Omaha, NE · Member since 2018 · 11 posts · 8 votes
Real Estate Investing is all fun and games until you need medical insurance. This is a concern that I would like to get some feedback on. Can anyone provide any advice or suggestions on going from a job with benefits to no benefits at all?
Were you able to locate reasonably priced medical insurance?
Do you think 401k is a necessity?
Do you think the wealth that you can potentially receive as an REI makes up for the lost benefits from the full time job? Meaning, can/are you able to fully finance yourself with the funds from REI (able to pay your own medical bills out of pocket, savings built up enough so you don't need 401K, etc.)
I just don't know what to expect and It would be amazing to get some insight on it so that I know what to prepare for.
Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
7y
@Marisa Faulkner also, make sure you account for self employment tax, which is an extra 15.3% tax on top of your regular income tax. My thought process tells me that I'll need to make 50% more than my salary to maintain the same net income level.
Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
7y
@Marisa Faulkner also, make sure you account for self employment tax, which is an extra 15.3% tax on top of your regular income tax. My thought process tells me that I'll need to make 50% more than my salary to maintain the same net income level.
Real Estate Investing is all fun and games until you need medical insurance. This is a concern that I would like to get some feedback on. Can anyone provide any advice or suggestions on going from a job with benefits to no benefits at all?
Were you able to locate reasonably priced medical insurance?
Do you think 401k is a necessity?
Do you think the wealth that you can potentially receive as an REI makes up for the lost benefits from the full time job? Meaning, can/are you able to fully finance yourself with the funds from REI (able to pay your own medical bills out of pocket, savings built up enough so you don't need 401K, etc.)
I just don't know what to expect and It would be amazing to get some insight on it so that I know what to prepare for.
Thanks BP!
These are similar concerns for all people who are self employed. It is certainly something to consider for those who want to leave their full-time jobs.
In terms of retirement, I believe that there are solo 401K plans for retirement as well as several IRA options. Real estate investing itself will probably make up the majority of the retirement plans for investors.
I imagine medical insurance would be quite costly. I would love to hear answers from those who do it. It is rarely talked about on here.
While a 401k may not be a necessity, the right retirement account can certainly help. If you're self-employed, a Solo 401k can help to defer a lot of taxes and those assets can be invested into real estate too.
It's true that employer-sponsored benefits can be helpful, but a strong income from self-employment is even better, in my opinion. HSAs in combination with high-deductible health insurance plans should be available.
Irvine, CA · Member since 2016 · 545 posts · 614 votes
7y
@Marisa Faulkner This is going to depend on a few key variables that will be different for many of us depending on where you are in the US. The medical, dental, vision, and life insurance are all significantly cheaper when you have a company footing a portion of the bill for you. If you live in a low cost area in the United States this can become easier to accomplish versus an expensive part of the US like CA or NYC where you're going to need a lot of cash flow to meet your goals.
I think if you're leaving your job to become a RE Investor full-time you need to have a clear plan as to when you will be replacing all of the benefits you're losing by making the change. I would say do some sort of Break-Even analysis so you can visually see what it takes, how long it will take, and what is required for you to not only replace the lost income and benefits but surpass that level. Do you have a clear plan as to how you'll replace your income and benefits that covers these metrics?
While I don't think a 401K is a necessity, there are benefits to having one especially if the employer matches your funds. My employer does an employer match and since I have a good paying W2 the matched portion that comes out of my employer pocket equates to monthly cash flow of almost 4 properties that I don't have to purchase if I'm using my minimum number for a property at $200 a door cash flow, and this free money doesn't include any appreciation/interest growth just what the employer adds to my account until I retire.
People on BP often talk about leveraging debt to acquire more properties, I'm leveraging all of these benefits that my employer is offering to help me meet my goals faster, I use RE as one of several types of income streams in my overall portfolio.
Rental Property Investor · Austin, TX · Member since 2016 · 294 posts · 104 votes
7y
@Marisa Faulkner it is very rare that someone drops w2 and stays in RE. You hear that someone quit their job at BP all the time, but it's a small percentage of people that doing that in reality. My passive investments cover my w2 salary, but no way I quit my job. Many of the investors have w2 or a small business and look at RE as a tool to park their money. Unless you earn over 10k per month in RE, don't quit your job. If and when you get to that number, the cost of the insurance will no longer be a question.