(Note from Brandon: Don’t read this if you love your job and don’t want to leave. This is the longest post I’ve written in some time – over 1800 words. However, if you are looking to leave your old job behind and become a full time real estate investor, please proceed.)
Last week here on BiggerPockets I spent some time showing you that you don’t have to quit your job in order to invest in real estate (click here to read that post). If you’ll recall, my major point was that it is possible to invest in real estate without needing to devote a full time career to it. I emphasized that investing and careers are separate things, and you need to look at them that way. Today, however, I want to look at the other side of that coin.
What if you don’t like your job?
Real estate can be a terrific way to earn income. My guess is that if you are here on BiggerPockets, you are probably interested in real estate more than you are your current job. In fact, many of you are probably reading this while on the clock at your desk job (shame, shame!). Transitioning from receiving a full-time income from a job to receiving a full-time income from real estate is the biggest question new investors have, and rightly so – because it’s not easy.
I want to discuss four different ways you can use real estate as a career that pays your bills, funds your adventures, and builds wealth for your future.
How to Invest in Real Estate While Working a Full-Time Job
Many investors think that they need to quit their job to get started in real estate. Not true! Many investors successfully build large portfolios over the years while enjoying the stability of their full-time job. If that’s something you are interested in, then this investor’s story of how he built a real estate business while keeping his 9-5 might be helpful.
1.) Real Estate Related Careers
One of the easiest ways to transition to making money in real estate is to get an actual job in a real estate related career. Yes, this is still a job, but for many it is a good way to learn the business while still making a decent income. This is an especially important step if you want to get into real estate investing and you have absolutely no money to do so.
Examples of real estate related careers would be:
- Real Estate Agent
- Mortgage Broker
- Working for a real estate investor (construction, office work, interning, etc)
- Live-in manager at an apartment complex
Working in the real estate field is an excellent way to gain tons of free knowledge and actually get paid to learn. You also will meet hundreds of potential investors, clients, and mentors in the course of your day. For example, as a real estate agent or mortgage broker, you will learn who the big players are in real estate investing in your town, who the best hard money lenders are, and also learn the lingo that these people use.
If you are struggling with a job you hate, but don’t feel you are quite ready to make the jump into full-time real estate investing, I highly encourage you to make the transition first to simply working in a real estate related career. You may find it, at minimum, a far better alternative to the job you currently hold.
Want to make money in real estate, learn the business and make important connections without any money and never owning a piece of property?
Wholesaling might be for you.
Wholesaling is the process by which you find deals and sell them to other investors who take the project to fruition. You can locate amazing deals, put them under contract, and sell that contract to an investor or house flipper and make a sizable profit doing so.
I am the first to admit that I am not the most experienced wholesaler on BiggerPockets, because I skipped that step and jumped straight into flipping. However, if I were to write a letter to myself five years ago, I would encourage myself to start this way. I made many mistakes when I first began investing that not only cost me thousands of dollars but slowed my growth for the first several years.
By wholesaling, you learn one of the most important skills any real estate investor needs to know – how to buy right. Best of all – you don’t have to spend any money to learn this skill. You simply need to begin finding deals and finding investors.
There are plenty of resources on BiggerPockets that can teach you the ins and out of wholesaling, and I recommend that you study these in depth. Then, track down who the big players are in your town. Who is actually buying most of the REOs in your town? Sit down and talk with them. Find out what they are looking for, and what they would be willing to pay.
As a wholesaler, you can build valuable relationships with other investors, agents, buyers, and sellers. However, you must be sure to maintain a stellar reputation among these people. It can take years to build a good reputation ,but just one event to destroy it.
By simply guarding your reputation and offering a great product, you can make a full-time income in real estate and learn the business. The foundation you gain from wholesaling will propel you far above most other investors who are just starting out.
3.) House Flipping
As I mentioned last week, house flipping is generally not investing – in the “passive income” way that you ultimately probably want to get to. However, flipping houses can be an exciting and profitable way to earn income to live off of. This is how I started in real estate, and continue to flip homes in addition to building up my real estate portfolio.
