Tips on Becoming a Full-Time Investor

[Ellie Perlman]

Ok, so first of all...

The Two Types of Full-Time Real Estate Investors

Generally speaking, there are two types of full-time real estate investors: the passive investor and the active investor. A passive investor is someone who invests in a real estate deal but is not involved in the management or the operations. If you purchased a single-family home and you collect rents from your tenants or call the plumber to fix the toilet, then you are not a passive investor; you are an active investor. A passive investor usually invests in a syndication or a REIT, and pay others to manage the investment for them.

An active investor is someone who manages the property for either themselves or for others. A great example is a syndicator, who finds deals, raises capital from investors, and manages the asset for them.

Benefits of Full-Time Real Estate Investing vs. the “Traditional 9-5”

Whether you are a passive or an active real estate investor, the major benefit of becoming a full-time real estate investor is having control of your own time. No more bosses, artificial deadlines, or fear of being laid off. Deadlines are a thing of the past when you are choosing your own hours, and you’re really able to fit your work around your life. For example, not having to worry about a rigorous commute to an office. But most importantly, you’re controlling your destiny and determining your own success.

If you want to become a full-time passive investor, make sure you understand that you need to be patient and invest in the right deals to grow your wealth-income until you don’t need a W2 job. Wealth takes time to build. For example, say you work as an engineer and have $100,000 in savings. You invest the money in a deal that pays you 7% cash on cash every year. That’s $7,000 a year, which is not enough to have the cash flow to sustain you, so you can't quit your day job. Now, after 5 years the syndicator sells the deal and your $100,000 turns into $200,000. You reinvest the money again in a deal that pays 7% returns and turns the $200,000 into $400,000 5 years later. Of course, this is a simplified example, but my goal here is to show you that it takes time to build wealth.

If you want to become a syndicator, you can work as hard or as easy as you want, and of course, your success will be in line with the quality of your work. When I transitioned to syndication from my very cushy, 6 figure tech job, I quickly found out that I was working harder than I was working prior to syndication. I had, and still do, very ambitious goals so working hard is what keeps me going. However, you can choose to focus on one area of syndication (e.g. asset management) as an active real estate investor and live pretty comfortably. I chose to start and scale a syndication business, which is a different level of commitment than taking on just one part of active investing.

What Does a Typical Day Look Like for a Full-Time Real Estate Investor?

Unlike common misconceptions, passive investors are not laying by the beach, drinking margaritas, and enjoying the sun. They are constantly evaluating deals, meeting with syndicators, and vetting them. They receive potential deals on a regular basis and use their days in evaluating those deals, as well as the performance of past deals they have invested in.

For active investors/syndicators, the day to day life is much different. These groups are split into three job functions; the acquisition arm which is constantly evaluating deals, negotiating with sellers, and conducting due diligence on properties. Asset management is the second function, where syndicators manage the property management companies they have hired to manage the assets. Part of the job is to evaluate property operations versus forecasted operations, overseeing renovation works, etc. The investor relations arm is the third piece of the puzzle, which is constantly raising capital and maintaining communications with investors.

How to Get Started as a Full-Time Real Estate Investor

Whether you wish to transition from a W2 job to an active or a passive career path, the first step is education. You can educate yourself through real estate investing books, listening to podcasts from notable investors who’s techniques match your interests, or read blogs posted under major finance blogs such as Forbes.

Another way to educate yourself is to attend workshops that can offer hands-on knowledge. Some workshops are intended to educate passive investors, but most of them are built to help educate aspiring real estate syndicators.

If you wish to take the next step and invest in your education, you can hire a mentor who has the experience and knows how to best improve your positioning as an investor. This is a common denominator within the industry, as many of the most successful investors are coached by others who have already succeeded.

Keys to Success As a full-Time Real Estate Syndicator

Diving in and simultaneously performing all of these tasks is an overwhelming affair; the first key to success is to start small and figure out how to efficiently scale your business from there. Diversify talent by hiring professionals who specialize in various job function arms of the firm. You can do it on a budget, too. You can start by hiring a virtual assistant to help you set up calls with investors or create deal presentations. Hiring contractors are a cheaper way than hiring W2 employees, and this is what I did when I first started Blue Lake. You can do the same for hiring marketing team members, who can help you place content online to attract investors.

When it comes to acquisitions, partnering with other sponsors on deals is a great way to gain real experience and quickly build a reputation for your firm to grow and scale accordingly.

Finally, investors should be utilizing technology to automate day to day processes and free up time; Mailchimp is a cheap and useful tool for investor relations communications, HubSpot is a free CRM database that can help you stay in touch with investors, and AirTable is great for company project management and assignment tracking.

Do you have any other tips or insights to making the transition? More great insights are always welcomed.