Ten Benefits to Keeping a Job While Starting out in Real Estate Investing
A popular question for many people is should they go all in on investing, or do it part time. You are slogging away in a job that does nothing for you. All you can think about is quitting your job and taking the leap into being a real estate investor. But you’re afraid to make the shift, for with that comes uncertainty. Good news is you don’t have to leap, dive, or plunge into it. In fact I want to suggest that you don’t do that. Being a full time realtor (meaning 12 hours a day typically), and part time investor, I have gained some perspective on this. Not only is it possible, but I feel it’s beneficial to be a part time investor.
Here are the benefits that I see -
Seed Money: First and most obvious is that your stable day job provides you with income that can be used as your down payment or rehab money. Fuel your active income and put it all into your passive. Not only can it fuel it, but that steady job income can act as a cushion if you were to ever run into a problem with a property not performing for a period.
Connections: As in any entrepreneurial endeavor you need people to get behind you. Not just partners to co invest with, but vendors and trades people, and having that full time gig where you’re out and about day in and day out you will grow your network. You can find colleagues who maybe have also invested and have a lender or agent you can lean on. Let’s say you’re a fitness trainer, and you’re having conversations with your clients who also have invested. Not only are they a resource, but could be an inspiration.
Qualify: “The power of a job” When starting out, most invest locally, and if that happens to be for you in a larger city, then the acquisition prices will be to the point where buying a smaller residential (1-4 unit) building is the only option. So having a stable full time job, not only helps you with that seed money, it allows you to get that type of loan (As opposed to a Commercial-type-loan, the bank on 1-4 units qualifies you for the loan based off your income stated on two most recent tax returns.) Therefore without a job, and just being an investor, you cannot even get started. Yeah, you might have the capital of 400K needed to get a decent duplex, but no way will a bank qualify you.
Industry Realted: If your day job is in the real estate field itself, then there are double benefits to that. For one, all the above mentioned so far have even greater impact. Let’s say you work as a mortgage broker then there are agents you already know and are speaking to daily. If you work as a contractor, you get your rehab covered. I myself being a realtor reap benefits for I am constantly on the MLS and in the field seeing property. I have other agent relations and when negotiating or chasing a deal, they see me as one “who gets it”, and I give confidence that I will close. If you're already in the industry you know how things work, the lingo, the people and makes being a part time investor easier. Here are some other industry related jobs: Appraiser, Architect, Real Estate Lawyer, Interior Designer, Accountant, any kind of Sub Contractor, Title Rep)
Balancing Effect: I imagine that no matter how new you might be to the idea of being an investor, you can fathom the strains and challenges it comes with. An income stream that has so many inherent ups, downs, wins and loses can be easier to handle by balancing that out with an easier more even-keeled position in a full time job. You have a place to go each day, support from colleagues, confidence from your successes in that role. All of which I see as being a balancing effect that will serve you well as you put yourself out there in the competitive, and sometimes elusive investment world. I see it being counter productive to quit a job, go full time at being a new investor, and you swing strikes for the first six months. You’re now out there alone, no income, no support network, and your confidence will dwindle. Balance this by putting just one foot in, and keep the other one planted in your day job.
You Only Need 7 Hours of Sleep: Do not believe that any real estate investing is 100% passive. You need time each week to handle the tasks. But let’s be honest, if you maintain a full time job and you are working that say 10 hours a day, this leaves you with 14 more hours on each weekday, outside of those sleeping. Devote just four of those hours for your investing work (two in the early morning, and two in the evening) you still have plenty of time left to watch Netflix, exercise, be social and eat. Then you add in the weekends. Say even just 4 hours on both Saturday and Sunday, total that all up and you have nearly 30 hours that can be easily found each and every week to spend on your second source of income. As I ramped things up end of 2021, and ventured into a larger deal, acting as General Partner (I wrote about that here https://www.arirealestateblog.com/blog/my-first-commercial-building-investment-a-personal-success-story), I consistently was working on that most weekday morning starting at 6am--still getting to my desk to be fully committed to my realtor work that I love, by 8am. So again, you only need 7 hours of sleep, and that makes plenty of time to be a part time investor.
Punching the Clock: Or “calling it in”, as they say in show business. What I mean is if you actually don’t like your job, and all you are doing is showing up for the paycheck. In that case having a side passion, which you actually do enjoy and are motivated by, then being the part time investor not only “works”, but it becomes your savior. You need it to keep sane. It may be far from an income stream you can solely rely on, but For the unfortunate who may dread the alarm clock each morning, this won’t be the case any longer. Even if it’s just the starting part of real rate investing, and all you're doing is reading books or going to industry events, or pursuing Zillow looking at inventory, or seeing buildings with an agent, with that effort alone you’re distracting yourself from the monotony of your day job, may be exactly what you need.
When It No Longer Works: I’m not qualified for this answer, as I haven’t got to that point yet, and truly don’t know if I want to. I enjoy my work as a Realtor, and that job is very much intertwined with my lifestyle. But if I were to ever imagine a time when I stop working at that, and be a full time investor, perhaps it would be based on a Cash Flow metric. Maybe that amount of net income from my rental properties surpasses my realtor commissions by double. Or maybe it would be based off employees? If I had a certain amount of admin or property managers with me handling rental properties, I would need to be full time running that business. I know for many, it would be as soon as they can, but for me, and maybe others who maintain their full time “active income’ job within the real-estate industry, keeping both going works.
Setting Yourself Up for A Part Time Retirement Gig: A friend who I was speaking with explained to me how his father who just retired is bored. He worked his whole life in a finance-related job that he enjoyed and was engaged in. But never building up a part time pursuit, and after making a hard stop and retiring, he was left feeling aimless with nothing to do or to fulfill his last quarter in life. Your part time real estate investing doesn't have to be more than a small building every few years--if even that--but working on it early, building something of a portfolio is a great way to avoid an unsatisfying retirement. By making a small investment now, well ahead of retirement, your assets start appreciating earlier, and you cut off any void you may be left with during that transition.
Plan B: They say one of the things every person should do at one point in their life is quit a job. To seize control of your days, time, and life can never be better exercised than by walking out on a job that is killing you slowly. OK, but then what? And what if it’s you getting fired, or a shift in the economy and you're laid off? The fall back of having been pursuing a part time investing is then perfect to jump into. One of the unique aspects of being a landlord--buying and holding--is you can vary the extent to which you are involved with the running of it. Maybe you never did a repair, and now suddenly you spend a time on YouTube figuring out how a water heater is swapped out or repaired, and you're now your own repair person and property manager. You'll have the experience and confidence to race out and buy another building, or leverage more equity you built up and see this new found freedom as the perfect time to hire a GC to build an ADU. Most other part time pursuits fail when you’re only mildly involved in them--or never get off their feet--but not investing.
As with any endeavor, the main thing is to do. How much you commit to it, you will determine once you’re doing it. This is the beautiful part of real estate investing is you can tailor your role to what suits you best. For me, I have found my flow, and depending on your situation you will find yours.