When can I quit my 9-5 job?

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When can I quit my 9-5 job?

Joshua Hill
Member since 2008 · 37 posts · 1 vote

Any advice out there on the best way to pull away from the full time job and make landlording the main gig. special formulas , cash flow, separate income accounts. My biggest concern is that once I leave my full time job, I will not qualify for new mortgages based on my income. Any thoughts out there or shared experiences on how you all made the transition?

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Lynn Z
Member since 2008 · 689 posts · 23 votes
19y

don't quit your day job. My CPA keeps suggesting I go back to work to support my rentals and I've been at it awhile. He makes me sick....but he has a point. Let's say your quit your job and buy some rentals. You rehab them and have big write offs for a couple of years. You go out to the local mortgage banker and produce your two years of tax records and....low and behold, they treat you like you're a bum...few of them even add back in depreciation when they look at your scedules. What they want is a W-2 that goes with a job which takes us back full circle.

Be prepared on the financing end of purchasing and holding real estate. The pendulum is definitely swinging back to conservative lending guidelines.

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  • Account Closed
    Real Estate Investor · Lancaster, OH · Member since 2008 · 87 posts · 0 votes
    18y

    Here's my 2 cents worth: lol

    Ohio is an employment-at-will state.
    An employer can fire an employee at any time with just cause and an employee can quit at any time for any reason. It's your choice.

    You are either a leader or a follower; employer or employee; landlord or tenant. It's a lifestyle choice. You can make it happen. Research all of your options and follow through.

    Regards,

    0Reply
  • Richard Wu
    Realtor · Seattle, WA · Member since 2008 · 9 posts · 0 votes
    18y

    With so much uncertainty and risk in the current economy, having a steady income is a luxury. Definitely think twice before retiring from a job !!

    0Reply
  • Shari Posey
    Residential Real Estate Agent · Long Beach, CA · Member since 2008 · 432 posts · 63 votes
    18y

    In addition to getting rid of all debt other than mortgages (although that would be ideal), really think about health insurance for your family. It is VERY hard to get insurance outside of a group plan if you have had anything more serious than a headache. If you get to a point where you can quit your job financial, go get your real estate license and join NAR so you can get on the group plan. My husband and I pay about $400 per month but it was automatic to join (no rejection).

    1Reply
  • Account Closed
    Los Angeles, CA · Member since 2008 · 557 posts · 70 votes
    18y
    Originally posted by Shari Posey:
    If you get to a point where you can quit your job financial, go get your real estate license and join NAR so you can get on the group plan. My husband and I pay about $400 per month but it was automatic to join (no rejection).


    Thanks for the great tip, Shari -
    I decided to go for the license a couple weeks ago. That reminds me, I need to get back to studying.
    0Reply
  • Alex Aronson
    Real Estate Investor · Memphis, TN · Member since 2008 · 86 posts · 1 vote
    18y

    I am a W2 slave, but I have a 5 year plan (9 months into it) to break the chains.

    My plan includes the following:
    -Real Estate Investing Goals: what type of properties I want to have in my portfolio (3/2 SFH only with $200+/month cash flow), flip homes that make sense.
    -Eliminate bad debt to 0 (credit card, car, and personal residence), if it does not help me make money, it is bad debt.
    -Have a 12 month cash reserve for current life style plus 12 month cash reserve for all PITI
    -Ability to replace my income with an increase of 20% from cash flow.
    -Real estate earnings spending plan until the chains of bondage are gone: From Cash Flow: 25% into savings for taxes (will adjust after my 08 tax return), 25% for PITI and personal living expenses, 25% to grow my business, 20% to pay down bad debt (with emphases on the worst cash flow per debt finance instead of highest interest rate), 5% for my wife to spend, From Flipping: 40% set a side for taxes, 20% for business growth, 35% for bad debt reduction, 5% for the wife (got to keep her from charging).

    My 5 year plan is posted on the fridge and is on the mirror of the master bath as a constant reminder.

    I do not believe that all your properties should be paid for before you leave your day job. I know investors at my reia that have any where between 10-180 SFH's which non are paid for. They lines of credit, sufficient cash flow, and cash reserves.

    So far in my plan, I have eliminated 8% of my bad debt, and replaced 6% of my annual income from cash flow.

    0Reply
  • Peter Vekselman
    Real Estate Coach · Atlanta, GA · Member since 2008 · 80 posts · 5 votes
    18y

    Hi Joshua,

    The decision as to when you're ready to pull the plug on your 9-5 job is deeply personal and will depend upon your financial situation and where you are in your real estate investing career. I'm going with the assumption that you've gotten some type of real estate training -- either through books, tagging along with another investor, or working with a real estate coach -- and that you've developed a solid plan of action and are seeing substantial and consistent positive MONTHLY cashflow.

    Your personal finances can be a major inhibitor to investing full time because too many investors are saddled with unnecessary credit card and other personal debt.

    I'd recommend you eliminate as much debt as possible -- credit cards, computer loans, furniture loans, etc., -- and that you have a well-established reserve of readily accessible cash for emergencies.

