Reality of Investing in Real Estate with a Full Time Job

Reality of Investing in Real Estate with a Full Time Job

Posted on March 13, 2016 from my website. I'm re-posting it here because I think you will find a lot of value. Enjoy!

Investing in real estate with a full time job is not easy. I am here to share with you how to do it and what it takes.

This may very well be the magnum opus of all my posts. It’s a longer one, I know. Please take the time to read it in full, as I feel there’s a lot to be learned from this one.

I decided to write it due to the number of people who asked how they can get started.

But before I go into that, I want to share with you the human side of real estate. What it looks like when the “real” in real estate actually means the “reality” we live in. This is the side that the gurus will not share with you. It is the part of the business that tests your heart and mind, and makes you question whether you’re up to the challenge.

Earlier this year, I found myself at the crossroads between heart and mind, where our passions test the limits of our sanity… I finally pushed the limit.

“The Edge… there is no honest way to explain it because the only people who really know where it is are the ones who have gone over.” – Hunter S. Thompson

Being humbled

It was January 2016 and I just got done telling my Realtor friend about the four renovations we had just completed over the last four months.

How they sorta fell into our lap all at once.

And what we had to go through to renovate and rent out each property while working a full-time job.

The conversation felt like a marathon. I was gasping for breath by the end of it.

My friend, who could be intrusively loud at times, hadn’t uttered a word for what seemed like hours. Probably praying that I would shut up already.

“You’re not trying hard enough until your wife threatens you with divorce” my friend retorted as I finished my last sentence. He had heard someone say this at his Real Estate Investor’s Association (R.E.I.A.) meeting.

As I absorbed what he had just said, the cold hard truth started to set in.

It was here that I realized how emotionally tolling it was to be an “on-the-side” Real Estate Investor.

The wall that I put up to guard my feelings was starting to crumble.

“Is it worth it? Am I satisfied? Did I take on too much?” were some of the many questions I asked myself as I took a step back to assess the damage that I’ve done.

One thing that I learned is that even when you’re taking on a large endeavor, the world does not stop. It didn’t stop for me and I’d wager it won’t stop for you.

Just because you’re doing real estate on the side doesn’t mean that…

• You won’t have to work overtime and weekends at your real job.
• You won’t have to pick up groceries, do laundry, and other household chores.
• Your friends and loved ones will stop having birthday parties, weddings, funerals, etc.

The humbling experience was not the workload involved. I could handle that. It was the collateral damage that took place when I came home from an 18-hour work day multiple times a week.

I was mentally and physically checked out. Friends referred to me as robotic. My inner zombie had manifested itself.

I let my fiance, family and friends down because I was always preoccupied, inattentive and mentally elsewhere (even when I was physically in the same room).

As an entrepreneur investor, what are you willing to give up? What are you willing to put on the table? What are you willing to sacrifice on the altar of financial independence? Because I can tell you first-hand that the moment you stray from the pack to pursue your dream, you put everything important to you on the line.

Picture yourself at a roulette table. Instead of chips, you make your bets with your money, your time, your job, and your family. And it’s only a few seconds before the ball stops to reveal whether you’ve won or lost.

This is what it’s like investing in real estate with a full-time job.

When you are first starting out, sometimes the excitement of renovating properties can cloud your judgement, as if you could live on this alone.

But know that none of this is possible without your full time job, your significant other, your friends and family. Keep this in the back of your mind as you make those big financial decisions.

Even though I had a few months to prepare by getting my system in place, the double decker bus was still waiting around the corner to run me over.

I was more than ready to rehab one property at a time, but four properties at once?

Even though I knew it was possible, I wasn’t exactly confident that I had the bandwidth to complete it.

But with a certain uncertainty I agreed to get the renovation party started.

It was not only my desire to accept the challenge. It was my obligation. It was my one shot to show the world that I was serious and that I had what it takes.

Okay, so how did I manage to do it?

Investing in real estate with a full time job. Some people makes it sound easy, but I assure you it’s not. Here are a few things that might help you.

Quick tip – Keep beer on hand. Your sub contractors will love you and it will help fuel you during those long nights and weekends. No need to overdue it. Just enough for everyone to “have a couple.”

Now we will get into the nitty-gritty. All of what I’m going to share is pretty standard stuff. But I want to emphasize what helped me the most.

1. You need a helping hand.
2. You need systems.
3. You need to celebrate.

The Breakdown

1. You need a helping hand

Don’t think for a damn second that you can do it alone. Because you can’t.

Sweat equity is nice but there is a diminishing return on time.

This is why we had to make educated decisions on who to hire out.

• Painter – From past experience, we knew that getting a painter was the best thing we could do. It would have taken us double or triple the time if we had chosen to do it ourselves. Out of all our subcontractors, this one was the most costly but it was worth every dime. Moreover, we were even able to negotiate a bulk price due to the volume of work we had for him.
• Plumber/HVAC – Let’s face it: plumbing sucks and fixing a furnace isn’t exactly my idea of fun. It was in our best interest to find a plumber that was also capable of doing HVAC. For safety reasons, we’d rather not mess with it ourselves anyway. A shoddy DIY plumbing job can cost you big money when water from your unit finds its way into your neighbor’s. Yep, happened to me twice. We also like to do preventive maintenance on the AC, furnace, and water heater to prevent future phone calls.
• Carpet Guy – We also opted not to do the carpet ourselves. Let the professionals handle this one.

