Quitting the day job to do REI full time

[Jeremy D.]

I know this subject has been discussed numerous times in various threads on BP, but I'm going to bring it up again.

I am looking for feedback from anyone that has gone from investing and managing their own properties as an after-work activity to doing it full time. I currently have a full time job which I really do not enjoy at all. The problem is that I'm wayyy overpaid for the area where I live and the job itself, so if I do quit, I'd likely be looking at a 25% cut if I decide to re-enter the field. I've been taking advantage of this situation by investing all of my extra disposable income into REI over the past 4 years. But now i'm thinking it's time to jump ship and invest/manage full time. I have come to the point where I know that money is really not everything and I would love the idea of waking up and looking forward to the day or week of work!

I am confident that at this point I can pull about $3,000/mo off of the properties as a "management fee". I self manage, and I factor in this cost when I purchase using the 2%/50% rule anyway, so the only effect it would have would be that I would not be paying down RE debt as quickly as I am now. So, I'd be looking at about $36k/yr as a salary from managing my own properties.

The alternative is keeping a six figure day job which I do not enjoy at all, and I'm overpaid by about 25% I would guess... The upside of the property management salary is that I already have the financing and capital lined up to continue growing over the next 18 months even if i quit the day job. By the end of the 18 month growing period I should be at a point where I can pull off enough to maintain the lifestyle i currently have with the day job. At that point the RE portfolio should be able to continue growing organically without the need for additional contributions.

Has anyone out there gone through the same thought process or situation? I am 30 years old, single, have no dependants, and my monthly base expenses are pretty minimal...I'll even live in one of my own units if/when I pull the plug on the day job to focus on REI to save even more.. I appreciates any thoughts or advice!!

[David Beard]

Yes, make the jump. Who gives a ^&*% if you have to re-enter your field later at reduced pay, you have one go round in this life. But before you jump:

* Shore up your work relationships and contacts. You might need them for work in the future, position you for contract/consulting work should you want to do some of this, and middle age-to-older executives could be a deep well of potential private money for you. As a self employed person, a private lending network will allow you to grow your REI business much faster. Revamp your Linked In profile, so they can all see you're a successful REI investor these days, as well as other social media.

* Increase your LOCs as much as possible. Go to numerous banks and ask for unsecured LOCs, at least 25k each. Don't count on credit cards. As soon as you start tapping that promotional cash, they have a hair trigger on cutting your lines down. This just happened to me. Plus the credit cards limit cash advances to just a fraction of the line, commonly, as you probably know.

* Go ahead and get your agent's license and prepare to hang your shingle with an investor-friendly transaction fee-based agency. This will give you more options to make money when you leave your employment, and will give you a leg up in finding the best deals. Justin S., J Scott, Steve L. and others have all written very persuasively about this.

* You are already a two-year landlord, which is great, so your net rental income will be allowed to count when applying for bank loans. You'll need to start "managing" your taxable income recognition -up not down (i.e. capitalize stuff instead of expensing it, for example). You might even consider restating prior returns if you can fatten your net rental income.

* Get a flip under your belt before you leave, to learn this skill while you still have a comfortable salary cushion.

The comfy six-figure job is like a narcotic. Fortunately, my company decided to relocate our site to other company locations, thus eliminating my job (except for a potential relo) with a nice good bye gift, so the decision was greatly helped along. (I have 5 weeks left.) Your situation takes more courage, but as a young single person you have less responsibility riding on your shoulders, so I vote to pursue your passion.