Trying to get into investing before leaving my current gig

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Trying to get into investing before leaving my current gig

Gabe J Schwarz
Member since 2018 · 3 posts · 0 votes

Hey folks,

Sorry for the rather broad discussion - I've got a bit of an odd situation right now which is rather time-sensitive, so I wanted to get this out sooner (even in a more broad & vague form) rather than later.

I've decided to quit my relatively high paying job in the near future to travel for awhile (couple years, visiting home ever few months or so) and possibly even retire early. I have significant amount of money invested in stock right now and reasonably trust the average index fund return rate of ~9.5% to continue (of course, been getting much higher than that the last couple years, but we're in a bit of a bubble). I've got other plans under way, so I don't have a ton of flexibility to prolong my employment to give more room here. I live quite modestly relative to my income and I'm young enough that I'm fine jumping into a job again if I need to, so I've got a pretty high risk tolerance (so long as it has comparable reward potential, of course).

I've been planning on just making money off the investment income, but I've always been rather interested in real estate investing and it occurred to me recently that I will probably have an easier time getting a mortgage now with my income than I will in a couple months when I don't have an active income. So, I'm very interested in prospect of using a portion of my net worth to invest in real estate now before this opportunity is lost (i.e. from not being able to get a mortgage, or at least as good of one, post-quitting)*.

So, I'm looking to try to acquire my first rental property during the week of 7/3-7/10 - which is when I'll be in the area I'm looking to invest in, and be living long-term starting in August (aside from traveling 90% of the year).

I've watched a handful of YT videos and read some blogs on real estate investing in the last day, but I'm looking for any quick advice that might make a big difference. My current thought is to look for a small multi-family unit to get started; I'm looking around a cost that is around 60% of my net worth in full - but of course, I'd like to leverage a mortgage so the majority of my net worth can remain invested elsewhere (incl. other properties in the future).

My current state (I'll add more as time goes on if folks are posting):

* Just got pre-approved for a %5.25 loan from Quicken with 0 points... Is this a good rate, should I be poking around a lot more or invest the time in house-hunting? This will be my first property. Should I invest in points?

* I'm looking at properties on Zillow & Craigslist right now; are there any big things I should be looking for or are there any useful overviews on the process here?

* Are there any more extensive calculators/spreadsheets for managing income flow around all of this and comparing against the opportunity cost elsewhere (e.g. stocks)?

* How much should a property manager cost? Given I plan on doing a lot of traveling at the same time, I'll probably end up need a property manager running most things (incl. finding tenants).

I'm of course going to do more internet searching for a lot of this information and continue doing more research around here over the next couple weeks, but if there's any immediate 'gotchas' I should be watching for or things I should get rolling now because they take time (e.g. setting up appointments to see places, getting mortgages pre-approved). 

Sorry again for the broadness, thanks again for the wisdom!

Cheers,

Gabe

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  • Aaron K.
    Specialist · Riverside, CA · Member since 2015 · 6k+ posts · 3k+ votes
    8y

    First off two weeks from potential purchase and not knowing what a property manager would cost is a red flag in my opinion.  A property manager cost will depend on the area I've seen it as low as 5% in high rent areas, but the national average seems to be about 10%.  Looking on Zillow and Craigslist is fine if you want to buy something off market but from your post that might be biting off a bit more than you can chew for your first property.  Not everything on Zillow is listed this is even more so on Craigslist; Redfin, Realtor.com, or an actual agent's drip will be far more accurate when looking at on market properties.  You should always shop around for loans even if you think you got a great deal, make the lenders compete for your business.  When looking at points do the math on the money you would be spending in relation to the property you're buying and you'll get your answer.

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  • Alina Trigub
    Rental Property Investor · Glen Rock, NJ · Member since 2015 · 3k+ posts · 2k+ votes
    8y

    @Gabe J Schwarz Congrats on making the decision to leave your high paying job! In terms of investing, if you have enough money to put into several things, then why not diversify?! In real estate, just like in a stock market you can also invest passively via syndications or notes or other things. So consider educating yourself on ways to passively invest in real estate prior to investing, ask questions and take an action.

    Happy to chat offline if you have questions.

    Best!

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  • Gabe J Schwarz
    OP
    Member since 2018 · 3 posts · 0 votes
    8y

    Thanks for the responses!

    I've been chatting with more mortgage lenders and realtors all day and figuring out my local money sources; this stuff is just fascinating. Very excited to be jumping in.

    I think the biggest question perhaps in the short-term is how much do I have to lose if I do *not* get everything completed before losing my active income source? Will I be effectively forgoing any ability to get a mortgage by not having any income or dramatically drive up my income rates? The reason I mention the 'high income' in particular is simply because right now, I seem to be a pretty solid bet for most lenders whereas I'm not sure if my net-worth in stock will be sufficient to get a good mortgage rate since my 'income-to-debt' ratio will be dramatically different.

    I don't intend to try taking on a bad deal in the short-term just because of the whole mortgage-lendability-risk issue, but I'm trying to figure out how much of an issue it really even is in the first place and how much I should take it into consideration.

    If I don't have an active income, presumably (and please, correct me if I'm wrong here) I'd still have some potential to get mortgages, but they'd be at a higher rate (e.g. maybe a couple percentage points higher)? It seems like cash-on-cash percentages can vary much more dramatically than a mortgage rate, and so perhaps it'd be worth holding out for some 'better' property. If this is the case, is there some reasonable rules of thumb to use here (e.g. how much should I be holding out for and what kind of a range in mortgage rates should I expect?)

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