How much money needed to start investing in real estate full time?

Question

This is just a question I asked myself the other day when I read a post by someone saying he would need at least 100K to start investing full time.

Im not really looking for a game plan on life here, and of course everyones market is different but it would be nice/motivating to hear what others believe they would need in order to leave their current jobs to invest full time.

How much would you need, where would you start and where would you hope to be in 5-10 years?

Ryan Pyle · Answer

If I were starting over again I would want 1 year of personal expenses, 1 year of business operating expenses PLUS investing capital. In order to figure out how much investing capital you need, you have to work backwards. First, figure out the answers to the first 2 questions above, then figure how much capital you will need to generate that income.

For me, I would need about $8k/mo for living and $1k/mo for operating expenses. That's $108k per year. On top of that figure $20k in taxes. That gets me to $128k. Now I know how much income my investing capital needs to produce.

Let's say I'm going to flip houses. In today's market I think you should plan for the worst and say you are going to make $10k per flip (which sucks, but everyone I know incuding me is averaging about that much right now). Let's say each flip takes 6 months from purchase to sale, and you will have $70k into each flip. That means for every $140k of investing capital you will generate $20k of income. So, inorder to make the $128k we said we would need, you will need $896,000 of capital.

Mind you, that $896,000 of investing capital is just that...capital. That does not all have to be yours. You can borrow some or all of it. However, you should have the initial $128k of personal and operating expenses as cash liquid funds that are yours and NOT borrowed.

That's my simplified take. I'm sure there are millions of other ways to look at it, but that's how I would approach it.

Jason S. · Answer

Need more information.

1.  How much money do you need to live on?
2.  Investing is your only source of income?

Aaron Mazzrillo · Answer

I think the best advice I ever received was "don't quite your day job!"

I transitioned to full time over about a 2 year period. The day I walked into the office and quit was awesome. It isn't that difficult to make money as a real estate investor. You really need to get in with the right people in your area. Avoid the snake oil salesmen and pay attention to those that are doing deals where you want to do deals. Find out what they are doing and how they are doing it and don't try to reinvent fire.

How much money one would need to quit their job today and go full time totally depends on how driven they are and their willingness to hustle. I know investors that have been in the game for 10+ years and still live hand to mouth. I also know investors who just decided this is what they wanted to do and begged, borrowed, and hustled their way into yearly incomes of $100K+ right out the gate.

That is the fun of this game; The sky really is the limit on how much you can earn. Here it is Sunday afternoon, and I am cruising Bigger Pockets, updating the blog, have read a few chapters of a marketing book this morning and will continue to 'work' throughout the day. I like to hustle and get deals done.

Sharon Vornholt · Answer

Johathan -

I agree with everyone else. Don't quit your day job. But here's what you can do; learn to wholesale first. You can get started with little or no cash, and your credit is not an issue.

Find properties and sell them to other investors either rehabbers or landlords. Take those chunks of cash and use part for marketing for deals and the rest you can stockpile.

You don't want to buy and hold until you have some cash reserves, and rehabbing also takes cash and knowledge. You can find a lot of articles on wholesaling on my blog.

Mike V. · Answer

250K.  One year living expenses and enough capitol to have at least 3 rehabs going at once.  Here is the big unknown - will my bank continue to allow me to have 2 construction loans at a time when I have quit my day job?  They are open to it but no hard commitment at this point.  I would definately pursue private money more seriously when I go full time.

Joel Owens · Answer

My scenario is different.I am the commercial real estate broker and owner of my company.

So I have my listings and buyer clients I work with which brings in a certain amount and then I have my own properties I purchase as an investor myself.

As a broker once you have your own investments bringing in income you can pick and choose who you want as clients on the real estate brokerage side.

It's empowering at a listing when the seller knows you are not DESPERATE for a listing and you are in demand.They want to choose you because you get results and not because you agree with everything they say.

What anyone needs to start is relative to income coming in and family and life demands.For instance if someone has racked up 80,000 in credit card debt on stupid stuff they have nobody to blame but themselves.In my state of Georgia 30,000 a year isn't that bad as cost of living is really low.In some other states 30,000 would just last a few months.

So that is how I run my business as I explained above.I try to train agents to help them out but I find they don't have the "fire in their belly" to change their lives.

With investing you have to have a "whatever it takes" mentality.

Jonathan H. · Answer

Hi Shanequa, thanks for the advice.
Just to clarify again though, Im not really looking for advice on whether I should quit my job or how much money I need.

Just wanted to get a few opinions on how some people have made the transition, or how some people plan on making the transition.

Shanequa J. · Answer

Since you are new and don't know much about RE, I would say to continue your current job and do RE part-time. Are you looking to flip or hold? See if you can qualify for a mortgage loan for both flipping and holding. Hard money and private lenders are good for flipping or quick refi's. Try wholesaling to get a few thousand dollars. Either way don't quit your job because it might make it harder for you to get money to fund your projects. Read the forums to get more knowledge about the things you are lacking.

Jonathan H. · Answer

ah! My replied showed after you guys typed your post.

Thats exactly the kind of stuff I was looking for. Nothing too specific, just some basic ideas about what one needs.

Jonathan H. · Answer

Hi guys,

Maybe I did not word my question right.

This was more to get an idea of how some of you guys think.  What sum would YOU need to start investing full time? What would YOU do with the money?

For someone like me, I dont know enough about RE investing to be efficient with my money so I would need a few hundred thousand dollars.
I dont know enough about creative financing, leveraging, or even finding deals to be useful with a large sum of cash. Of course this will change but the reality for me is that I am not educated enough yet.

How much money needed to start investing in real estate full time?

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