I need advice about quitting my job.

16 Replies

Hello BP,

I need some advice.  I have the opportunity to quit my job and partner up doing wholesaling full time, we are actually starting to get some deals done now.  I am excited about the opportunity, and the benefits it can bring, however I need some input.  I have a little apprehension because I want to start purchasing rental properties within the next year, and I know that it gets much harder to get a loan without a traditional W-2 income.  Have any of you guys dealt with this, and if so, what is your advice?  Thanks for all your help as always!  

Yes, it can be harder to get funding without a traditional W-2 income. Is it an option to continue to work your normal W-2 job and do wholesaling on the side for a couple years? This way you could save more, start building your rental property portfolio and start wholesaling deals as well.

Depends on a lot of factors. How much money has wholesaling made you? Has it exceeded your W2 income?

Don’t get overly excited or anxious to quit. I’m not going to even consider quitting until my investments make me (and probably my family by then) 200-300k a year. I’m giving myself 12-15 years minimum to do that.

It is SIGNIFICANTLY more difficult to get a traditional loan without a W2. My husband went from W2 to self employed while working for the exact same company doing the exact same thing with a significant investment portfolio and enough income to cover the mortgage many times over, and was denied for a loan because he didn't have 2 years of self-employment tax returns. 

If you plan on using different forms of funding, then this isn't a big deal. If you plan on going the traditional mortgage route, maybe reconsider your departure.

Originally posted by @Mindy Jensen :

It is SIGNIFICANTLY more difficult to get a traditional loan without a W2. My husband went from W2 to self employed while working for the exact same company doing the exact same thing with a significant investment portfolio and enough income to cover the mortgage many times over, and was denied for a loan because he didn't have 2 years of self-employment tax returns. 

If you plan on using different forms of funding, then this isn't a big deal. If you plan on going the traditional mortgage route, maybe reconsider your departure.

Hi Mindy, when you say "traditional mortgage"...do you mean FHA, conventional, commercial, or "all of the above"?

I'm not ready to quit my day job yet, but use commercial lending. I told my wife a while back that my banker will probably have more say whether I "retire" or not than either of us! lol 

Originally posted by @Mindy Jensen :

@Dustin Beam , all of the above. Not hard money, private money, seller financing, etc. But a mortgage from a traditional lender.

 I figured that's what you meant. 

It's really a shame because I figure I'll need to double my loaned amount to quit my job and I couldn't sustain paying the existing loan off w/ my day job. If the property isn't doing its job, I'm screwed either way. But, I gotta play by their rules. 

Difficult to get a loan- No 

Difficult to get a traditional loan - Yes

Unless you are making enough money and feel confident enough to quit, hold on to all income- My opinion 

(I personally probably quit my job 2 years too early but it worked out in the end, never be too scared to make the leap )

When quitting a W-2 job to start a business (whether it's full-time consulting, making widgets, or wholesaling real estate), the advice has always been to get your personal financial statements in order (the "Suze Orman" stuff) before turning in your resignation. This means building up your cash reserves, paying down (or off) your debts, and opening any credit lines you are going to need. The financial world understands W-2 income, but has trouble with self-employment income.

Unless you've started a business before, it's hard to know the stuff you don't know. Before I quit my W-2 job to start a business, I made a 2-page list of questions to answer. Half of the questions I could research (asking my insurance agent for a health insurance quote, for example), while the remaining questions I concluded could only be answered after I took the plunge. That's when I learned that none of these unanswered questions were relevant to running a business.

My business failed after a year, but I managed to find a W-2 job (technical writing) that combined the mission of my failed business (freelance writing) with my previous W-2 career (computer tech). A few years later, I had the experience and portfolio of writing samples to work as an employee of a small temporary help agency. In the classic lemons-into-lemonade turnaround, my income as a W-2 contractor was higher than the salary I could have made as a W-2 employee, which allowed me to build my wealth that much faster. While some contractors work on a 1099 basis, I worked as a W-2 for safe harbor reasons (the IRS has vague rules about who is a contractor and who is an employee -- picking the wrong one can get expensive for the parties involved when the IRS disagrees with your choice).

I also had to learn how to live on a lumpy income stream as a contractor (if the agency didn't have a project for me to work on [no "billable hours"], I didn't get a paycheck). This wasn't anything I couldn't learn how to handle. The difference is that as a direct W-2, I felt my stream of paychecks extended into infinity (even though I knew otherwise), while as a W-2 contractor, I felt and knew my last paycheck was really my last paycheck. I learned how to focus on getting the job done and because I wasn't a threat to the end client's W-2 employees (I could never get promoted to the corner office), I could get away with ignoring office politics. Whenever layoffs happened, I usually fell in the middle. During the first round of downsizing, the client got rid of those they had wanted to get rid of all along. Then they got rid of the contractors (they didn't have to pay the unemployment taxes to the state when they got rid of us), and finally, they had to cut into their own muscle when things got really bad.

Thank you for all your advice guys, I do have a lot to consider that I hadn't before.  My situation more specifically is I just got out of college, and am only doing landscaping right now, I haven't exactly started a real career.  At the moment doing just one deal a month is bringing in more than I am making in landscaping, so I guess you could say that it has exceeded my W-2 income. The crossroads I am at was whether to pursue wholesaling full time, or actually start a career with a W-2.  Even with that though Im not sure if I would want to handcuff myself per-say by cutting off the eligibility to get a conventional loan.   

@Austin Latty hey man, grays for getting into the game! I quit my job in July, still had no problem getting financing due to the deal being great and my credit being good. I put 10% down which helped, but I got financing for the purchase and the rehab.

I would suggest keeping a regular job until you have purchased the first two to three rentals. This way you have built a track record with a lender, and have built some passive income to help with future financing. 

The second thing I would suggest is getting a different job. You have learned a valuable trade in landscaping that could help with your real estate career. Possibly try going to work for an electrician, plumber or hvac company and learn some of those trades. You will keep a regular job, learn valuable skills, and learning new things will keep you interested. 

Good Luck, Aaron

Make sure you figure in Health Care.  For a family it can be upwards of 2k a month for good coverage.

@Austin Latty read the 4 hour work week by Tim Ferris, in it he will teach you strategies to work less in your current job so you have more time for your own business. I used his strategies years ago to get my boss to let me work almost full time from home, and before that. He talks about starting with a sick or vacation day, and telling your boss that you couldn't stay away from the work you had to do, so your worked at home and found it to be so much more productive because there are less interruptions and could focus more and got more done. You convince your boss you are more productive working from home. This is just one of many strategies to ease yourself out. It worked wonders for me!
@Austin Latty also, I should mention I picked up a second job as a night time college coordinator at the community college, I basically helped students with random question on only had 15 minutes of real work over a 4 hour period, making $25 an hour working on my own biz! If you can find a job requires a warm body, but let's you work on your own stuff from a computer, you're set!