Time to quit the day job? Purchased first rental.

[Charlie Booth]

Okay, please hear me out.

If you:

paid cash for a fixer-upper/soon-to-be rental (property one),

~$300k saved up,

a primary residence (property two) with only $230k left on the mortgage (low interest),

and had all the knowledge and skills to remodel each home so that:

property one ARF = ~$400k (4 bed, 2 bath)

and property two ARF = ~$600k (5 bed, 3 bath)

(each home will take 3-6 months to remodel and about ~$100k total)

would you quit your demanding $80k/year career and move to invest/remodel full-time using the BRRRR method?

Additional Details:

Homes in the area cost ~$300 on average and most need remodeling, rentals are in high demand. I am being careful with the #s  - either property could appraise for more.

New to investing, but not to remodeling. Made money with serious sweat equity on past homes. Worked in residential real estate for 5 years, and residential/mixed-use rental and building management for another 5 years.

We are a happily married couple that has done many remodels together and enjoys it. We are both very skilled (framing, drywall, cabinetry, trim work, plumbing, tile, electrical, fencing +). One is unemployed/always working on a home. Quitting the day job and paying for our own insurance scares one of us. 

Any advice/thoughts are much appreciated!

[Alecia Loveless]

@Charlie Booth If you plan to keep both houses as LTR as opposed to flips how much equity can you take out and still be cash flowing with the rent you will be making on each? If you’re only cash flowing $500 for each property per month and we’ll say you’ve been living on $6000/ month then it’s all good and well that you’ve got a $300K nest egg but with your salary gone you won’t get too many mortgages to buy nice $500,000 homes and when you refinance you only get 75% back out unless you increase the value significantly but then you run into my rent/mortgage issue and then you run into the do I just flip them question? As a flipper you pay high taxes and never get to that passive income level.

Consider for example that I have an 8 unit that when I am ready to refinance it in December will have a value of about $1M. But the rents will only support me taking out $350K. It's a very strong deal, one of my best so far but I can't raise rents any higher to take more out currently as I just switched the building over and am having the tenants pay for the heat which lowered my operating expenses and increased my NOI but on top of rent I just can't go any higher. It will end up being a great power play for me because I'll be getting most of my money out of the deal but having $650,000 left in equity that once the bank does their appraisal on it and takes the income into consideration as well will allow it to sit nicely on my balance sheet and use for net worth for borrowing on future deals.