Don't Invest Full Time

Why would someone who profitably completes, say, 3 real estate deals a year choose not to double, triple, or quadruple that number and leave their day job? I always see things about excellent home investors who only do a few deals a year as a hobby, make cash, and continue working their full time job. It doesn’t make sense to me - if you like your hobby, and you do it profitably on the side, why not increase productivity and do your hobby full time?

A few reasons.

First, and probably most importantly, one of the most popular methods of obtaining financing for REI endeavors would be to obtain loans/mortgages/etc through banks. Getting a loan from banks, especially nowadays, with a job is hard enough as it is, let alone without one!

Related to that idea of security for banks is security for self. Cash gained from your standard 9-5 is relatively guaranteed, whilst that gained from REI, especially initially, is not nearly so predictable. Most people don’t start investing until they have families already, and it’s not easy living with putting your family in that type of financial uncertainty.

Another reason would be that output does not scale linearly with time invested. There’s many reasons for this. For example, there’s only a limited amount of pursuable deals available at a time. Obviously with the buyer’s market as it is, finding the deals isn’t the problem. The limit here, then can be the limited amount of time and energy.

There’s obviously more reasons that I have not listed, and probably some reasons why I’m a blundering fool, so take everything with a grain of salt. Perhaps it makes more sense in your situation to give up your day job and go into REI full-time. Just make sure you make the right decision, and then don’t look back!

I will tell you my reason. Real estate investing has always been a hobby, and probably will be for the rest of my life. If I had quit my job to do real estate full time, then I would not have a hobby anymore. I would just have another job.

I started in 1981 when I became a landlord for the first time. I only acquired one or two properties per year and none in some years. By Aug 1998, my wife observed that we no longer needed the income from my full time job to support our lifestyle. As soon as that realization set in, I gave my employer two weeks notice. We moved into our retirement home over the labor day weekend.

About six months later, I celebrated my 50th birthday with my wife in our retirement home. My “hobby” made me financially independent in my spare time. My hobby has never been “work”, never a job, just fun. In Aug 1998, I became self-UNEMPLOYED and have remained so to this day.

While you certainly can quit. You have to make sure that you can cover not only the job’s income, but health insurance and other benies from the job. Also, I believe the banks will only like 75% of rental income. So you really need to have an amount way over and above your job’s income. If you hate your job, you may be more inclined to bail out ASAP. But if you like what you do, what’s the rush?

Well, I work full time and I invest. I would have to flip a good 6 to 10 EXTRA houses a year to replace my job’s income. I get to work from home, set my own hours, and have steady income.

My investment strategy plays a role as well where I do not get paid today, but rather down the road. I am starting to change my investing focus to generate cash for my business, but it will take some time to build reserves and cash out the properties I have.

I do plan on quitting my job down the road when I start couple of projects I am working on in couple of years.

Because I make a whole lot of money in my day job. I get to have a whole lot of fun and it doen’t take away much time from my investing. I would do this job if I won the lottery for $10 bizillion.

I make 6 figures, I get to work at about 9:30am, go to lunch from 12:00 to 1:00 by 2:00 I am headed home unless I have a meeting or something. I travel enough to get elite status but not so much that I get burned out. I have a staff that is totally competent. I get to tell anybody that I find doing someting stupid…“stop doing that it is stupid” (that is everybody from the president to the janitor)

I am waiting until they give me real work to do and then I will retire and do nothing but real estate.

Sounds like you have it made BlueMoon! Congrats! For me I didn’t have it as an option on whether I went full time or not. I had to. I had to because I hated working for somebody else making them rich. Well, not rich, but you know what I mean. I worked my ass off 50-60 hours a week and what did I get? A company truck? A business expense account? Insurance? Yeah, that’s all great, but I had no freedom. That’s what this is all about for me… my FREEDOM! (I said that last line a Scottish accent like Mel Gibson in Braveheart)

I actually like my job. I’m a Respiratory Therapist but because it’s healthcare, I have to work every other weekend and every other holiday. The pay is great, but I HATE, HATE HATE, ASKING FOR TIME OFF! I’m looking for RE to give me enough to give up my full time commited job and be able to work when I feel like it. I get a lot of satisfaction from my job. But I want it on my terms.

What personal financial benchmarks would you look for during the rei journey? For instance, what should your finances look like when you start investing, and then how should they look to go full time, etc.?

It seems there would be 2 main categories - total monthly expenses and total cash on hand.

To begin investing, it seems only cash on hand really matters, as you still have a day job hopefully paying the bills. To go full time into rei though, it seems both categories are crucial - correct me if I’m wrong.

So say you have $2k in monthly expenses, and $16k in available cash on hand (with a credit score of 700+). Is this enough cash to begin investing? How about to go full time? Given this situation, on one extreme you could quit your day job and do nothing and live 8 months before exhausting all your cash. At the other extreme, you could quit your job, invest $10k into real estate, and live off the other $6k for 3 months while fixing the house and selling it to net, say, $16k and repeat the process ad infinitum.

Anyways, what numbers would you recommend as a bare minimum/safe cushion/more than enough?

Cash is not as important as CASH FLOW when you are considering going full time. Having a 3, 6, or 12 month reserve of cash on hand is irrelevant if you can’t be sure your real estate business will be able to support you after your cash reserve is gone. More importantly, that cash reserve may be needed for unexpected business expenses. So, my suggestion is that you don’t quit your day job until your business is providing enough cash flow to cover all your personal expenses.

Good Luck,


Here are a few reasons that I could imagine affect people…

  • Fear. People fear change. Also many people don’t like the idea of leaving a “stable job” to run a business or invest full time (though personally I don’t believe any job is more “stable” than your own business).
  • Lack of capital reserves. Maybe the investors don’t have enough savings or other liquid investments to feel safe enough to quit? That would cover them if things slowed down for some reason.
  • Lack of cashflow, or more importantly, lack of net income. Your business/investment income would need to consistently meet or beat your job income.
  • No plan or system for expansion. I would not want to quit a good job, if I were just to make the same level of income (or anywhere close to the same income) as my job. I would want to double my income…which is what I did back in the day. However I had a system (assets + a plan) in place to guarantee that would happen. Again this provides another level of security for you the business owner.
  • Their job is fun. I loved my job before doing my business full-time, and that did make it harder to leave, but I knew to make the money I deserved I couldn’t stay there.

I prefer to have at least 6 mos. of reserves in savings. Then I start to build my investment captial/reserves to use for purchasing & maintaining properties. The property’s cashflow will contribute to the capital/reserves account. When it comes to doing RE full time, you have to factor in the added cost of health ins. and any other benefits that your job provides outside of the paycheck. Also, you should ask your lender about incme requirements. Will they still finance your endeavors with just the income from the properties? I work three 12 hr. night shifts/week. I work while the most people are sleeping. So I may have a while before my job intereferes with my investing.

Have enjoyed your replies and knowledge of the realestate market. Have been in this type of business for many years, bur am looking at short sales and wholesaling instead of rentals. What have you heard in regards to the many programs on the market. Am lookin at TCS Foreclosures, Graham Trekle, and Jason Loucks, amoung others. Need some feed back. Thanks