Quit Job after 1-2 Deals?

[Kyler J Sloan]

Has anyone quit their job after just one or two deals? 

After the second one I have in mind, my net income will equal my W2. 

Just curious. I am tempted. 

(I posted this in the STR discussion because I doubt this has occurred in long-term except for those investing in commercial properties)

[David Dachtera]

Quote from @Kyler J Sloan:

Has anyone quit their job after just one or two deals? 

After the second one I have in mind, my net income will equal my W2. 

Just curious. I am tempted. 

(I posted this in the STR discussion because I doubt this has occurred in long-term except for those investing in commercial properties)

The key phrase there is "my net income". Remember, you still have SUTA, FUTA, FICA and elective benefits (usually healthcare, and often includes retirement funding). xUTA can help provide income in case your job evaporates before you are ready (your current employer pays half of those). FICA can help provide income beyond retirement age to support you during challenges with your properties.

My personal preference would be to build a business entity structure which will help shield me from the risks and liabilities of REI as well as provide a W2 income to help keep me viable as a borrower until the businesses can get credit on their own.

My $0.02 ...

[Matt Mertz]

This is a fun topic because that's our goal.

I would recommend keeping your W2 job but start looking for another one to get a bump in pay.  The biggest pay raises you get are typically from switching jobs.

If your rentals are replacing your income, great!  Sock away every penny you make from your W2 then re-assess in 2-5 years.

Maybe set some goals before you quit: pay off a mortgage, build up a large emergency fund, pay off your car loan, etc.  Basically give yourself sound, financial goals that will benefit you when you lose the income from your W2.  This will justify and set your decision later when you achieve those goals.

[Todd Jones]

While you may calculate “my portfolio is equal to w2, then I can lose w2”.

Problem is with two units, what happens if one or even both become vacant for x months? A W2 is steady and reliable whereas income from tenant rent is not.

Like it was suggested. Get a really big buffer with several more units. Waiting for x5 your income is high but x3 with 8-10 units is when you can start think about it. 

[Mike Dymski]

I wonder how many "quitting the job" and "$10k per month income" posts have resulted in either happening.  I suspect zero.

[V.G Jason]

If it merely "matches" your W2, then your W2 was quite low. You're also no way prepared to quit your job.

It needs to exceed your W2 and you need a substantial amount of reserves. Could you cover a damaged roof + new kitchen appliances + annual tenant turnover for the next 3 years, no problem?

[V.G Jason]

Quote from @Mike Dymski:

I wonder how many "quitting the job" and "$10k per month income" posts have resulted in either happening.  I suspect zero.

It's these podcasts this site pops up that has everybody coming and asking. Any (new) area I go to, the first thing I get I asked is how you must be trying to do F.I.R.E or quitting the rat race?

I did that already, 6 years ago. I did that with a multiple of what people would've done because they have no idea how quickly things can run on you + our family intends to get bigger(therefore costlier). 

If you're making (good) money on this side hustle, like $1500-$2500/mo, keep your W-2. Save up for more of a portfolio, rainy day funds, etc. The only way you should quit your W2 is if you have significant reserves(9-15mos per house) + most debt paid down(70-80% done, min 50%) + cash flow is excessive(min 15% over your W2) just from a job vs. real estate evaluation. The other part is if you've got healthy investments in other areas(say 1-2 years worth of W2 in an alt investment) + 18-24mos of savings(w2 equivalent not spending equivalent) + your significant other is making some money(with benefits like retirement + healthcare). And that's just if you're a family of 3-4. 

You're going to get run on, if you try to quit at the very first opportunity. Keep the W-2. 

[Todd Jones]

Quote from @V.G Jason:

Quote from @Mike Dymski:

I wonder how many "quitting the job" and "$10k per month income" posts have resulted in either happening.  I suspect zero.

It's these podcasts this site pops up that has everybody coming and asking. Any (new) area I go to, the first thing I get I asked is how you must be trying to do F.I.R.E or quitting the rat race?

I did that already, 6 years ago. I did that with a multiple of what people would've done because they have no idea how quickly things can run on you + our family intends to get bigger(therefore costlier). 

If you're making (good) money on this side hustle, like $1500-$2500/mo, keep your W-2. Save up for more of a portfolio, rainy day funds, etc. The only way you should quit your W2 is if you have significant reserves(9-15mos per house) + most debt paid down(70-80% done, min 50%) + cash flow is excessive(min 15% over your W2) just from a job vs. real estate evaluation. The other part is if you've got healthy investments in other areas(say 1-2 years worth of W2 in an alt investment) + 18-24mos of savings(w2 equivalent not spending equivalent) + your significant other is making some money(with benefits like retirement + healthcare). And that's just if you're a family of 3-4. 

You're going to get run on, if you try to quit at the very first opportunity. Keep the W-2. 

this.
The previous post of medical, dental, and vision  should be placed into your calculations.

