What if you make a lot of monies with day job?

Question

I like my day job and expect to make a six figure salary in a few years. I hope to invest in a couple of multifamily properties. I used to think of real estate as passive income but being in this forum for a while I now realize how much work is involved in running your own properties. But I cannot afford to manage my own properties, time spent at day job just bring in more monies than time spent managing the in/outs of the houses. Are there people out there whose day job bring in significant cash to a point that managing your own properties just does not make economic sense? What are your approaches? Many people would suggest management companies and I think it's an excellent choice. But is it a good idea to start outright with management companies when you have no experience with in/outs of running the business?

Ali Boone · Answer

Yep, I think it's good and fine to start out with management companies. I don't buy into that bit about having to know how to landlord properties on your own in order to know how to deal with a manager. It's two completely different tasks--knowing how to unclog toilets and knowing how to manage people. You don't have to know how to unclog a toilet or take money in order to know how to manage people (the manager).

I started out using property managers and wouldn't do it any other way. Originally I had a full-time job I traveled for, so no time to deal with properties, but more of my motivation for managers is, regardless of whether I'm too busy or not, I literally have no desire to landlord my own properties. I'm all for the freedom of them, of which you don't get as a landlord (unless you set up amazing systems and like doing it). I have all the time in the world right now, and I still refuse to deal with my own properties.

Jason Brouillard · Answer

I'm in a similar situation, where I have a well-paid day job.  I've chosen to only use property management since the $100-180/month saved isn't worth my time.

I only do multi families properties since cash flowing on SFH's without rehabbing or self-managing is tough.

The strong W2 income really helps keep the financing easy and down payments easier/quicker to come by, so I intend to continue to work and target properties than cash flow with property management.

Jason

Alexander A. · Answer

@Michael Ting

I self manage my only rental that is close to me and have a property manager for my 3 other out of state rentals.  I work a full time day job and the rental I manage doesnt take much effort at all to be honest.  In the 2 years Ive self managed ive maybe put in 15 hours worth of actual work and most of that was me doing my own repairs.

Eventually though as I grow older and really want to make it more passive, I will get a property manager for that one.

I would recommend for you if the property will be close to you, to self manage for a year and see how it goes. But make sure you run your numbers as though you will have a property manager that way when and if you do go to property management, you will be making your expected returns.

Larry Fried · Answer

@Michael Ting

When I started in REI I was managing my own business more than full time.  I had no desire to be a landlord nor the time either.  Properties in my area also did not offer a good cash flow and return, so I took the out of state turnkey route, where they essentially do everything from locating, purchasing, rehabbing to placing a tenant with ongoing management.  Its worked out well so far.

Roy Oliphant · Answer

@Michael Ting

I think it depends on what your career goals are.  If you have a desire to leave your current field and manage a real estate business full-time, getting self management experience is a requirement (though when you need to do that is still open for discussion).  If you are just seeing real estate as a good place to invest, there are much easier ways than self-managing.

Consider passive investing using a turn-key service until there is enough income to transition to full-time investor.  That way you can use your current income to supplement your investing income and achieve your goals faster.

Tyson Taylor · Answer

I'm in a similar situation, I used to self-manage but got to the point where I just didn't have time. There are unfortunately only so many hours in the day and too many things to do. I've started to focus on what I'm best at and outsource what I'm not.

Honestly, I also realized I don't want to be a property manager, I really don't enjoy that part of the business (though I did manage my own properties for 15 years).

If it still cash flows and you can find a manager that makes your life easier, I say go for it.

Walker Seid · Answer

I own property in Idaho and currently live in Texas. I do that because I make great money at my day job but want to someday move back to Idaho. I self manage and it seems to work well so far. My mom is a real estate agent and does the showings for me. I think if you screen your tenants well and set up clear parameters at the start it can be done easily. I do have someone to small maintenance work and when I go back a couple times a year I do inspections. I also think if you buy quality houses you will have less problems. I attract families instead of young people looking for their first house. Less wear and tear and less drama.

Bryan O. · Answer

My advice is to self-manage if it is very close to where you live and use property management if it is not. Showings are a PAIN when you have a full time job. I've been considering using a leasing agent to show/lease the properties, then managing them on my own to increase cash flow, but I'm realizing that my time may be more valuable than that added $100/month... Not much of an answer, but things to consider.

What if you make a lot of monies with day job?

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