Reading Michael Zuber’s post the other day got me thinking back to the days when I was a newbie investor and still had a full time day job. My weekends were pretty full also, as well as many of my nights after work. My wife and I worked very hard, buying and rehabbing properties, dealing with tenants, raising and saving capital. Heck, I even cut all the yards for a while. However, we worked so hard because we had a goal.
That goal was to become full time investors and leave the 9 to 5 world behind. I think many people who get into real estate investing share the same goal. They want to change the path they are on. They want to build wealth and have the time and flexibility to enjoy life. Real estate can do all these things for you and more. It is not easy though. If it was everyone would be doing it. So if becoming a full time real estate investor is one of your goals . . .
Here are some thoughts and tips before you leap into the full time investor world and quit your day job:
- Be sure to start and keep a monthly household and business budget. You must have a firm idea of what money is coming in and where it is going out. Only then can you begin to think about what it will take to leave your day job behind.
- Know what you “jump off” point is. If you know you will need a minimum of $30,000 once you quit your day job, and you know you can get a cash flow of $150 per month per property in your market, then you know you will need 17 or so properties/units to reach your “jump off” point.
- Some of your expenses may go down once you leave your day job. Things such as gas for that commute or dry cleaning may no longer be needed. Other expenses may increase like utilities since you may now work out of your house all day (and keep the air or the heat turned up).
- One big expense to plan for is health insurance. Do some research and shop around.
- Don’t cut all the fun stuff out of your budget. While you may need to cut some costs at first, remember to have some fun as well.
- Put some reserves away if you can before you quit. Having reserves will not only help you sleep at night but it will get you through some unforeseen rough patches. Plus bankers really like to see reserves on that balance sheet these days.
- Keep your cards close until you are ready to make your move. There is no need for you to rock the boat until you are ready. When you are ready to make your move, give plenty of notice, do not gloat, be gracious and never burn that bridge. You never know when you may need someone later on.
- Make a plan for your real estate business. Outline some goals and set a path to achieve those goals. Sure you can enjoy a little time when you first get out, but remember it will be all up to you once you are on your own.
- Make sure that your sources of capital, such as banks, are ok with you leaving the “working world.” Will your sources of capital dry up along with your W-2 income?
Finally, do not be afraid to get up on the diving board and jump in when you are ready. I was very excited when the day finally came and I have never looked back. I know the though of leaving that security can be scary, but you will be amazed how much you real estate business grows once you can focus on it full time. What tips do you other full time investors have for those just starting out?
Till next time, happy investing!