I was fired this week! What could you do with $275K?

[Jason Krawitz]

I lost my job this week! My wife, father-in-law, sister, and closest friends tell me this could be an answer to prayer and that I would have never fully pursued my passion for real-estate if this hadn't happened. I've been slowly and conservatively investing in real-estate the entire time I've worked for a corporation. We own a paid for single family home worth $275k that rents for $1595/month. I also have about $150K equity in my personal residence.

How much monthly income could you produce if you had $275K + your time and sweat to offer? How would you do it? I'm eager to hear your thoughts and ideas! If it matters, my preference is rental/cash-flow properties. However, I want to keep an open mind! 

Also - Have any of you transitioned into full-time real-estate after losing your "real job"? I'd love to hear those stories!

Thanks!

- Jason

[Jeff C.]

Hey Jason,

I was lucky enough to be laid off from my job in 2010. Turned out to be the best thing that ever happened to me. At this point I make nearly monthly what I made yearly then. I too had been doing some buy and hold investing while I worked there starting in 2006.. and I felt a layoff coming on long before it actually happened and started saving all my pennies. It took about a year or year and a half longer for me to get laid off than I anticipated. I survived two or three rounds of layoffs before the one that got me. That gave me some additional time to save cash. Now it was time to figure out what to do with myself.

After a lot of studying and a number of dry runs I picked up a property at trustees sale, and had a friend committed to buying it almost immediately, before I had even finished evicting the current occupants. As soon as they were out, we closed and I made something like $20k (and I had actually given my buddy a great deal). Not life changing but enough to let me know that there was something there. It was proof of concept. I did a bunch more deals over the next couple of years, moving up to two or three at a time, but at that point I was doing most of the work myself.. which assured the profitability of each deal but put a pretty low cap on the number of deals I could handle at a time. It was clear it was time to start stepping away from the hammer and nails part of the business. 

Hiring out all the labor greatly increased the number of deals I could handle, and I pushed it up to 6-7 at a time. Comparing the 7-8% net return I was getting on rental properties VS the 25%+ annualized returns I was seeing from the flips convinced me it was finally time to bring the money home and roll it into the business. I had been reluctant to put all my eggs in one basket, but the returns were just so much higher doing the flips that I just couldn't watch my capital languish like that anymore. I also finally had real confidence that I knew what I was doing. Divesting myself of all my rentals gave me the capacity to do about 11-12 deals at a time, and I started feeling like I was really making money.

I don't know if this will last forever (it certainly isn't getting any easier), but I'm in a much better financial position to weather whatever comes now than I would have been had I just grabbed another menial job and relied on the small amount of passive income that my rentals were providing. If I do want to go back to rentals, I have a heck of a lot more cash to buy them now (and I probably will again at some point when I don't want to be quite so active and / or want to diversify).