You’ve probably seen the flipping television shows where investors turn a dump into a mansion in three weeks and profit hundreds of thousands of dollars. While this is possible, don’t enter real estate expecting this to happen to you. Most of the individuals you see on TV were investing in a market where anything sold quickly and prices were not based on value but on emotion. Today, you will be competing with many more homes, including bank repossessions that are priced to sell.
I don’t want to necessarily discourage you from flipping, but I want you to be prepared.
Before flipping, you need to take an honest look at your current skill set:
- Will you be doing the repairs yourself or hiring them out?
- If you need to hire them out, do you know how much jobs are going to cost to get done?
- How are your skills on managing people?
- Can you keep contractors in-line and on budget, or fire one if the need arises?
- How good are your math and bookkeeping skills?
Secondly, you need to have a very clear understanding of the market:
- How much are homes selling for?
- How long are homes sitting on the market for?
- What type/size of homes are selling fastest?
- What neighborhoods are the best for quick sales?
As Ken Corsini wrote several days ago, you need to begin with the end in mind. This is especially true with a house flip. You need to know what the home needs to look like and be priced at in order to sell (and be conservative!) Then, working backwards you can determine what price you can pay for the home. Be sure that you allow significant room for unforeseen costs and risks.
If you want to learn more about flipping homes, you can find hundreds of books on the subjects as well as hundreds of forum threads here at BiggerPockets.
4.) Living Off Cashflow
The final way to use real estate to pay your bills is collecting cashflowing properties and living off that cashflow. When you invest correctly (using standards such as the 50% rule), your properties should all produce cashflow. If you add enough of these properties together, the cashflow can add up quickly to provide significant income for yourself.
I believe in receiving – at minimum – $100.00 per unit per month in cashflow. This is after all expenses are paid including reserves for vacancies, repairs, and other unforeseen circumstances. A four-plex, therefore, should produce at least $400.00 per month in passive income.
How much money do you need each month to live? If you need $5,000.00 per month, this equates to owning fifty units. This could be several small apartment buildings, fifty single-family homes, or one large apartment complex.
I especially love apartment buildings because, if purchased correctly, they can produce a liveable income. Keep in mind, however, that these property types are much more management intensive and can require a significant down payment in order to purchase. However, if you have some money set aside and really want to get out of your day job asap, buying a large property can get you there.
If you plan on using the cashflow from your properties to live off, keep in mind:
- You must have significant monetary reserves for when things go wrong.
- Realize that spending your cashflow profits, rather than reinvesting them in your business, will slow your overall growth.
Why Settle For Just One?
You’ve no doubt heard the phrase “multiple streams of income,” which refers to a person having numerous different methods of receiving income. Most full-time real estate investors, myself included, do not simply use one of these methods but mix-and-match them. Perhaps you can take a job as a real estate agent, while building up relationships with other investors and flipping one home a year. Or maybe you can use the several cashflowing properties you already own to support you while you get your real estate license and make more income that way.
There are many different ways to make a full-time income from real estate. If you hate your job, don’t settle with day-to-day misery. Build your knowledge, build connections, and begin to build your future.
No one is going to offer you a job as a real estate investor, so stop waiting around for it.
You need to take it.
Your Next Step
Finally, I’m going to wrap up this lengthy post with a question.
If you want to start a job in real estate, what is you next actionable step?
In David Allen’s groundbreaking book on productivity, he challenges readers to not simply stare and be overcome by the “big picture” goal, but simply determine what the next step is that you can physically do to take you one step closer to your end goal.
- Is it picking up the phone and making a phone call?
- Reading a book?
- Calling the newspaper and placing an ad?
- Reaching out to a BiggerPockets blogger?
- Commenting on this blog post below? 😉
He calls this the “next actionable step.” By focusing on one step at a time, a large goal (like making a full-time income from real estate) becomes much more manageable.
So I ask again, what is your next actionable step?
(yes, please actually tell me your next actionable step below in the comments! )
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