Grow Career and Income or Grow Investment Portfolio?

Question

I currently own my first House Hack and have a goal to purchase my second this year. I got my Real Estate license in October and began working on the side in an hourly position showing homes with a modern discount brokerage, with the intention of learning the market quickly and networking with other investors. My goal was to purchase a second House Hack in 2021.

I was offered a full-time position as a Listing Agent with the modern discount brokerage, which would provide me commission, salary, and benefits. This position would allow me to receive a second mortgage this year, as I will still have a salary (albiet a lower salary than I am currently making in my present marketing job). The disadvantage of taking this role is that I would not have the unlimited income potential of becoming a traditional Real Estate agent with a brokerage that has a robust training/coaching program.

Alternatively, the decision to move forward as a traditional Real Estate agent would likely deliver a much higher income (~$60K/year more during the first year), but this income is not guaranteed and I likely would need to put my investment goals aside for 2-3 years until I have proof of income to receive a second mortgage.

For context, I have student loans and a substantial first mortgage, so it could potentially be adventageous to take the traditional RE role and pay off debts before purchasing a second property. However, I believe over time the second property would appreciate substantially due to the market (Denver), but likely wouldn't cash flow for the first year or two. Both options have no guarantees and associated risks.

Would you:

1. Take the salary at the modern discount brokerage and purchase a second property

2. Take the traditional route and become a Real Estate agent, putting property purchases on hold until you have 2-3 years of proof of commission?

Brian G. · Answer

@Hannah Taylor I would prioritize income creation. Income is your primary wealth building tool. As your income increases, so does your ability to invest. Income is paramount, longterm investing flows best out of a strong income imo.

Candice De · Answer

@Hannah Taylor I agree with others that you are in a great position. And it’s always easy to hear about looking long term, but it’s uncomfortable in the short term sometimes. When you find a deal that you like, you can get creative regardless of variations in current income. My experience has been to get my RE license and keep my W2 job doing both part time while learning the ropes and still having income that supports financing a mortgage until my agent business grows more.

Hannah Taylor · Answer

Thank you all for your insight and perspective. @Cole Simpson, I agree that working with investors is incredibly important. Given the discount brokerage's low realtor fees, I think the likelihood of working with investors may be higher with that position. @AJ H, great point about alternative methods to fund investment properties. I have been narrow-focused because I am exclusively House Hacking and only have 3-5% to put down, but I agree that I could find alternative methods if I get creative. Given the expense of the Denver market, I may need to get very creative in order to find something! @Jon Kelly, you're right, I was decided and then doubt crept in. I think I will give the Discount Brokerage a 6-month trial period to see if it is helping me achieve my goals, and if not, then I have a great alternative.@Tucker Cummings, Thanks for sharing your story. My goal would also be to have my real estate investments/rental income replace my W2. Therefore, I think you sealed the deal in confirming my decision for Option #1. Much appreciated, all!

Tucker Cummings · Answer

Lot's of factors to consider and ultimately it's going to come down to what your long term goals are. But I'll speak from personal experience.I'm in sales, so I get salary, commission, bonuses as well. I've been offered positions where I would be a higher earner, but they would have been a bit more stressful. Ultimately my long term goal is to replace my W2 income with rental income, so the higher income would push that goal further out. Also, when you're in sales and a high earner, you're taxed at about a 50% tax rate. Rental income is much closer to 0% taxable. Once I get to the point where my rental income is sustaining my expenses, I plan on setting my sights on building or buying a business, which would still be lower than the 50% tax rate. This way I continue to have the active and passive income, but I keep a significantly higher amount of my income. On the flip side, if your job alternative is going to help with your investing education (which it sounds like it is) perhaps this is the better route. At the end of the day, figure out where you want to be 40, 30, 20, 10, 5, 1 year(s) from now and work backwards from those goals to figure out how you'll get there the fastest.Hope this helps!

Jon Kelly · Answer

@Hannah Taylor Bottom line is you cannot make the wrong decision. Whichever option you choose you will make it work for you. If you believe in real estate, which you clearly do, I would choose the option that allows you to buy property(ies) the quickest, which is option 1. This also aligns with your goals and I would imagine it's the option you're leaning towards. For some reason doubt crept in and you tried to talk your way out of it. Go with option 1. You will have a "safe" job learning real estate and have unlimited income/net worth potential while you invest in real estate on the side.

Aaron W. · Answer

@Hannah Taylor Awesome work on the first house hack!What are your goals with real estate investing? Which job do you think will advance you the furthest with your goals? Which job are you more passionate about?I would go with the job that you are passionate about as this will make doing the job easier. I wouldn't be too worried about how it could impact your short-term ability to purchase. There are a lot of options out there to acquire property with little to no money down whether through hard money, private money, investors, or partners. It could mean you just need to be creative with your next deal until you can qualify for your own properties. Financing can be overcome if you can find the right deal.Good luck!

Cole Simpson · Answer

if you are working with a good brokerage, especially a brokerage that works with investors, then it will probably accelerate your investing because of how much you will learn. I would say find a good team that works with investors and be an agent with them, you will probably do a higher volume, learn more, and invest more. I think I know some people in the area if you need some recommendations.