When is the right time to Quit the 9-5

Question

First congratulations to Biggerpockets and the wealth of knowledge accumulated here. It's been very difficult for me to type a question that wasn't already addressed by your forums. So in an effort to participate, my question is when is the best time to quit your job and focus on real estate investing full time? In this case what I'm looking for are the signs that it's time to transition from working full time for someone else to working full time in investing?

George P. · Answer

when it's time.... you will know. it's like breaking up with a high school crush... once u went to college.

Chris Soignier · Answer

My decision was made for me when I lost my job in mid-Feb. this year and didn't feel like working for others any longer. Cash flow hasn't been great so far, but I've built up equity well in excess of my former annual income in just a few months, and will get a sizable paycheck when my first flip sells. IMO, the decision rests on a few key factors. First, what kind of investing do you want to do? In my situation, financing rehabs is easy, financing buy and holds isn't. If the primary goal is to acquire and hold single family rentals, I'd likely stay employed and get as many mortgages for rentals as you can while you have a W-2 income, as it won't get any easier afterwards. If you want to do more active forms of investing, OTOH, a job will just get in the way of finding deals and creating value. But before you make the jump, do a close analysis of your budget in terms of fixed and discretionary expenses. Analyze what financial resources you have to invest as well as live on. How long can you survive w/o a paycheck? Your first deal will probably be the hardest and take the longest to complete. In summary, there's no easy answer - follow your heart, but first make sure you have the training, network, support system, and financial resources to succeed.

Albert Bui · Answer

My rationale for 3x cash flow or global debt coverage ratio as we like to call it in the banking world is based on not only paying for living expenses but within that 3 times expense model I've also considered the min amount of funds I'll need to have to feel comfortable funding my reserves, cap ex, fund my other ventures, and a cushion as well in order to keep growing a self sustaining machine that can scale purely off the "passive," cashflow in and of itself.So for those who need just 1x or till passive equals 9-5 that might work if you live below your means with your 9-5 but if not you may find yourself overwhelmed when the units need an over haul.

Hugh Ayles · Answer

It is best to wait to quit until you have an income you can live with.I started a business that required me to jump in full time. I had adequate savings, or so I thought. My business was a huge cash suck.First lesson learned: I should have adjusted my lifestyle and spending habits until my business was comfortably established. I should have maintained that lifestyle until I replenished my investment in my business.Also, I would maintain the lower lifestyle until there was at least 6 months of expenses saved up, perhaps more.If you decide to jump in with both feet straightaway, and assuming you are not working on a buy and hold strategy, you better have 9-12 months of savings already accumulated. This allows for time to find your first deal and get ti sold.But you also need to be looking for the next deal before the first one is done.

Brandon Hall · Answer

It depends on your post-job goals. Are you going to quit and then just hang out living off your passive income? If so, you need to figure out the number that will cover your monthly expenses AND allow you to continue to grow your portfolio. Remember, capex will come around and if you are solely living off of passive income, it will need to be rather substantial to maintain solid reserves.You need to have a plan for when you quit your job. It should detail how you intend to continue growing your portfolio and/or what type of active business you are going to start running.For instance, I run a tax/accounting practice on the side of my 9-5. My practice doesn't necessarily need to earn as much as my day job when I quit because going full-time in my side biz will give me 8 extra hours a day to focus on growing it. And I'll be able to grow it quickly due to that extra time. I'll use my passive income to supplement me in the early months but will want to get to a point where my passive income goes back into real estate again.

Sherri Southwell · Answer

I see I'm not the only one struggling with this question. I like my JOB but I also have a desire to go full throttle on my RE!!! I incorporate research and BP podcasts into my workday but I could do so much more if I was out finding deals. My job has become a distraction. I remind myself that I need to keep it until I reach 1.5 or twice my salary. Then it's QUITTING TIME!!!

Albert Bui · Answer

HI James,Its been difficult for me too and while I may not have a 9-5 I am an independent loan officer and in most aspects, self employed.I have tried to consider when would be the ideal time I could or should I start winding down my lending endeavors and just focus on acquisitions, wholesaling, and obsessing over the numbers like a lot member mentioned!I have not made my verdict yet and it is difficult because my "day job," is a bit atypical but I am considering my options at the moment.However if my passive income is 3x the expenses of my ideal life style I would have enough leverage to probably pull the trigger and wind down my my lending to working with just my favorite realtors, accountants, and attorney's.

James Lynk · Answer

Tony your level of success is admirable. I'm wondering if I had more time to dedicate to real estate, if I could double my business and "accelerate" my success?

Drew Castleberry · Answer

@George P.I think that sums it up perfectly! LOLFor me, its when my income from my properties surpasses my income from my 9-5. It'll probably longer than I could realistically quit my 9-5 before that, but that's my goal on paper. It might get to the point before that where as George says, when it's time I'll know.

Anthony Johnson · Answer

Great time old question. I am also struggling with this question. I make a good living as a Broker, however, I now have a nice portfolio of homes that can easily cover my monthly salary/budget and there is enough left over for vacancies and repairs. My thinking is to make the switch sooner so that I can focus on my future now, and to not overlook something, or in other words, to focus everything on my systems to eventually have more, even tho I will earn less now. For me, I feel I do not have to make the decision, it is something that just took me over. I have no motivation to do anything other than the property mgmt role, acquisition, and constantly obsessing over the numbers.