    If you have a family, it would be nice if you have a working spouse who ideally has health insurance to help offset your living expenses as well as provide for the bulk of your healthcare needs.

    When you build up a monthly cash flow that's at a bare minimum equal to your needs you can consider making the break, but with many lenders tightening lending requirements and not being as free and easy as they once were with low and no doc loans (or any loans for that matter) you might hold on as long as possible.

    A very good real estate mentor once told me that living your dream is great, but poor planning can quickly turn it into a nightmare.

    Plan right, be smart, and do it right -- the first time.

    Peter Vekselman

    0Reply
  • Don Rotanz
    Investor · Chalfont, PA · Member since 2008 · 35 posts · 9 votes
    17y

    After investing in real estate for 17 years, I quit my 7-5 job. It's been 4 1/2 years now and couldn't be happier. Before I quit my job, I lined up $140,000 in LOC and had about 1 year worth of wages liquid. I flip 2 properties per year now to satisfy my cash flow needs. All other properties that I buy I rent out.

    I don't believe you need to pay off all your mortgages before you quit your job. Why would I pay off 5, 6 and 7% loans? I could do alot better buying rentals.

    Don't count on getting bank financing for the first two years that you are self employed. My first two years I bought using owner financing and buying subject to.

    I pay about $900 per month for my family's health insurance.

    Keep in mind too, when you flip a property you put out money buying it, fixing it, holding it and then about 6 months later from when you bought it, you get paid when it sells. Not only are you not getting paid for those six months, you have alot of outlay.

    I hope this helps.

    Don

    1Reply
  • Robert Schmitt
    Real Estate Investor · Long Valley, NJ · Member since 2008 · 15 posts · 0 votes
    17y

    Great post Dan!

    I disagree with one item, that you cannot get bank financing unless you have 2 years in business. I have obtained financing with less than 2 years in business. The key is of course collateral. Before you are thinking of retiring, have one nice house free and clear which you can obtain financing from by offering as collateral.

    Rob

    0Reply
  • Rich Weese
    Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    17y

    I have quite a few homes f&c and STILL can't get financing. All my properties are in LLCs or trusts and I show no income and pay no taxes. No lender will loan to me.

    1Reply
  • Alex Aronson
    Real Estate Investor · Memphis, TN · Member since 2008 · 86 posts · 1 vote
    17y

    Rich,

    You either have a lot of bad debt that makes you undersirable, do not own properties f&c, or have not tried hard enough to find financing.

    Sorry if I offend you, but I can't see why you can't get financing. I know several local banks that would give me a 100K heloc if I had a 200K house to use as collateral. Do you have a REIA to participate in that can provide local help and guidance?

    Try Eric Linderman at Kismet Funding. He can work wonders. Go to Kismetfunding.com for more info. They are based in Memphis, TN and if I am not mistaken can do deal in all 50 states. My mortgage broker turned over my application to them when his financing went south.

    Good luck

    0Reply
  • Rich Weese
    Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    17y

    I'll try Eric. I have no bad debt or hardly any debt, BUT everything is owned by llcs and lenders will not loan. I have a problem because I show NO taxable income and they have binders on.

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    17y

    Rich,
    Isn't that our catch 22? Show income, pay taxes. Show no income, can't get traditional financing!

    What I do? Private lending, owner carries, home equity lines, credit lines, and partners.

    Podcast Guest on Show #130
    0Reply
  • Michael Rossi
    Real Estate Investor · OH · Member since 2008 · 4k+ posts · 1k+ votes
    17y


    Alex is right. You are looking at the wrong banks. Small local banks that keep their loans in their portfolio will certainly loan money if your properties are owned in LLCs. I just talked to both my bankers in the last 2 weeks and they are lending money. I have also received several unsolicited calls from one of the larger banks in our area offering to lend me some money. Banks must lend money to survive. Right now, many of them have lots of money and no borrowers. Of course, you must have excellent credit and a history of being successful in your business.

    Mike

    1Reply
  • Tony L.
    Lakebay, WA · Member since 2008 · 48 posts · 0 votes
    17y

    Joshua, Good commentary throughout here. If you have created an LLC or Corporation and have reached the point that your passive income from your investments that are kept in one of these entities you can create your own 9-5 job by making yourself an employee of your company with pay ofcourse thus having a W-2. Don't think any lenders have a problem with this.

    0Reply
  • Lee Common
    Real Estate Investor · San Antonio, TX · Member since 2008 · 553 posts · 20 votes
    17y

    Bob Mc Intosh,

    You have the right idea! Pay your self through your LLC & beyond that have multiple LLC's so you don't apply for a loan & show employment through the same one!

    Each LLC is a seperate legal entity so the rules of how many loans you can have apply to each seperately. You can only have 4 loans with 1 LLC with 2 you get 8 & so on.

