'm glad you landed on your feet as well. I haven't thrown out the idea of a large unit so your experience is really valuable info for me to consider.
Paul, what did you do specifically and what industry? Not just being nosey but to get a better grasp of it all.
Getting into RE as an agent might be a good thing for you, but realize most fail in 3 years. The key to success is knowing people and knowing people in various professional and vocational areas. Knowing everyone in a factory is great. but you can't base a business off of knowing many in one industry really.
Write down 100 people you know, they need to be people you can approach about you getting into RE and who would be reasonably receptive to you approaching them. Most all need to be employed or have means. If your area is like mine, a third of who you know will be related to a Realtor or have a close relationship with one. That doesn't mean that your relationship is worthless with them. I sold a life insurance policy to an insurance agent once, so anything is possible. I had an aunt in a small town about 30 miles away list a property with another agent! Another third won't be interested in buying or selling within 5 years, but use them as centers of influence and for leads to others they know. The last third may be in the market. A third of them won't use you, that leaves 20 people you might work with in the next 2 or 3 years, that means you might have 7 to 10 to work with. 20 to 30% of those won't close or close on time, there may be issues that keep them from really buying today or in year one. There should be about 6 deals on that first year to your list of people. Yes this is conservative!
But, if you get 20% of those to think of you when they speak to others, just twice a year, that's 40 more contacts second hand, getting a third of those is 12 with 3 falling out, you have 9 more deals. So, 15 sales can fall out of that initial list.
Keeping your ear to the ground, walking and talking, telling everyone you meet you're in the business should get another client every month on the average, again with fall out that's 9 more deals in a year. Now, you may be banking on 24 deals.
Now, when I say a year I don't mean in the first 12 months, but within the year of starting to work with them. The person you meet in March may not close until October. So it will take 12 months to have closings set up in a consistent manner.
Later on in year 2 and into year 3 you can look back at those fall out deals if it's taken them that long to cure any credit issues or never moved again on another deal, these get fed back into your system of potential clients, suspects to clients. So toward the end of the second year and into the third you may get some snowballing. You really need to stay in touch with all those you come into contact with to get this going and build the business.
It's tough work. If you can't come up with 100 people, it will be tougher, if you know 200 people it will be less stressful, not really easier as you need to tend to the garden, but you'll get rolling faster.
You should expect to go 6 months before a pay day in RE as an agent. It also depends on what broker you go with, some will assign you to a seasoned agent and you may have a commission split with them, of some kind, in the second month, if the other agent really puts you to work. You'll probably need about $3K in the first year for expenses, fees, education and coffee to walk and talk on, could use more, but that should scrape you by.
In Jon's example as to commissions, we didn't mention the house, the broker's part of that 3% sales commission, such range early on from half to about 25% and other arrangements may be an option where you buy in and receive 100% of the commission, that might not be the best choice for a new agent unless you're sure about your production levels. It is a numbers game.
Don't go wild on a` wardrobe, most dress casual business. No new car needed, just keep yours clean inside and out and in good order, I'd bet you already have a nice car or truck.
Sorry for the long post, just conversation of an opinion, no guarantees there.
So, just know it's not all roses and that the key to success as an agent is knowing people, unless you get a job with a builder or some other captured type agency.
If you don't have a long list of contacts, lets consider something else and may be go part time as an agent. I'd say if you hit $3500 a month at the end of 3 years you'd be doing exceptionally well starting out, so part time might be something to consider.
Just, IMO! Best of luck regardless of what you do, I'm sure you'll do well. :)
Great advice, Bill. I appreciate that you put this together as its very sobering and valuable advice. I'll refer to it often over the next 12 months, I'm sure.Thanks so much.
I come from a unique area in finance...a Trading Desk. I've spent the last 13 years of my life in a 3' x 4' area staring at six monitors and executing trades over online platforms and other trading Desks in NY, Chi, London, and Australia (I am in MI). I was not prop trading so its not like I am a market guru or anything; I was simply following rules set in place to execute trades when certain events transpired. Coming up with a list of 100 people would be nearly impossible for me which is why my RE career would require unique marketing and supplemented by flip projects... at least that is the idea at this point and the one I am working on heavily while I fulfill my obligations with current firm.
@Paul Jamgotch I am a buy side trader in the Detroit area. The profession is not as stable as it used to be and we have been close to being in the same situation as I suspect your firm is in. Unfortunately there are only a handful of trading positions in all of Michigan. If you lose your job you almost have to change careers completely. Best of luck to you. Stick with it and I am sure you will succeed.
@Paul Jamgotch at least you are well versed in stressful occupations so becoming a RE Agent & a MF Landlord should be a breeze :)
Good luck...too bad you weren't in our neck of the woods.
@Pat L. Thanks Pat. There has been a lot of stress over the years... lol Agreed, NY, NY area would be prime spot for what I did. Our kids are doing quite well in high-school so we're trying to keep from moving them.
Paul, you're in a big town, your skills transfer to banking, investment banks under portfolio managers, not sure if you have any license, but you might consider a Series 6 and 7 in a larger bank. At least you know what a cussip number is. You could still engage RE as well. :)
I have a series 3 but could add a 7 for the right opportunity. Right or wrong, I feel my age (mid 40s) is working against me in the financial field. Easier to get a guy out of school and train him the way you want for $30-40k/year. I ask myself if I want to try to get back into the tub of heating water with the other frogs again.
I've been looking at property. Have one with @Brandon Krieg I am eyeing... meeting with a GC tonight.
Thanks for all the advice, all... plz keep it coming.
Actually, insurance companies have pay days too, it's how I started and the 6/7 is a big plus, consider Metropolitan or Prudential, IMO. You'd have lots of time for RE.
I do understand the age issue in reality, get a kid that has no bad habits yet, trained like you want them and who might be around 15+ years. BUT,
In retail finance, banking and insurance that target retirees, estate planning matters, buy-sell agreements to business owners, even larger health plans and corporate accounts older applicants have a much better chance of landing beginning positions, in sales, than the accounting student who just got out of school who looks like they could be 19.
Banking, insurance and yes, RE are all in the financial arena. This industry has it's public perception set at being conservative. Conservative meaning mature thinking, ability to gain trust, influence others with knowledge, expertise and experience. It's a dark suit white shirt business in banking and insurance. That's because of the need to be perceived by the public as having conservative wisdom.
True, there may be some younger grad types in that bank, some 35 year old might be your supervisor, but give respect where it's due, they been there, done that. There will be students in clerical jobs, but look at the real sales force, you'll see maturity there!
I assure you, in financial sales, you age is an asset and they are aware of that.
You get some 62 year old corn farmer in there and I assure you, he'll listen to you before he does the young'n! You just need to learn the job, in your 40s you have 20 more years you could be in the industry.
I'm not pushing you away from RE, but seems to me you need to do more of what you know, get a steady check and get into RE gradually. :)