But to be clear, quitting your w2 is doable. Just follow careful planning like the suggestion above.
Good luck!

[Jay Hinrichs]

Quote from @Jill Addison:

@Kyler J Sloan here's my story with that...I owned my own business for 12 years. I got really burned out for the last 2 years and wanted to sell it really bad, but I knew I needed another income stream before I walked away. I got on a tear and bought 7 long term rentals in less than a year. (Plus I already owned one from before, so 8 total.) On paper it looked like I could cover all my personal living expenses with my passive income. And I had just about used up my 10 Fannie and Freddie loans, and knew I was going to qualify for another 7 using my husband's income, so I was safe there. So I sold my business. The numbers turned out just like I planned for the first 4 months. But then I had a flood of cap ex expenses that just kept coming. I ended up just about breaking even for the first year. Luckily I had a big pile of cash from the sale of my business, but it's too bad I had to use some of that to basically cover living expenses while I went cash flow negative for about 5 months. :( I bought another 2 properties and thought I was finally getting to where I'd be covering my living expenses easily, but then property tax increases kicked in for several properties and knocked my cash flow back down to where I had been before those last 2 buys. So now I'm at the point where I really need to keep moving forward with my real estate buys since I'm really only halfway to my passive income goal (which is twice my living expenses). Even though I can see it wasn't the best decision to jump ship on my business with what I discovered was insufficient cushion in my monthly cash flow numbers, honestly, I'm still glad I sold my business when I did. I was so ready to be free of it. I can still make it work, but my advice is: if you're not hating your job, stick with it, because it will make your wealth building much easier and faster and more stress-free. Also, you have way more options for lending when you have proven income.

what you describe is about par for the course for the small mom and pop rental property investors who is basically using the full leverage thats available to them loan wise.  U need cash to scale too even with DSCR lenders they want to see a pretty big wad of cash in your account to keep scaling.

[Jay Hinrichs]

Quote from @Mike Dymski:

I wonder how many "quitting the job" and "$10k per month income" posts have resulted in either happening.  I suspect zero.

I am repeating myself but 10k a month self employed aint going to cut it unless you have zero debt and pretty much live in an area of the country that is very cheap to live in.  

[Brooklyn McCarty]

No way. Leverage that W2 as long as you can 

[Don Konipol]

Quote from @Kyler J Sloan:

Has anyone quit their job after just one or two deals? 

After the second one I have in mind, my net income will equal my W2. 

Just curious. I am tempted. 

(I posted this in the STR discussion because I doubt this has occurred in long-term except for those investing in commercial properties)

Need clarification.  Are you saying that the PROFIT (capital gains) from 2 deals will equal your annual job income or are you saying that the continuous annual cash flow from two deals will equal your annual job income or are you saying that the continuous annual net income from two deals will equal your annual job income?  

The first would mean it needs to be duplicated every year from scratch; the second means that there needs to be no increase in maintenance/repairs and no future capital improvement projects, while the third means that the numbers must stay the same or get better, not worse.  Of course if you can find and finance similar transactions that can help to ensure replacement of job income. 

An additional piece of information necessary is the amount of your available reserves; the amount of your other investments and savings; if you have a working or income earning spouse; your annual expenditures; if your supporting other people beside yourself; your cost of living; if you own or rent your residence; if own whether you have a mortgage payment or own the property free and clear; etc., etc., etc.

[Account Closed]

A week after selling my second flip I quit my old job by saying F#@% YOU I quit! to the ops manager.

Locked in the third flip two days later then turned down a different job offer before closing on the flip. I wanted to focus 100% on flipping. 

Important to note: This was a big gamble but a very calculated risk. I had enough money saved to buy the 3rd deal cash, gut it and make the repairs without taking a loan.

I wouldn't recommend this strategy but I'm 37 and have completed many more deals than I would have been able to as a weekend warrior. Income is now 3X the old job, net worth has skyrocketed and quality of life is 100% better. I work a lot but I truly enjoy what I do.

If the market tanked tomorrow I could at least flip burgers at Wendy's and would still be way ahead on paper. 

Do what you want in life, just have a plan and know your numbers!!!

[Account Closed]

I would hesitate to outright quit after 1/2 deals. Once you have a consistent flow of leads and deals, then it is definitely a consideration. Obviously this is a personal decision though, and maybe money isn't your #1 priority. 

[David Ramirez]

Hey @Kyler J Sloan, 

You are the only one capable of answering that question. We are all different, and we don't share the same ambitions. In my case, I knew that jumping full-time would result in exponential growth. So, after proving the concept on my fourth deal, I decided to go all in. I made sure I had enough money saved up to cover all my expenses for a year without making one more penny. Obviously, that did not happen; the first month in, I did more than I had in the previous six months. 

Good luck!

[Mackaylee Beach]

Congrats on your deals!

I would secure Cash Flow before leaving my W2 job.