Making the Jump from W-2 to 1099

[Matt Hendrickson]

My wife and I have been exploring options for our future. It just dawned on me that I should use bigger pockets as a networking opportunity and seek feedback for what we're hoping to do. 

Just a little about me, I'm 27 and I've been investing in real estate for the past two years personally. I've been interested in real estate for 6+ years, but because of financial resources, college, and other road blocks, I didn't make the jump into real estate investment until 2016 when I purchased my first property. I graduated with a construction management degree and work for a commercial general contractor (past 3 years). I've worked on a variety of projects from small TI's, to airports, prisons, office buildings etc. I like construction, but love real estate. I have a lot of experience in estimating, and project management. I've done construction myself as well (rehabs, concrete, landscaping, framing, etc.), so I know what matters most to investors. A few months ago, I also got my real estate licence and I'm beginning to work on that new revenue stream while working my full-time job. I'm recently married and my wife is a nurse. She's all in on real estate.

I'm slowly trying to put together a strong foundation to make the the jump into leaving my, all too-often monotonous, 8-5 job. My wife and I have made preliminary plans in 8 months (8 months because we will have a sufficient "nest egg" saved up) to make the jump from a W-2 income to 1099. I feel that my experience in construction, my management of my personal properties, and investments have given me experience and confidence that I can make the jump if I work hard. I know I still have a lot to learn, but have learned a lot in these past two years.

Our goal is to start an investment real estate company, property management company, and construction company. I believe that multiple streams of cash flow mitigate risk and increase potential. I'm not oblivious to the fact that this will not happen overnight, but rather take years to build properly. In short that is my vision and I'm going to go after it.

I post this here because I'm curious to know any advice those who have made the jump have. What do you wish you would have known? What road blocks did you face? How did you gradually make that transition from W-2 to 1099? Any other advice?

I also post this because I'd love to team up with someone who is looking for a young, hungry, like-minded real estate investor. I'm willing to work for someone (manage rehabs, assist in property management duties, etc). I've thought that this may make the jump a little less daunting and I may be able to use my experience to help someone who is already established and needs a trustworthy person to help scale the business. I'm originally from Kansas City, MO. My parents currently reside in Lee's Summit, MO. My wife and I have been planning on moving back to KC to start working on the dream as it seems like a natural fit. We've also thought about going to Nashville, Cleveland, Cincinnati, Indianapolis, or Orlando (we're really open to about anywhere that makes sense for what we want to do). We currently reside in Idaho, but have found real estate to be really expensive and tough to cash flow.

Anyways, I really appreciate the help in advance. 

Thanks,

Matt!

[Doug Shapiro]

Hi Matt!  I like your ambition.  

My advice to you: 

1) Focus your energy. Choose one company idea initially (real estate investment, property management, or construction).  

2) Have the support. It would also be best if either you, or your wife kept the W2 job while the other started the business.  Having the financial support will go a long ways (even with a nest egg built up). The W2 would help with medical insurance, or else it would be out of pocket which is expensive. 

3) Get a great grip on your finances if you have not done so already. Sign up for a site like mint.com to track your expenses and eliminate unnecessary spending. This will remove stress with the loss of income and help extend your nest egg runway. 

4) If you plan on buying more real estate, make sure you can either buy in cash or get a loan from a bank. If you both go 1099, banks will have a hard time approving you since they typically want to see 2 years tax returns as 1099 to count your income.  

On a side note - I used to be W2 working in IT with a very unfulfilling job. I made the switch as a real estate agent in NYC, and now have my own brokerage.  Couldn't have done it without my wife having her W2 job.  Maybe you can be successful with both you and your wife going 1099 at the same time, but you run a big risk.  If your business doesn't do as well as you want it to do in the first year, it may become very stressful psychologically and financially, and it will hurt your chances of success.