Posted by Mike on October 19, 2004 at 06:49:35:
Thanks Del! I can imagine there is a time when life is very, very, very busy. That has to be the time when your REI business was almost big enough to quit the job but you still needed it for a little while longer. Even though it was busy I’m sure seeing the light at the end of the tunnel made it easier.
Thanks for sharing!
Mike
When is it enough to… - Posted by Mike
Posted by Mike on October 18, 2004 at 12:56:11:
quit your job? I just read 2 posts regarding contracting out lawn care, manager properties…from people that have 20 plus properties. My question is, with that many units why aren’t people already in their own business and NOT working a job? I am not asking this to critisize I really want to understand. I am new to investing (in my second year) and have 3 properties. I must admit it is disheartening to hear other investors that have 20 plus properties are still working a full time job. I really hoped that by the time I owned that many properties I would be done working for other people.
Is it because some of you have highly compensated jobs and it is more difficult to replace the income from your job? Is it because your properties don’t produce enough cash flow? Are you not turning any properties for profit that you can use to “live on”? Can anyone that is currently on this category (20 plus units) give me some real life examples of what life is like in the 20 plus units world?
Thanks,
Mike
You might like your job and not maintenance - Posted by John (OR)
Posted by John (OR) on October 19, 2004 at 07:04:21:
One other view is that not everyone wants to do all the hands-on tasks.
Some investors enjoy finding deals more then they do managing the
property.
In addition, some actually enjoy their jobs or receive other benefits that
can not be easily replaced by a RE investing career as a full time
option.
Having read all the replies to date I think you will notice that RE does
not throw off a lot of cash flow in the early days. You need time to be
on your side. While waiting for the equity to rise having a job makes
the loan applications easier.
John
Re: When is it enough to… - Posted by Rob FL
Posted by Rob FL on October 18, 2004 at 21:49:08:
When you are ready to go full-time, you will know. IMHO, The keys are (1) to get comfortable enough in your investing where you know that you can easily bring in the monthly dole to pay all your bills every single month, and (2) to have a nest egg of 6 to 12 months cash available at your disposal just in case something goes wrong - kind of an emergency slush fund.
Re: When is it enough to… - Posted by John-Fl
Posted by John-Fl on October 18, 2004 at 19:53:11:
In Dec I will be “full time” for 2 years and I don’t have a single property that I hold as a rental. My rental cashflow is $0 monthly. I do however currently have 3 rehabs in various stages and have been successfully cashing 1 or 2 $25K checks monthly from rehabs being sold. I went from a cushy $75K a year job to making $25 - $50K a month.
I used to travel 5 days a week and be away from my wife & kids but now I’m with them so much we got on each others nerves…
Re: When is it enough to… - Posted by Sean
Posted by Sean on October 18, 2004 at 16:41:00:
My requirement:
Double your current income monthly CONSISTENTLY, or at least 1 full years worth of income in the BANK (not working capital, but 1 years worth of salary earmarked for nothing but you to live off of while you work real estate full time).
That’s when full timing makes sense… of course I tend to be conservative when it comes to these sorts of things.
Re: When is it enough to… - Posted by eric
Posted by eric on October 18, 2004 at 16:28:57:
I have been in to RE for close to 10 yrs now. For me keeping a full time job allows me to reinvest any of the cash flow to keep them up to snuff, plus to acquire more. I use the approach of dividen reinvestment. The bldgs are paying for their maintanence and upkeep plus buying more, it works like a snowball. Keeping in mind that when you “retire” you don’t want to be in the middle of a major rehab. You want several consistant bldgs with minimal maintanece.
Also, keeping the job has helped me in leveling out a recent dramitic rise in vacancy rates. By not needing that money I was able to ride the wave until is leveled out.
Not to mention this gives you a real chance to look before you leap. If you come to that point within the next year that you can leave your job because you are making enough from your investments what happens two yrs from now when you may find out this is not for you?
Re: When is it enough to… - Posted by wpage
Posted by wpage on October 18, 2004 at 14:04:01:
Mike David gave you a very good answer. Part of the problem is that people, most often, are buying with very low down payments which leaves high mortgage payments. Acquiring 20 plus units is the easy part, maintaining all the costs involved is the hard part. The smart person keeps his job until there is enough cash flow to live on. That could take several years depending on your standard of living. Turning properties is only part of the equation. If you don’t want to keep your job then you are going to have to buy and sell on a regular basis to maintain your living; therefore you will not be building any equity with each mortgage payment. You also lose out on the appreciation which time will give you by holding. The secret to becoming wealthy in re investing is to do a combination of both. The smart investor will have 2 portfolios. One where they keep the best properties they buy and the second one is for turning over. Each time you turn over a property you put a portion of the profit towards paying down the properties in the holding portfolio. Sounds easy doesn’t it? But it does work, just not as fast as some people pretend and hope for. HTH wpage
Re: When is it enough to… - Posted by David Krulac
Posted by David Krulac on October 18, 2004 at 13:39:41:
I’ve had 30 several times, both working full time and not working at all.
imho, the key on whether you can go full time investor no job, is besides what standard of living you want/have; obviously replacing a $30,000 job is easier than a $100,000 job. Besides that the key is what are your financing costs on the properties. If you have no mortgages, its a whole lot easier to generat a bunch of income. But if you have 80 or 90% LTV then there’s not a whole lot left after expenses, maintenance, taxes, insurance, and debt service to put into your pocket. If you put say $200 per month per property in your pocket, how many properties do you need to replace your income? If your income is $30,000 that’s 13 houses roughly. If your income is $100,000 that’s 42 houses.
