If you’ve ever dreamed of living a life where you don’t have to report to a boss and punch a time clock, real estate investing could be the answer. Over the years, hundreds of thousands of people have discovered financial freedom and built wealth by ditching their day jobs and investing in real estate full-time. Could you do the same?
7 Tips for a Smooth Transition to Real Estate Investing
There’s something to be said for being a part-time real estate investor in addition to your full-time job. Real estate investing is flexible in the sense that it allows for this. However, you aren’t going to make nearly the same ROI on your investment properties doing real estate part-time as you would full-time.
In addition to the increased ROI, full-time real estate investing comes with a number of other perks, including: the ability to set your own hours; freedom from a boss; unlimited earning potential; and the chance to work outside of a traditional office or cubicle.
The challenge for most investors is figuring out how to manage the transition. There’s a certain level of security that comes with having a 9-to-5 job and giving that up for a less certain opportunity can be perceived as scary and risky. Considering these factors, here are a few tips for a smooth transition:
1. Determine Your Income Goal
The first thing you need to do is determine your income goal. In all likelihood, you’ll want to replace your current income and then some. However, you can’t just look at your current salary and assume this translates perfectly.
If you’re currently earning a salary of $100,000 per year as a salaried W-2 employee, you’re going to need to make considerably more to offset the taxes, lack of benefits, and other expenses you’ll incur. You may, in fact, need to make something closer to $125,000 just to keep up your current lifestyle/budget. Make sure you think about these factors as you calculate your target income.
2. Build Up an Emergency Fund
Before you actually start real estate investing in real estate is the perfect time to build up an emergency fund. As the name suggests, your emergency fund is a pool of cash that you have waiting in the wings in case something goes wrong and your real estate investments don’t pay off.
You may come up with your own definition of an emergency fund – and you may already have enough on hand – but three to six months of expenses is a good place to start. If your monthly expenses are $5,000, this means you need $15,000 to $30,000 tucked away for a rainy day.
3. Find Your Niche(s)
Saying you want to be a real estate investor is like saying you want to work in finance. There are dozens of specialties and it’s important that you narrow your focus and find your niche. Options include wholesaling, single-family property management, multi-family housing, land, commercial properties, etc. You don’t have to choose just one, so consider any and all that stand out to you.
“Most full-time real estate investors, myself included, do not simply use one of these methods but mix-and-match them,” says Brandon Turner, founder of BiggerPockets. “Perhaps you can take a job as a real estate agent, while building up relationships with other investors and flipping one home a year. Or maybe you can use the several cashflowing properties you already own to support you while you get your real estate license and make more income that way.”
4. Find Time to Invest
The next step is to find some time to get started with real estate investing while working your full-time job. The goal is to start generating some revenue before leaving, which makes the transition smooth on the financial front.
Since you’re probably already working a 40-hour job, you’ll need to carve out time outside of that normal 9-to-5 slot. If you’re a morning person, you may find that waking up a couple of hours early helps you research properties. If you’re a night owl, two or three hours in the evening may be ideal. Maybe weekends are good for you? Or perhaps you have the flexibility to take off a day in the middle of the week? The point is that you have to find time.
5. Start the Transition
Sooner or later, you actually have to begin the transition. If your job allows for it, you may be able to slowly cut back hours. For example, you might move from 40 hours to 30 hours the first month, 30 to 20 the second month, 20 to 10 the third month, and 10 to 0 the fourth month. However, most people won’t have this luxury. In all likelihood, you’ll have to put in your two weeks notice and quit. But as long as you’ve prepared in advance, this won’t be nearly as scary.
6. Don’t Burn Bridges
When transitioning out of your full-time career and into real estate investing, you need to be cautious and conservative. Avoid burning any bridges that you’ve built over the years, even if you’re confident that this new career path is what you’ll be doing for the rest of your life.
You never know when real estate will stop working for you, or when you’ll want to return to your former career. Keeping positive relationships with your coworkers, employers, and clients will give you a nice safety net.
7. Hire a Property Manager
You should always be looking for ways to make your job easier. The less effort you spend on time-consuming tasks, the more energy you can spend on the “big picture. When investing in rental properties, one of the best things you can do is hire a property manager to take care of these things.
Let Green Residential Help
If you’re looking for professional property management services in the Houston area, look no further than Green Residential. Over the past 30-plus years, we’ve built our reputation on the tenets of trust, transparency, reliability, and expertise. For more information on how we can help – and for a free property analysis – don’t hesitate to contact us today!