Can I Quit My Job to be a Real Estate Investor? [QUIZ]on July 6, 2017 5:20 pm under Real Estate Investment Tips
If you are thinking about quitting your full-time job to be a real estate investor you’ll want to be totally prepared before you hand in your resignation.
Answer these questions honestly to see if you can really pull it off:
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Are you ready to leave your job and flip houses full-time? Answer the questions below to see!
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Do you have successful experience flipping a house?
Do you have existing relationships with contractors that you can trust to deliver on time?
Do you have an existing relationship with a lender so that they are comfortable with your credit score and payment history, even without current income validation?
Do you have recurring income or a large enough savings to cover your living expenses for at least the duration of your project?
Do you have flexible funding that would cover an unexpected expense or delay in your project (about 10-15% of your total investment)?
Do you have an exit strategy for the property, including a plan B, or plan C that would keep you from going bankrupt on the project?
If you answered “no” to any of these questions, then you should NOT quit your job to become a full-time real estate investor . . . yet. While real estate investing can be a great job, the transition from employee to full-time flipper should only happen when you’ve eliminated as much risk as possible. The best way to smooth the transition from your current job is to flip a house or two while you are still employed. You’ll be very busy for a year or so, but it’ll be worth it. You’ll set yourself up for long-term financial success and build your professional network before leaving your bread-and-butter profession.
So, how do you live the “Flip or Flop,” “Property Brothers” lifestyle while you still have a 9-5 job? It wont happen overnight, so start now. Follow these steps to set yourself up for success. Invest time now so you can invest in real estate later.
How to Quit your Job to be a Real Estate Investor:
Flip Before you Quit.
There is no substitute for experience, and no greater sign of trustworthiness than past success. Lenders, contractors, and inspectors will all feel more comfortable working with you after you have a few successful house flips under your belt. That means that your projects will be easier and your network of support stronger. If you want to be off the corporate payroll while you flip a house you’ll need everything to run as smoothly as possible. Flip before you quit.
Build a Relationship with a Lender
House flipping lenders are not interested in how much money you make on a flip. They only care that they get paid back from the project. Having a steady job is a strong indicator that you will be able to pay back a loan even if your project hits the skids. After a few flips, your lender will see that you are both capable and financially responsible and will care less that you have other employment. Demonstrating that you can make good financial decisions under pressure is a valid substitute for full-time employment, but don’t expect anyone to take your word on it. TIP: Create a portfolio of your projects with financial statements to show your lenders, contractors, and partners.
Build a Network of Reliable Contractors, Real Estate Agents, and Partners.
Everyone is trustworthy until they aren’t. The best way to know someone will be good to work with is to have worked with them successfully in the past. Do you really want to be experimenting to find the best professionals without a backup source of income? No, that’s a recipe for disaster. Think of your first two flips as opportunities for education and trial runs to make sure you have the best team.
Accumulate a Sizable Cash Savings.
Real Estate Investing is risky because of the huge upfront costs (purchase and rehab). In contrast to a weekly paycheck you’d get from a steady job, you only see a return at the very end of your project when you sell or refinance the property. That means you will have to fund the project AND your life before getting a cent in return.Although it may take a year or more, you need to save enough cash to cover your living expenses for the duration of your project, plus several months, just in case.
Plan Several Exit Strategies that will be Profitable for You.
You need to have a well thought out plan of how your financials will work out in multiple situations. By planning ahead you can make sure you are keeping the most money in your pocket as possible. Don’t lose money just because you didn’t think ahead.
As you start investing in real estate, the smartest option is to keep your job. Work hard for a year as an investor with a full-time job and then use your experience to transition to full time real estate investor. You’ll be glad to have the knowledge, experience, cash, and relationships when you go full-time.