I can tell you firsthand that there is no better motivator or way to expedite your growth than to be a full time investor. I have been in this business full time for 10 years now. In that time, I have met many people who would love to work full time in their investing business, but they haven’t found the way to do it. I have brainstormed ideas on making it happen with them, and some have been able to break free.
Over the years, I have seen equations that worked and those that didn’t for transitioning to full time. Today I want to outline three ways I have seen work to break off from that JOB and start putting all your energy into being a kick butt real estate entrepreneur. For those of you who are still working a 9 to 5 and want to walk as soon as you can, I hope you get some ideas and inspiration here. Let’s get to it!
How to Purchase Real Estate With No (or Low) Money!
One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.
3 Feasible Game Plans For Quitting Your 9-5 to Invest Full Time
Path #1: The 1099 Route
Most people with jobs get a W-2 at the end of the year and are commonly called “W-2 employees.” The company you work for sets the rules on when you have to be there and what you are allowed to do when you are “on the clock.” I just hired a new property manager who is leaving his current job as a bank teller. He is not allowed to have his cell phone with him during work at all. That would make it pretty hard to get that call about a prospective tenant or hot purchase deal, wouldn’t you say? W-2s have to give up their time for money.
One way to get your time back is to take on a 1099 “independent contractor” position. People with 1099s are in control of their own time. They are not paid by the hour; they are paid to get the job done. If they do it in 10 hours instead of 20, those additional 10 hours are theirs to use as they wish. Typical 1099 positions are commission based salespeople. You sell something, you make money. You don’t sell, you don’t earn.
The most common 1099 path for aspiring buy and hold real estate investors is becoming a licensed real estate agent. They are sometimes on the inside track for the really good deals and can spend time surfing the MLS for deals for their clients and for themselves at the same time. In most states, a real estate agent just needs to disclose that they are licensed when purchasing or selling property on their own behalf, and they are covered. Other buy and hold investors who spend some time in other fields work as appraisers, and I even know one claims adjuster who is a very successful buy and hold investor.
For the aspiring fix and flipper looking for a 1099, the ones I have seen do well are those who also own or work for a licensed construction company. One day they are adding a deck to your home with their crew, the next they are installing a new kitchen on that flip property they bought at the Sheriff sale.
Wholesalers on the other hand seem to have their hands tied. I can’t seem to think of any 1099 positions that make sense for a wholesaler! I may receive some disagreement in the comments here, but it is my understanding that licensed agents have a hard time wholesaling deals because they are making money on the sale of a property outside of their brokerage. Even if it’s ok with the Real Estate Commission, it is probably not ok with the owner of their brokerage. Feel free to debate me on this one or offer up some ideas that do work for wholesalers looking for a 1099!
So this path is not actually doing the business full time, I acknowledge that. It is, however, doing it as much as you can while you work the 1099 just enough to pay your bills. Most of those I know who started out this way were able to leverage their relationships and income from their 1099 position, and within two to three years they had shifted to running their investing business as their primary focus. The 1099 became something they did either did to “keep the license active” or for a change of pace every here and again.
Path #2: Hold Your Breath
So this one is the big roll of the dice. It goes like this: You live off savings, cash, credit, etc. and do this full time. It takes a humongous shot of courage, but it’s one of the best motivators out there.
Interested? Read on.
Take all your liquid assets–cash, lines of credit, credit cards, and even your retirement accounts–and total up how much money you can come up with. Take your annual living expenses, living as lean as you can, and divide it into the first number. The number you come up with is how long you can live off your liquid cash and focus completely on your RE business. If you can’t figure out how to do this for a year, I would not recommend it.
My wife and I did the “hold your breath” method to have her join me full time in 2009, and it didn’t work. That was a tough year for us, but we gave it a go. After a year of living on our savings and a sporadic income from the business, we decided the best thing was for her to go back to work. I know several people who made it work, although it was extremely stressful at the time for them!
This method is the one I see most aspiring wholesalers go for. As wholesaling doesn’t require a huge cash outlay up front aside from some marketing expenses, you can push all your available cash to your living expenses. Whatever your investment strategy, this path requires a solid plan, a super strict and conservative personal budget, and lots of courage to stick with it even when you have a dry spell!
Path #3: Stand on Your Spouse’s Shoulders
The title pretty much explains itself. First off, you need to be married or have a significant other that you have a deep level of trust with. You find a way to live off one of your incomes, which is a challenge in this day and age. If you can figure it out, one of you gets freed up to focus on their RE business full time, while the other holds down the fort with their income from their job. This path requires a lot of trust on both sides and most importantly requires that the working spouse is 100% enrolled in the real estate business and how it will be benefit you both in the long run.
This is the direction my wife and I took. We were real estate education junkies while we were dating so the enrollment was there at an early stage. We actually decided when we were engaged for me to quit my job right after we got married. We bought a house that was very modest and well below our means, easily affordable on her salary. We didn’t buy new cars. We didn’t eat out too much. We lived as lean as we could, and we made it work. It took a while and there were some frustrations about getting it moving, but with patience and persistence, we got there! In 2013 we had our son, and my wife was able to stay home with him full time. I write this article the day before our 10 year anniversary, to give you an idea of the commitment it took to stick to this plan!
So to wrap it up, there is no easy road to doing this business full time. Any one of the plans I laid out above have plenty of hurdles and challenges that will inadvertently come up. That being said, I can tell you that with a solid plan and commitment, it’s worth it. There is no better way to expedite your growth and get where you want to go in this business than being able to put all (or most of) your time into it.
Have another method to go full time? Have you succeeded or failed at one of the above?
Let’s hear about it! Leave a comment below, and let’s get the conversation started.