Luckily, my partner works for a general contractor and he already had the right contacts.

If you don’t have this luxury, hang out at the Home Depot pro desk at 6:00 am. You will find out who the good contractors are very quickly.

Other than the couple of friends we coaxed into spring cleaning, we did the rest of the work ourselves.

2.You need systems

We like appreciation as much as the next guy. But not the kind your thinking of. You know – where you wait five years and you make a five percent return…

The kind of appreciation that I’m talking about is the kind you create, not the kind you pray for.

We like to put our own touches and create value on the properties we buy and manage.

This is a before and after picture of our first renovation:

The after portion of this picture is representative of how we do all of our townhouse renovations.

And here is what the others look like:

We use the same flooring, the same paint, the same appliances – pretty much the same everything, every time. You can hardly tell them apart!

It helps systematize everything and it creates a brand for ourselves. You know who did the renovation the second you walk in the door.

When you are investing in real estate with a full time job it is of utmost importance to automate and systematize.

Here are the three most important systems to plan out before you buy your first investment property. I’ll include some of the cool resources that have helped me along the way.

• Bookkeeping and paperwork system – I took an online bookkeeping course for Quickbooks through a community college. It only cost me $109.00 and 8 hours of my time. You can register for the class here (don’t worry – I’m not affiliated). I also took a really cool online real estate investing class through the same college for $109.00. I only say this because you don’t have to pay a guru $5,000 to learn how to invest in real estate. I spent $218.00. And with sources like Bigger Pockets, you really have no excuse.
• Construction system – Renovating is mostly a linear process, but not always. With books like FLIP you can learn how to systematize your renovations. We like to keep our renovations around $7,000.00. For what we invest in, it is not a total gut job, but rather doing what is necessary to achieve top of the market rent. When you do this, you are setting a precedent. It’s a pleasant surprise when prospective tenants have no problem paying higher than market prices to stay in one of our locations.
• Leasing and management system – Leasing has been a learning process to say the least. If I were to choose just one book that I learned from it would be the Bigger Pockets Book to Managing Rental Properties. It has been by far the best resource for refining our leasing system. The book helps automate every step of the process so that it takes minimal effort to conduct business. Truly making my investments as passive as possible.

Our model is to achieve above market rent with awesome properties and great customer service. We have structured the investment business to do just that.

When you’re a real estate investor with a full-time job, you cannot afford to leave work at a moment’s notice every time something goes wrong at the property. That is why you just have to delegate the repairs to your subcontractors. Presumably you trust them and presumably they trust you to pay them even when you’re not there.

3. You need to celebrate

Sometime ya gotta let loose. Mark’s lucky he wasn’t wearing beard oil that evening.

By the time the renovations were complete, tenants were in place and the books were audited, it was time to let loose and treat ourselves after a job well done.

We got steaks. Big ones. The kind where you have a choice of dry- or wet-rubbed rib eye.

We also decided to take our lovely lady friends with us. After all, if we didn’t have their support, none of this would have been possible.

And lastly, we decided to take a three month break to catch up on life.

This allowed us to step back from our system to test what we have created.

Since then we have managed to create new systems to help us during our next round of renovations.

Reflecting on all of the people that were positively affected by just one rehab.

• Our Investor – Happy that we successfully created a cash flowing business to help provide for an elder family member in need.
• Our Sellers – Relived that they were able to part ways and move forward.
• Our Contractors, Brokers, and Attorney – Grateful for the opportunity to expand their business and put food on the table.
• Our Tenants – Thankful that they know they have an awesome place to live at managed by a couple guys who really care.
• Our Neighbors – Cheerful that we are bettering the neighborhood with our high end upgrades and quality tenants.
• Our Business – Excited to be given the chance to prove who we are and what we stand for.

A few awesome tips for you

1. Make sure you change all of the outlets and switches if the home is older than ten years. You don’t know what kind of condition they’re in and I wouldn’t risk taking prior contractors on their word. The last thing you want is an electrical fire in your brand new investment.
2. One awesome way to create a lot of value is to purchase vinyl floor tile from Lowes. We like it so much that we are going to use it on all of our renovations in the kitchen, foyer, and bathrooms. We like it because when you grout the gaps, it looks like real title.

Vinyl flooring with grout

3. We like to replace all of the lights with LED bulbs and fixtures. These things last for a million years or so before they burn out. Definitely worth the extra money!

4. Lastly, don’t forget to shave! Ever heard of a playoff beard? Well this was my renovation beard.

What my beard looked like by the last day of the renovation.

Yep. That is me at ten o’clock at night, the day before our last tenant moved in.

Conclusion

Before you decide to take the big leap investing in real estate with a full time job:

• Know the ramifications that it may have on your life.
• Remember that your job and family come first.
• Get someone to help you.
• Make sure you have systems in place before you even start.
• Celebrate the wins no matter how small they are.

Photo Cred- Featured Photo: Flickr