Re: Going To The Show - Posted by JT - IN
Posted by JT - IN on July 03, 2001 at 06:50:34:
GL and Ron Starr have made some great points that you should respect and follow.
In regard to your question concering this LOC; could the lender rescind? Yes. These are generally renweable for a short term, sothat the banker can review a changing situation. Re investing is seen as high-risk (speculative), when there is no other income to offset these obligations. Bankers are looking at things in a what if scenario, until you have “immunized” the risk, and can withstand several, possible negative downturns.
My advice, and I am a full-time investor, for the past 4 - 5 years, is to wait until you are busting at the seems, and can no longer afford to stay at your present JOB. This is difficult to be objective about, since your desire is to “pull the switch”, and go full-time, but until you are overwhelmed with business that you are not able to handle, making sure that you have a proven comodity in your business approach, then and only then, would I leave the security of a JOB. Additionally, as previously stated, when you do make this move, you will diminish your ability to leverage, without the other stability. Now if you are able to buy/sell enough property w/o the use of outside funds, so be it. However, the use of borrowed funds definitely has a place in the typical RE investment scheme. My recommendation is for your RE income to be at least double what it is from your current salary, net of any routine business expenses. (Or if you have substantial net worth, the kind with a looooot of zerooooos on it, then make the move). You should not be looking to replace your income, but to increase it, as I am sure that you are. Every dollar that you take away from your RE investing to meet living expenses, becomes a direct expense to your business, as opposed to funding your living exp. via another income.
It is better to make the decision to make this move too late, rather than too early.
Just the way that I view things…
JT - IN