What To Consider Before Diving Full-Time Into Real EstateBy Paul Esajian on August 2, 2019
There is nothing wrong with investing in real estate on a part time basis. For many investors the goal is to get their portfolio so big, they can walk away from their current job. While this is certainly admirable, it isn’t always the best move to make. As much as you may want the freedom to focus on real estate full-time, there are several legitimate benefits to keeping your job. Not only does it give you a steady flow of income, there are other everyday factors as well. Once you leave your job, it is very difficult, or even impossible, to get back to the same place. As good as your real estate business may look now, is it solid enough to face some setbacks? Simply put, you don’t need to work on real estate full time to have the financial freedom you desire. Here are five important things to consider before diving into real estate full-time.
- No Steady Income: There are times when investing in real estate almost seems too easy. You can acquire three sweet projects in a week, have another handful in your pipeline and one ready to close. You may think you have things figured out when out of the blue two deals fall through and your closing is held up because of a title issue. It is in times like this when you are glad you have a full time pay check to lean on. Instead of feeling stress and anger because you have all your eggs in one basket you can roll with the punches and quickly move on to the next deal. A consistent paycheck allows you to make decisions that are best for your long-term business rather than always thinking in the short term. Balancing real estate and a full-time job isn’t easy, but the reward of a paycheck is worth it.
- Isolation: As much as you may not like getting trapped at the water cooler with one of your co-workers you may actually miss it when its gone. Investing in real estate is largely an individual activity. Even if you have a partner you will do most of your work in isolation. You won’t have anyone to talk to, have lunch with or run your ideas by. If you are the type of person that works better in silence, you will get more done. However, if you like to get up and see what is going on in the other side of the office, it will take some getting used to. There are ways to get past this like working in coffee shops or the local library, but you will do it alone. The ability to make your own hours and work wherever you like often outweigh the isolation, but it is an adjustment that not every new investor can make.
- Insurance/Benefits: There are hidden benefits to keeping certain jobs. Obviously, generating income is the main perk, but health care is a close second. If you have never had to obtain independent coverage on your own, you may be shocked at just how much it costs. In some cases, your health care can be on par with you mortgage payment. This alone should give you some pause if you are thinking about leaving your employer. Unless you have other insurance lined up, leaving your job can be a major risk, and expense. You should also consider your contribution to your 401K or any other retirement accounts offered. The ability to generate much more income through real estate should give you a nice retirement cushion, but you also must have the discipline to follow through. Just because you make money doesn’t mean you will spend it wisely. Be prepared to take a portion of all revenue generated and put it in a long-term savings account. Without your employer doing it for you, it is solely your responsibility.
- Non-Traditional Hours: The ability to work on your own schedule is on the short list of reasons to get involved with real estate. As great as this can be, it doesn’t mean you are on a permanent vacation. You will still work 40-50 hours a week, just on a different schedule. Instead of getting to the office for 8:30 you may need to go to a networking meeting at 8 or meet a real estate agent after hours at 6:30. You may need to spend a Sunday driving to open houses or stay up later crunching numbers on a new deal. There is nobody telling you where you need to be and what you need to do. However, there is also nobody paying you every two weeks. You can sleep till noon if you like, but your bottom line will suffer.
- Increased Stress: As an investor you are responsible for every aspect of your business. Until your business starts generating income you are the CEO, CFO, marketing manager, lead generator and website administrator. If you own a rental property you are probably the manager. If you have a rehab project there is a good chance you are the GC, or at least involved in every aspect of it. All these roles lead to increased stress. Without closing deals and making money you will have to sacrifice elsewhere. This is a different stress than you may be used to with your primary employer.
The benefits of real estate investing full time will almost always outweigh the negatives if your business is solid. However, you need to make the move when you and your business are financially & emotionally ready. If not, you won’t have the long-term success you desire.