    0Reply
  • Account Closed
    Real Estate Investor · Ephrata, PA · Member since 2010 · 58 posts · 2 votes
    16y

    Everybody has different goals and purposes. I do agree with a lot of people here to keep your 9-5 for a little bit longer. Think about it, your employer supposedly pays for your health insurance, plus just think of your job as play money or money you can reinvest in. I personally will quit my job when 1.) I can pay off my personal loans and school loans off first, 2.) My real estate business REQUIRES me to be there more than my 9-5 3.) I make more than from my rentals than my 9-5. Just think this way, the people here are more financially intelligent than the mass of people out there. We are not better than they are, we are just more financially prepared. I got into rentals because I saw how the current economy is. If anything ever happened to my job, or something unfortunate would happen to me, I have my real estate business to at least cover my expenses. Just a thought.

    2Reply
  • Michael G.
    Real Estate Investor · Member since 2009 · 34 posts · 8 votes
    16y

    I know this is an old thread so maybe some folks have changed their tune a little but.....

    It really seems like everyone on this thread is saying that it is impossible (or highly improbable) to make a living on REI only. I find that hard to believe.... but if it is true then I am pretty bummed out about that.

    I have a feeling there are MANY people out there making a good living doing nothing but REI, I know a few of them in fact. Its not going to happen over night for anyone starting out but it can happen.

    I think there is just a little too much doom and gloom in this thread (again, it could be a reflection of the time when the thread was started).

    Just my 2 cents, that and a 5 dollar bill will get you a cup of joe.

    0Reply
  • Jon Klaus
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    16y
    Originally posted by Michael Gonda:
    I know this is an old thread so maybe some folks have changed their tune a little but.....

    It really seems like everyone on this thread is saying that it is impossible (or highly improbable) to make a living on REI only. I find that hard to believe.... but if it is true then I am pretty bummed out about that.


    I have a feeling there are MANY people out there making a good living doing nothing but REI, I know a few of them in fact. Its not going to happen over night for anyone starting out but it can happen.

    I think there is just a little too much doom and gloom in this thread (again, it could be a reflection of the time when the thread was started).

    Just my 2 cents, that and a 5 dollar bill will get you a cup of joe.

    Michael, I just read this thread for the first time. It's an oldie, but goody. I think some of the posters are just conservative, rather than pessimistic. Also I know that some in the thread do make good livings from real estate investing, including Mike, Rich, Will, and likely others.

    On a side note, bank lending has gotten
    much more challenging as the thread has progressed over the past few years.

    0Reply
  • Rich Weese
    Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    16y

    As Jon said, many on BP have shared their successes in RE with the members. Yes, you can make a successful living in REI, in any area and in ANY economy. It just takes different strategies and actions. Good luck. Rich

    p.s. Knowing Jon above, he's been VERY successful in his program.

    0Reply
  • Mark UpdegraffBusiness Member
    Real Estate Broker · Rochester, NY · Member since 2010 · 1k+ posts · 701 votes
    16y

    i recently got laid off & am hoping to make REI my main focus moving forward. I've spent about 2 years saving, and 3 years investing. The loss of the job is definitely a hit financially, but I'm willing to sacrifice the income to have more time working REI.

    Here is to hoping!
    9-5lessly,
    Mark

    Podcast Guest on Show #112
    Updegraff Group Realty4.746 Reviews
    WebsiteView Page
    1Reply
  • Geoffrey Murphy
    Real Estate Investor · Hartford, CT · Member since 2011 · 222 posts · 17 votes
    14y

    I know im really late as well but i really could not help but to chime in on this thread. i found it searching through the treasure chest so here goes!

    Jon K, you couldnt of said it any better! i know people that are liveing solely living off of REI.

    However everyone is right an it also takes time to build but im sure it can be done.

    Here's my question to you guys....How much reserves would you guys say would be a great number to have saved up, while your in the process of cutting your leash from your job?

    0Reply
  • David Wedemire
    Real Estate Investor · Bellingham, WA · Member since 2008 · 407 posts · 90 votes
    14y

    The beauty of REI is that you get cash flow so you don't have to work but you like to work. It all depends on the job. If it is work you love and it doesn't interfere with REI then use it for income verification.

    0Reply
  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    14y
    Originally posted by Geoffrey Murphy:
    Here's my question to you guys....How much reserves would you guys say would be a great number to have saved up, while your in the process of cutting your leash from your job?

    It really depends on your personal situation and your business plan...

    For example, if you need $50,000 per year to live, and expect that it will take 6 months to make your first million, then you need less than 6 months reserves.

    But, if you need $50,000 per year to live, and expect that it will take a year before you make your first penny and then another 2 years before you're making $50,000 per year, then you need somewhere between 1-3 years of reserves.

    Podcast Guest on Show The Truth About Real Estate Investing in 2024 (What Investors NEED to Know)
    1Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    14y

    Great answer given by Jason and I would add to that with this:
    If you think it will take you one year to create enough income to replace that $50k anual income job, then count on it taking longer (18 months or two years) and make sure you have enough reserves saved up to account for that.

    Podcast Guest on Show #130
    0Reply
  • Geoffrey Murphy
    Real Estate Investor · Hartford, CT · Member since 2011 · 222 posts · 17 votes
    14y

    Will & jason, great points guys, i really needed them. You guys are awesome. That is my ultimate goal because im young and still reside with parents. So im doing my absolute best to build up a huge nest egg and also to het this ball rolling!

    0Reply
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