How long did it take you?

Question

I am wondering how long it takes on average (i know it differs greatly) or what you have seen for how long it takes people to be full time REI. I have made a business plan, which is ever so changing of course and am looking to change it again.

In my dream world I would goto grad school which will be three years and have to work very little afterwards and be full time REI. I want to buy and hold and will start day one at grad school but how much can someone really accomplish in that amount of time? I have already been looking at markets where I might be and finding deals and playing them through in my head.

In my mind I think once I get a certain amount of properties paid off that it could replace my other work is when I will go to REI full time. Luckily my work will most likely be out of my home working with people in the evening so even after school I will be able to really work at getting a great foundation set for myself in REI. I guess ideally I would want about ten homes paid off free and clear before I were to make the transition.

How long would this take a majority of investors? 5, 10, 15, 20 years? I do want to wholesale and do lease-options to pay off these homes so I hope I will have some income coming in. I guess thats a plus to starting early that because I won't have to make much money to be happy I would much rather live like an average dude out of college for 5 years and be set for the long haul real well. Again, I know this varies greatly and it will depend on how hard I really work, but I have been dreaming a lot and I just want to know if my dreams are too good to be true.

Account Closed · Answer

Matt, my suggestion is different than what you have already read here.

First, ignore anyone saying you do not need to complete your education. That should be your focus.

Second, you said you have some money saved up. I would suggest you not start buying real estate until you have finished your education. I would suggest you take the cash you have saved and look into some well performing ETFs with good option spreads. These are things you can do with as little as a couple of hours a month if you want and easily earn 3% a month on the money. If you put more time into like, like a couple of hours a week, you can get it up above 5% a month. By the time you are finished with grad school, you can take half of the funds (or more if you wanted) and leverage your way into some really great real estate deals.

Third, don't look to just one asset class to give you security. I recommend you find a copy of Buckets of Money and read it. Once you finished with school, start putting that strategy into place.

Fourth, actually work in your chosen career for at least a few years. You may find you actually like it since you know you will not have to depend on it forever. You can still invest in real estate at the same time but experience will give you an additional fall-back option to make money should times require it.

Diane Menke · Answer

Matt the guys have already given you a lot of good advice. I second the question re grad studies.

We have bought and sold in the marginal areas of our city and we have done well this way. Look for areas where coffee shops are opening, artists are moving in, craftsmen...the artsy dynamic areas seem to "move up" quickest. Your student rental population is gonna be web savvy so we market on Craigs List and in the local university lists. The latter is new to us. I also put up fliers in those coffee shops.

You are a smart guy so why not put together a balance sheet and income statement? Look to see where you need to improve financially in these 2 statements. You will probably need to get a few hundred dollars in positive cash flow each month and buy so to see your equity grow. Maybe put a 12-24 month equity growth plan in place where you can tap that equity in 12 months to get property #2. So make these 2 = minimum cash flow and minimum equity growth in 12 months your plan.

So for example if you are buying $100K 3 bedroom houses to rent to students, you want to see $300 or more in positive cash flow each mo + the potential for at least 10-15% equity growth in 12 months so you can tap that equity to get prop #2.

Keep all the financial info on your Quick Books software, and a couple of Excel spreadsheets. Because that is what you will show to the bank when you go for your second home loan. You show them the proforma and the cash flow statements.

Keep your money seperate from the rental prop money and any costs of improvements too. The clean books will attract a bank and make tax time much easier.

While you put this plan into action, you should have a job that pays all your personal expenses and allows you to save. Don't touch your property cash flow for personal expenses yet.

Good luck and remember you make your money when you buy. So buy wisely.

Diane

Timothy W. · Answer

I'll start the chronology from when I truly decided to do this full time.  Through some real soul searching and hard work, I've been able to cut my "living expenses" to $1,000-$1,500 a month.  That's everything, housing, food, clothing, transportation.  While I've done that I've been able to generate about $20,000 a year in cashflow.  So thechnically you can go full time in 1 year though I'm not done yet.  I kind of want more than 20-30k a year before I delare myself retired, but realize I could "live" off that.  
                        
                        Also realize I spent about 2-3 years before that listening to the wrong people and wasting a lot of time and ending up with about $4500 in bird dog fees as the result of 3 years of work.  So the answer to your question is it will probably take you a couple years of spinning your wheels then about 1-2 years of repeating what you have found works.  I know you want to jump right to those 1-2 years and things like BP are here to help you with that...maybe you will, maybe you won't.  If you don't it's because you have some good lessons of discipline to learn.  Regardless don't give up.
                        
