If there are so many ways and deals to be had isnt it rationally possible for one who had access to $100,000 ,even if it is in a heloc for one to go out and make a living investing provided they had good education knowledge of their market and reasonable living costs ($3000 all inclusive)
I quit with a whole lot less than that. Actually I never had a day job. I was contracting for other on a low pay scale.
here’s a copy of a post I did about a month ago over in the rehab section to a very similar question…some of this is specific to rehabbing but a lot of it applies to anyone consider RE investing full-time.
Also, 100k in capitial is really not a lot of money to deploy in investments. Also, if you were to do REI full-time you really need to have a considerable “rain-day fund” to live off of in the event bad things happen(IMHO).
here’s some thoughts form a guy who has done REI for 8 yrs. During that time I’ve been an investment partner in an LLC (doing rehabs/rentals) as well as doing a couple of rehabs myself (I’m a weekend Joe-Tool-belt guy). Also, I did a couple year stint of being a self-employed consultant (i.e. lumpy income flow like you might see in a full-time REI business). One should not underestimate the value of your health benefits, paid vaction and the face that cash money shows up in your bank acct every two weeks/once a month when you get paid by your employer. As such, I’ve considered such things as going fullt-ime in rehab, but I think there is a few things to consider.
First and foremost is the change from having the flexiblity to pick and chose deals when and if its convenient (both buying and selling) to “I’ve got to make some thing happen to earn income/pay my bills”. As a guy with a steady job, I just today walked from a deal due to structural problems revealed by the inspection. The price was cheap and it cash flowed, but I did not want take a chance of having to spend big money for improvements in the future and/or have a hard time selling it on the back-end. Likewise, I put REI on the back-burner for most of the year as we had our first child in the middle of year (busy changing diapers instead of hunting for deals).
Second is you are going to pay tax like regular income couple with self-employed half of Soc. Sec. Also, you lose the ability to do nice things like 1031 exchanges, etc. As an example, as an investor, if I make $40k on a deal, I can keep the whole thing if I roll it into some other properties with a 1031 echange (which is tax defferred, but not tax-free), vs if you are a full-time rehabber, you might end up with $20-25k in your pocket after you pay fed taxes, SS (7.5%) and state and local taxes. Plus you are not as likely to net as much as I might as an investor (and probably will not) as you are more likely to take a low or medicore offer on the sell side.
Third is I have to say that I have made plenty of money doing rehabs, but a large faction of that was becuase the market I’m in (SoCalif) was appreciating; not so much that I’m a great rehabber. In a flat or moderately slow market, I think you find when you back out the per hour rate you end up getting paid, the number is not so great.
In the end, I think many people that start out as full-time rehabbers (actually doing the work) end up becomingf a constrcution company. That’s what happen to my two partners in the LLC when they took it full-time. That’s not to say you can not start out working by yourself and building it up to have a small crew of guys doing the work for you, but its a tough road (IMHO)
Some food for thought.
Happy Investing in '06
No. Not for $100K or even $500K. My work gives me a strong enough income to support my family and maintain a comfortable lifestyle. It allows me to qualify for loans on multiple properties simultaneously. It also exposes me to real estate investment opportunities. Having equity in real estate investments allows me harvest some cash if I need it to overcome slow times at work.
I would not like to be a fulltime real estate investor. For me it is fun BECAUSE it is part time and is a slight change of pace.
Thanks for the GREAT advice Mike,
According to the professionals you dont need money to invest , so I would think $100,000 would carry you to the next mllenium.Of course there are risks and changes but what if you invest part of that money in say building a laundrymatin a building you own .A business that offers very nice potential cashflow with very min time required so you have time to fix and sell and rent and invest.
Yes steve but you made a key point …you dont want to be a full time investor.I dont want to work my job I have to make someone else rich when I could be fixing toilets and tromping through abandoned houses making me rich which I dont mind either .FYI I only make $35,000 a year at my current profession That doesnt support my family but my realestate and that does.
I wouldnt quit my job being able to borrow money, but if i had around a million in the bank and little debt, i would quit. im sure i could live off of the interest at that point.
