when can i quit my job?? :)

Question

Ok, I am really hating my job and plan on leaving in the near future.  I am almost done with my first flip and have a contractor buddy of mine helping me with it now. He has lots of experience and has flipped over 50 homes.  We are doing a 60/40 split on this one. I will probably make 15k when this one goes on the market in the next 3weeks.  Along with the 15k made all I have is my 40k heloc loan and about 10k in savings to live off.  I would love to wait until I have another home secured to flip and then quit my 9-5 job so I actually have time to do the work on the flip and cut the profit to a 80/20 split this time.  I guess I'm looking for justification to quit my job and do this full time.  My family needs about 5k  a month to live off.

Andrew Michael · Answer

I would not quit your job until it is actually costing you more money to be there. There are a lot of benefits to having that steady income especially when shopping for financing. No offense but having one successful flip under your belt hardly justifies the quitting my job convo. If you are going to dive in full time here are some questions to consider. Do I have at minimum 6 months of saved up income to live off of, where will my family get benefits from, what happens if I cant find my next deal quickly, are you going to market for deals, do you have a marketing plan and budget in place, do you have a business plan in place, have you considered the tax implications of self employment, if the market turns what is an alternate strategy, if one flip fails do you have enough capital to bail yourself out and still be operational, do you have an entity in place and an in-depth operating agreement etc.

The excitement of flips and big payouts is certainly intriguing but people need to take time and the appropriate steps in order to transition into full time real estate investing. I know your 9-5 probably sucks but use that as motivation to structure your flipping business and set yourself up for long terms success.

The excitement of flips and big payouts is certainly intriguing but people need to take time and the appropriate steps in order to transition into full time real estate investing.  I know your 9-5 probably sucks but use that as motivation to structure your flipping business and set yourself up for long terms success.

Jay DeCima · Answer

Jay Bee

I have done all links of deals and like all kinds or real estate, but let me share a few thoughts:

I have done many flips, but I soon realize doing them was a job and not really investing.  You pay taxes at the higher ordinary income rate, you pay social security tax as an employee and employer (ouch) you get really no tax benefits and no long term financial benefits.

I have a few BP blogs that may give you some ideas.

At my high point I had 250+ rental homes in Northern Calif.  I buy groups of homes (usually 5 or more on a single parcel), in need of repairs.  They will always be in older areas of town, not in the suburbs.

Because banks will not finance 5 or more ugly houses the sellers of these know that and will usually take back the financing.  Over 85% of my purchases over the years had seller financing.

Get the rents coming in then leave your job when rents are replacing W2 income.  Long term rentals are terrific.

Find a mentor.  Check there name on google. They can save you a lot of wasted time.

Good Luck

Fixer Jay DeCima

Jay Hinrichs · Answer

same as others.. real estate is a long game and it always changes let me describe what i did in my 42 years in the game for perspective

1. began selling land  land was hot in the late 70s  see movie ( glenn Gary Glenn ross)  we made big money at the land game when buyers were looking for retirement property and we had tons of inventory to sell and well set up marketing campaigns

2. 18 to 20% interest rates early 80s  morphed to owner finance homes.. killed it.

3. HML got hot ... as fix and flip was coming into vouge mid 80s and tear down construction... good money if you have a big portfolio  .. we did 50 million by 1987.

4. 1989  war  Loma Preta earth quake Northern CA goes into a deep recession... real estate business stalls foreclsore business starts in earnest... rents crash... etc etc.

5. Japanese 1991 to 1995 melt down.. for 4 years the Japanese were paying double for douglas fir timber in the northwest... started land and timber company made big bucks selling logs to japanese and creating building parcels on logged over land.

6. housing marketing in Northwest 1995 takes off.. get into building subdivision lots for builders.. hit some major homes runs.

7. 2001 down turn blip... start back at buying foreclsoures .. and that goes very well.

8. 2002 to 2003  buying foreclosures and rehabbing to much work start HML company again and run it up to 35 million.. printing money.. semi retire.

9 2008 GFC get hammered to the ground  WHAT RETIREMENT.. rentals sucked real estate sucked building stopped.  reposition.

10. 2010 start buying like crazy buy 350 rental homes ... start buying lots from banks and building new construction .. these sell in Oregon and Charleston 2012 to date.

11. New construction hotter than a fire cracker in PDX and Charleston ramp up to 40 plus homes a year.

12. BP trains legions of wholesalers and fix and flippers raise substantial funds to fund these folks and also turn  key companies... can it get any better.

so there you go it will never be the same.... real estate if anything is constantly changing and if you want to be a player you need to be able to move with whats hot... just my voyage...