                        Tim

Casey Auciello · Answer

I would possibly reconsider your graduate degree. Is that a personal goal or something to benefit you in REI? Having completed my bachelor of business admin (focus in marketing, integral in real estate) from UC, it taught me to be an employee not an investor. There was more of a focus on RE financial concepts (definitely good to know for investing) and RE development.

There is no need for a degree from a university to be an investor. Depending on what aspect of investing you're looking to get into, you might want to reconsider your grad degree and focus on getting real world experience by doing deals and seeing how people act/react- something school can't teach.

Lee V · Answer

hey Matt

I was and still am in the same boat as you a few years back. Im only 27 and have already made a ton of bad decisions. I went to grad school and finished. Right before I completed my degree.... in 2005, CA was booming. Like you, my credit was great, 780, and like you, my savings was great, 25k in savings... all before I turned 23 years old. But unlike you, i didnt do any research into real estate investment, i just listened to all those over-night mortgage and realtor businesses and rush into to buying my first house, 490k. I was offered, no money down...blah blah blah. Well, I unsure what to do, i did the 10% down and took my 25k, with my parents 25k and bought that house. Cleaning out my savings.

3 years later, in 08, my house was worth less then 250k. My mom who was living in the house with me passed away, lost a source of income. One thing led to another, and foreclosure here I come.

Luckily, I saw what was going to happened, and bought another house, althought higher then I'll liked, right before i stopped making payments on my first house.

Also, i kept my wifes name out of everything at first and we also bought an investment under her name, renting to my dad (no positive cash flow, come on... its my dad! haha).

Anyways, do finsih your degree, althought I am not working in my field at the current time. Explore all opportunities but remember... CASH IS KING. Use as little as you can of your cash, and a lession Ive learned well, CREDIT IS KING ALSO!

As long as you have these two items in check, I think you will do fine. Im no experienced investor, Im a newby also. So good luck and keep me inform of your investments. I'll do the same, Peace!

Matt DuSold · Answer

Thanks again for the advice.

Not finishing my education simply is NOT an option. I know many people who have been hurt by just going into real estate and then not coming out alive and having nothing to fall on. If I can not get into REI full time or at all I would be perfectly happy doing what I am going to do with my education. Knowing I can have something to fall back on will also make REI more fun knowing I don't HAVE to live off of it.

I am starting to feel like wholesaling or birddogging would be best for a year or so, so I am able to invest in nicer areas or get places which already have tenants in them.

Matt DuSold · Answer

Thanks for all the responses guys! I have another question its not exactly related to this but I don't know if I should start a new thread?

I will likely be going to Kansas City next year and that where be where I start investing. I am wondering how hard is it to get approved by HUD and how long would it take to get a tenant in place (HUD or not). There are A LOT of VERY cheap homes under $15,000. Obviously they are not great homes but I could rent WELL UNDER the market rents around and still have over $100 a month in cash flow. The only thing I worry about would be getting a tenant in there... because without them it would be pretty hard to make money.

Yoshio Sugawara · Answer

I have to say that you're on the right track.  Don't get too impatient or greedy.  If you've saved more than your average peer, I'd say keep those practices in place.  You've learned to do what a major part of our population doesn't.  In fact, I'd increase savings when possible.

That said, the key is to understand what a good deal looks like,... or a great deal,.. or one you shouldn't even consider.  Be patient.  Some say, knowing when not to get involved, is the bigger part of investing.  Don't be too excited about making a killing. Because of your age, you can make a ton of money in your lifetime by going for a consistent, bankable return.

Curt Davis · Answer

Matt,

How fast this all happens for you is really up to you. Keep in mind it will be hard for you to buy properties until you have solid income and great credit. You will also need to build a team of professionals who are looking out for your success. You will probably start out with single family investments and then hopefully move into small commercial. You need to learn as much as you can and surround yourself with people who have done the things you want to do. Keep working on it.

Matt DuSold · Answer

Yeah I knew that answer was coming... I do have outstanding credit, people had to call in and check to see if I knew what I was talking about because of what it is at for a college kid. I also have a pretty good amount of money saved up, a lot more than most college kids.

But I would like to avoid this anyway and want to target pre foreclosures and desperate sellers to try and get sub-to's  or owner financing with very very little down.

I am excited to goto REI club's they don't have one here in Columbia Mo. so I have never been...

How long did it take you?

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