When can you quit your day job and go RE full time?

Question

At what point can you go full time (be a realtor, work on flips, and manage your rentals)? A years salary saved up? Multiple flips going on with enough rental income coming in?

I have a well paying job (but don't enjoy it....), been a realtor now for a few months, have 3 rentals (positive cash flow of $700 per mo), and have three flips (only working on one at a time). I have a crew of 3-4 guys so it takes 2-3 months per house. I'm working on finding another crew of guys to work on one house while the crew I have now can do one (2 going at a time).  I really want to dive into it full time but want to be smart about it. I'm just curious to know what others have used for their criteria.

I'm about to pull a HELOC of $100K on my PM and buy more rentals (then use the BRRRR strategy) to hopefully build up enough passive income in the next couple of years. I have excellent credit and a relatively low DTI.

Any feedback would be appreciated.

Michael Noto · Answer

@Drew Denham One thing to consider is that without a W-2 it may impact your ability to qualify for loans.

Thomas S. · Answer

Working is all about mind set. A 9-5 as only trading time for money. What easier way is there to generate the money to invest.  Investing, managing a business and being a landlord are far more work and stress than any normal 9-5.

People that need to enjoy what they are doing are bound to eventually dislike what they do. Way too much importance is placed on what you do more importance should be placed on what you do with the money.  Go to work, think and plan your off time, go home. Once your investments provide you more money than you need you then have the problem of finding something fulfilling to do 9-5 anyway. Freedom, vacation/traveling ware thin very quickly. You need purpose otherwise like many retirees you die young.

Cody L. · Answer

For sure.  At least 1-4 family.  Those loans go away fast.  I've been doing this for 10 years am basically "retired" at this point.  I can get a $10m commercial loan easier than I can refinance on of my $100k SFH (I still have many of the homes I bought when I was getting started)

At some point you just shrug it off and realize that our conforming loan rules are dumb and designed only for W2 people and just move on.  If I want to "refinance" my primary home I'll do it via refinancing a commercial property, take some cash out, and pay off my primary home.  Sure it won't be that 30 year 4% money but oh well.

Chris Armstrong · Answer

The way I see it is that the W2 job is a good thing if you enjoy the work. Real luxury/wealth in my opinion is having the option to quit if you wanted to. Those who HAVE to wake up everyday and punch the clock have a negative mindset about work. The world and work seem much different when you HAVE THE OPTION of doing something or not. I will own many properties in the coming years (I own 3 now), and I will reach the point where I will be able to quit my job if I wanted to but the best part is I will have that option.  A small difference in mindset can have HUGE impact on quality of life.

Thomas S. · Answer

Assuming you are managing to accomplish your goals while still working why give up your W2 before your investment annual income surpasses that of your full time job.

Working wages are easy to come by, are risk free and usually require little brain power to accomplish. Hold on to that income stream as long as you can.

Melanie Mahoney · Answer

Perfect!!

Tyler Weaver · Answer

If you are in a W2 you do not like, you are likely doing harm to your mindset. Thinking too small/scared scarcity mentality will be used to justify staying. To me it sounds like you have it together to make a leap (from one paragraph). A good time to make a move could be right after you secure the 100k LOC.

My shift to full time RE was a bit more abrupt, not on purpose, and timing was not ideal.  That being said, if it didn't happen I probably would not be working full time in RE.

One thing I found out when going full time is that it works much better to use financing for BRRRR etc. For instance if I have enough capital to have 2 houses in the BRR portion in cash, it is fairly stressful, and slow. If I use financing and do multiple flips, and multiple BRRRR's at the same time, sure it costs an additional 5-10k per deal in financing but suddenly I can do more like 10 deals at a time.  This way I can spend more time building the business and perspective.

Regarding the constructions side. You may not need additional crews at this point.  If you have one crew that can do all the finish carpentry, etc and they are currently doing everything, you can start pulling trades out of their scope of work to get more than one jobsite going at once.  Things like electric, plumbing, drywall, tile, windows, anything exterior, and flooring can often be done better by people who do that every day. This gives you a bit of flexibility because if the pipeline slows down you can have your crews pick up more of the trades, and if it speeds up you can call in more subs for specific jobs.

Andrew Johnson · Answer

@Drew Denham Whew, any answer to this is going to be a personal one.  To some a well paying job is $50K/year and to others it's $250K/year.  Both can be well paying but both have very different required levels of "income replacement".  I know the timing isn't aligned but I wouldn't want to be in a position of pulling a HELOC (increasing debt) while simultaneously quitting your job.  It just strikes me as, well, risky.  And there are some aspects of your portfolio career (like being a realtor) that can have boom and bust times.  I'd focus on building up your portfolio of cash-flowing rentals.  Those would be the backbone of your "quit your job" scenario.  Yes, rents and go up and down, but it's not quite the same as the boom/bust that make part-time realtors went through in 2007 through 2010.

One thing you haven't mentioned is what you enjoy.  Do you enjoy managing the properties?  Do you enjoy flipping?  Is your desire to flip a means-to-an-end that involves cash-flowing rentals?  Or do you love the process and big check when you sell?  There's no right or wrong but you'd want to be sure you're trading your day job for an aspect of real estate you enjoy.  There's no sense in trading on unfun job or another unfun job.  One nice thing about a steady job is that it's, well, steady.  It's always there for the "I" in DTI.  Unless it's tied to real estate, it could be seen as a backstop against a market downturn.

Anyway, I'm rambling now, but maybe that at least lends some perspective.

Anthony Gayden · Answer

@Drew Denham

That is an interesting question, and only one that you can answer. How much money do you need to make in order to be confident in quitting your job?

When can you quit your day job and go RE full time?

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