Re: When is it enough to… - Posted by todd
Posted by todd on October 19, 2004 at 21:44:34:
Hey John,
I love your e-mail address by the way…to funny LOL! I was just wondering, how did you start out with rehabs? what was your first move?
thanks for your time.
Todd Williamson
Re: When is it enough to… - Posted by Mike
Posted by Mike on October 18, 2004 at 20:55:53:
That is inspiring! Congrats. It sounds like your REI vehicle is rehabs. You have the best of both worlds, time and money! One day…
Thanks
Re: When is it enough to… - Posted by Mike
Posted by Mike on October 18, 2004 at 20:53:29:
I like your conservative position. I am married with three young boys (all under 7) so I am not in a position to take too much risk.
Thanks!
Re: When is it enough to… - Posted by Mike
Posted by Mike on October 18, 2004 at 20:51:49:
Thanks Eric. You spelled out your experience clearly and that helps me to understand where I can see myself in 10 years (hopefully) I am assuming that because of your REI you either can retire sooner than you would have w/o the investments or you can retire at the same time just much more comfortably. The job covering times when there are vacancies is a very good point.
Thanks again!
Re: When is it enough to… - Posted by CJinNJ
Posted by CJinNJ on October 18, 2004 at 22:31:58:
Great point. My wife and I happen to be less real estate investors as we are ‘collectors’. People used to put us down for hopping from IT job to IT job inthe late 90’s through now but our salaries are great and each SFH or townhome we purchase is done right (usually a rehab or bought through tax sale) and when it is time to move we simply never sell, just rent out. I now have 5 properties since 1998 all rented in NJ and PA. I remember when ‘house collector’ was a bad word, but not the way we see it. We simply buy right when our jobs move us.
Don’t get me wrong, I’d love to be out there hustling for those rehabs 50 hours a week but where I live there are MANY bandits and even some billboards on I-95 coming out of Philadelphia. Too many people fighting for too few rehabs (worth dealing on) in this area.
Re: When is it enough to… - Posted by Mike
Posted by Mike on October 18, 2004 at 15:34:54:
Thanks for your response. Forecasting is very difficult because of all the varialbes. It is even more difficult when I hear of people that have what I would have thought to be enough properties to allow them to be investing full time as opposed to doing this IN ADDITION to a full time job. I understand better now how this can be true. I like your example of 2 portfolios and I will have to spend some time thinking about how to incorporate that plan in to my REI portfolio.
Thanks again for taking your time to share your thoughts!
Re: When is it enough to… - Posted by CA
Posted by CA on October 18, 2004 at 18:17:51:
I am curious to know what majority of RE techniques being used. I know everyone is different and mixed RE options are being used.
Are L/O and SUB2 supposed to give one the most and enough income to quit F/T job. It’s rather interesting to see if one has 20-30 properties but still have to work F/T, unless you’re looking for depreciatioin - seem to be a lot of work short term wise. How much time and money you have to spend taking of your investment, do you have enough time for family etc., I wonder?
Re: When is it enough to… - Posted by Mike
Posted by Mike on October 18, 2004 at 15:43:26:
Thanks for your response David.
I understand and can only guess that the posts I am reading are from investors that are house rich and cash flow poor(I understand that doesn’t mean this is a bad thing, they could have a nice chunk of equity). Or, they are being conservative and are holding on to the job until they are absolutely sure they are ready. I will need to spend some time processing my plan for the next few years and see where I will be if I continue following my current investment strategy.
Thanks for taking the time to share your thoughts.
Mike
Re: When is it enough to… - Posted by Del-Ohio
Posted by Del-Ohio on October 18, 2004 at 23:27:16:
wpage’s strategy is similar to what we decided to adopt.
We started in the bussiness Jan 03 we bought numerous small apartment buildings with decent cash flow, did some renovations, increased the rents. Created some nice equity and good cash but not enough for my partner and I to pull a decent wage from. We did a few rehab and sell projects the same year. We both by the end of the year saw the tremendous potential and decided to sell our other companies to focus full time on real estate, growing the new company. Our strategy this year is soley rehab and sell to create cash. We took the Robyn Thompson bootcamp on rehab earlier this year and are now doing two rehab properties per month. We are getting the systems in place to double this next year.
Our strategy as of Jan 05 will be what Dave Lindahl calls the “chunker” strategy. You rehab, pay yourself a decent salary, take a “chunk” of the cash and use it to buy multi-unit apartment complexes for long term investment.
This is the strategy we have decide to use, fits us well and seems to be the best thing we have come up with for cash/profit to live on as well as create equity (paid off buildings) for retirement.
I know someone else who buys cheap houses, rehabs, refinances, pulls out 10,000-30,000 per house and then rents them out for long term.
There are a lot of different strategies and we each have to pick and choose what best fits us. But my experience and observation is that it takes a LOT of rentals to create enough cash flow to pull a substantial salary.
Best wishes in your real estate endeavors.
My viewpoints
Del-Ohio
Re: When is it enough to… - Posted by David Krulac
Posted by David Krulac on October 18, 2004 at 22:37:49:
I do a lot of different things, including 3 new subdivisions, rehab, resell, rent, develop. I never do sub2, and a few l/o or just o and CFDs. I do sheriff sales and foreclsoures. I buy reos, I buy at auctions. And many properties come right out of the MLS. Almost everything I buy needs work. I have no employees and have bought over 100 properties since Jan, 2002. Other than that I just sit around and loaf.