Jeff Wallace · Answer

@Jay Bee

I wouldn't quit my job no matter how successful your first flip was - rental property is the name of the game - passive income versus the earned income from flipping… Also Flipping can be feast or famine and where as rental property pays every month ...  I was in a similar situation and hated my 9-to-5 job, but once I focused on acquiring sufficient rental property to allow me to leave my job,  The stress of the job actually eased up a bit -  having that long-term goal made it easier to get up and go to work every day because I knew that I wasn't stuck there forever – as it turned out it only took me a few years to acquire enough rental property to pay my bills -  then, leaving a job I hated it was a very very easy decision ...

Good luck to you

JD Martin · Answer

I predict financial calamity in your future if you go this route. If you need $5k/month, you are nowhere near quitting your job. First, what leads you to believe your contractor buddy is going to agree to an 80/20 split? In this example, on an 80/20 split, your buddy would be making a little over 7 grand on a flip. The flippers I know wouldn't mobilize a crew to make 7 grand. Second, you barely have 2 months living expenses saved up. Third, where are you going to get your funds to buy the properties that you'll need to keep flipping? No one is going to give you a loan when you put "flipper" on your loan application as your employment.

Max Householder · Answer

Michael is spot-on. Don't quit your job until it's costing you money by taking 40+ hours a week away from a venture that you've proven is more profitable such as flipping or finding buy and hold deals.

Also, consider your expenses. Could you downsize your primary residence or rent or sell a car and buy a used one or reign in your spending such that your monthly income needs are much less? If you can maintain a smaller lifestyle, your monthly income needs are drastically reduced and you can probably accelerate your retirement.

Last, don't always think of retirement as never working again. Is there another job or career or hobby that might earn you less income, but you would enjoy a lot more and could bridge the gap to being fully financially independent? Instead of the 9-5 grind maybe you'd enjoy driving a delivery route or tending bar or being a tour guide or something you couldn't afford to do before but maybe now it's more realistic with the flexibility REI offers. Just some thoughts, best of luck!

Andrew Michael · Answer

@Jay Bee I think that is a fantastic idea and trust me, I 100% sympathize with wanting to quit the grind.  But the last thing you want is to rush it and be forced back into it.  A smooth planned transition will ensure you never have to return to it again.  I think your plan to wait a little while longer is a good one.  Best of luck and keep us posted on your progress.

Jay Bee · Answer

Thanks Andrew for taking the time to offer up your advice. Some good things to think about for sure. I do have a business plan and a possible alternate strategy. I had not thought too much on the tax implications lately.  Just really ready for a change in life. Not even financially.  I'm thinking I may have to wait until the wife is ready to go back to teaching full time next year.  That gives me enough time to complete 2 to 3 flips and gain some momentum.  Then her income will offset what I need to earn a bit. Thanks again!

Mimi H. · Answer

I'm agreeing with everyone here and I'll add a few more points:

• if you need us to validate your decision to quit your job, you're probably not there yet
• if people start asking you why you're still working when you're flush in cash, you're probably there

I don't know why this is the case, but I've found it to be true several times in my life.

One flip and $55k cushion is probably not enough to get you through 2 bad years, or maybe even one, especially if you are not flying solo. Let's face it, maybe you can live on ramen every night but you might not want to subject your significant other (and possibly kid(s)) to the same fate if you could avoid it. Don't forget about things that the employer may be taking care of now - health insurance, possible matching $401k - if your partner's employer doesn't have this, add another several hundred per month.

So simple math wise, $5k/month * 12 months => $60k, that's post tax btw. + possible health insurance.

One flip isn't enough to give a sense of the reliability of your contractor. What if he throws out his back? What's your B plan?

@Andrew Michael already brought up excellent points on financing @Jay DeCima makes a great point on finding a mentor, never underestimate the power of groups, no matter how small.

Do you see yourself flipping "full time"? If yes, do you think that this will make you happy? Are you looking to own a business or are you prepared for the business to own you? re: @Jeff W.'s excellent point.

Minimally, prior to upping and leaving, it's worthwhile to consider why you're unhappy so you don't jump from a bad situation to a worse situation. I know that if the job sucks, it's tempting to jump but depending on your age and industry, it can be a challenge to get back in if you need to. You may want to play with cutting costs to see just how lean you + fam can live without driving each other nuts and plot out the escape route.

It's not that it can't be done. It can, I'd just say that you can also expect that it will be minimally 3x harder than your day job and 5x more frustrating until you can get into a rhythm. Unless you can throw tons of money at the problem, but if that's the case, you'd have a team of contractors and more leverage.

Ryan Cameron · Answer

@Jay Bee

I'm not really sure if quitting the 9-5 would be the right move (If I were in that position).

Assume you left the job today; how long would what you last if your family need $5k monthly ($15k from flip,10K in savings and $40K Heloc (Which you'd have to pay back, and this may be hard with no steady income). My math suggests 5-months

I'd start working on an exit strategy from the 9-5. You will need to replace that steady income with another source of steady income, in the form of rental properties

Best of luck to you

when can i quit my job?? :)

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