I agree, unless you have more money in the bank financing will be difficult if you have no job.
I see we have an awful lot of conservatives here Let me ask if I may with all due respect to your standards. If you believe in the theries (?) taught to you by Carlton and others and you believe in yourself that you have learned and as much as needed to get started …realestate inesting is a no loose situation. Isnt it? according to many you dont need a job .No DOC loan ?
sure, its possible to get a house on a land contract or lease option or whatever with little or no down, but that will severely limit your options. if you can find a way to borrow enough cash, via credit cards, relatives, friends and banks to pay cash for a house, you can usually get the best deal and you avoid paying closing costs. then get your cash back with a no closing cost heloc. instead of paying a few thousand to refinance, apply that cash towards the principal balance.
That is the premisis of this post wil817 .$100,000 should be enough work with to buy flips and cashflows dont ya think? Would you quit ?
Campbellgroup, the way I see it, Investing can be a no loose situation. IF you know what you are doing. But even then there are always risks or something may come up that you have no control over.
If you believe in yourself and feel you have learned enough to get started, do just that. Start.
But don’t quit your day job until your investing earns more than what you are making now. AND make sure you have enough to hold yourself and family over for at least 6 months. (Longer would be better)
There are too many things that can go wrong with investing.
Have you read the post titled “makings of another soap opera” or the other recent post about the lady that wouldnt leave her house and all the crap she’s been putting that person through? Sorry I couldn’t remember the title off the top of my head.
Those are just examples of somethings that could go wrong and you never know what might come up.
I personally just think it’s better to be safe than sorry. I wouldn’t quit if I were you, not yet anyway.
If you want to quit your job, have a good plan and enough $ to hold yourself over for a while (should things not go as planned) then by all means go for it. Just be careful.
have you read my posts in "My career in realestate has begun thank you " and how do I know Im not going to walk in to work tomorrow and they say “SEE YAAAAAAAAAAAAA” or I walk out the door and a plane falls on my home and crushes it . Yes there are unexpected things that could happen. I feel I have enough knowledge to work my plan and take control of the things that could happen to reduce the risk.I only take home $2100 a month right now from my J.O.B and I live very comfortably for my standards.I have 17 rental units here in florida with horror stories that would have made any begginer pull a bag over his head and run a marathon through a thorn bush nude to get away. But there is a phrase I have found to be so true "There is nothing money cant cure "
It seems to me you’re looking for someone to say “yeah you can do it, go for it”
It can be done and has been done in the past.
I’m nobody to tell you what you should or should not do. It’s up to you and what you want.
Since you feel as though you have the knowledge and can reduce your risks, then by all means go for it!
I wish you luck & hopefully everything turns out like you plan.
Wll of course I want approval from the crowd. Who wouldnt . But from what Im gathering the crowd is as affraid to give their approval because they themselves do have the guts to do it just as each and every one has themselvs asked for advise when they started and the crowd told them all the bad mean and nasty things that could happen.We all know what COULD happen but my question is "IS IT A LOGICAL POSSIBILITY? NOT …DO YOU APPROVE . thanks for your help ;D though most of you are comfortable in the lifestyle you are in is besides the point Is my idea financially responsible and logical. Ill worry abut the waht ifs allthough I appreciate your what if comments to keep me activly aware of them.
I DON’T have the guts. :-[
I’m the type of person that doesn’t believe in taking unneccessary risks. Maybe thats a bad quality but thats the way I am… ;D
Of course it’s possible, I don’t know about it being logical though.
I don’t think it would be considered financially responsible.
AHHHH quite the contrare I will take the risk if there is a possability of great financial reward
Then you will probably go further than me…
Think possitive . Sometimes thats the ONLY thing that gets me through things. Think possitive and Kepp thinking possitive even when your tenants toilet is overflowing to the 2 downstairs tenants . Just think in about an hour this place will be smelling like roses again Every person has the ability to succeed equally they just have to believe it
Oh, I do think positive. This can be a very rewarding career not only $ wise. I’m just not going to take risks I don’t need to.