Many new investors approach real estate with the goal of replacing the income and benefits of their full-time jobs with the rental and sale income from their properties. This is a noble aspiration, as successful real estate investors benefit themselves, their families, their communities, and the country in general in many direct and subtle ways. For instance, the wealth you build in real estate will secure the financial future of your family not just in this generation, but indefinitely. As a full-time real estate entrepreneur, you will create jobs for others as contractors, bookkeepers, and a host of others. In all likelihood, you will at some point take a rundown, useless property and turn it into livable, affordable housing for those who need it-returning to the tax rolls as a producing entity and raising the values of your neighbor's properties in the process. You'll pay more property, income, employment, and capital gains taxes than most people, while using up less government "services" than most. And you'll be living proof that, with desire and hard work, it's still possible to make it financially in America today.

Having said this, many people struggle with the decision about when to leave the relative security of a full-time job in favor of a life of self-unemployment. Some jump the gun, and give notice after their first successful deal. Others continue to work at a job they hate for years beyond the time when it's no longer necessary.

So when is the right time? It varies from person to person based on their own situations and risk tolerance. But here are some clues that it may be time to kiss your job goodbye:

• You're making more per hour in the hours you spend on your real estate business than you are on your job. I recently spoke to a relatively new investor who'd wholesale 3 or 4 properties over the course of the last year for an average profit of $5,000 each. Each deal had taken him less and less time to complete, and his hourly "wage" on his last deal had worked out to about $500 per hour. He quit his full-time, $60,000-a-year job because he realized that he could replace the income from it working just 120 hours a year. Another 20 hours would pay the taxes due from his deals and replace his medical insurance, as well. And an additional 10 hours would take care of the matching funds his employer was putting into his 401-K annually. Trading a 2,000 hour a year job for a 150 hour a year job at the same salary just made sense to him-and he had enough deals under his belt to be confidant that he could repeat these results over and over.


• Your "real job" is getting in the way of your real estate business. This same investor felt that he had lost more potential deals than he had made by being unavailable to take calls from potential sellers during the day and by being limited to viewing properties to evenings and weekends. A close friend of mine experienced a similar situation-after almost 20 years in corporate America, she realized that she was taking all of her vacation and sick days to oversee renovations on her collection of 10 properties, and decided that she could acquire and renovate 2-3 times as many properties if not for her time commitments to work. So when the next round of layoffs came, she volunteered to take the severance package, and got busy building her holdings to the point that they would support her.

My apartment buildings show a pre-tax income of $16,000 per year
My job pays $20,000 per year with benefits and bonuses (this was 1976, by the way) However, my job COSTS me
$500 per year in expensive work clothing and dry-cleaning, which I won't need anymore
$500 more per year in lunches eaten at restaurants than I'd pay to eat at home
$2400 per year in income taxes, when the depreciation allowance on my properties brings my taxable income on rents down to $0
$1000 per year in gas and wear and tear on my car getting to and from work and various job sites (remember, he was already going to and from the apartment buildings in addition)
$500 in unreimbursed travel expenses-magazines at the airport, tips to the bellman at the hotel and the skycap, etc
$500 in miscellaneous gifts, donations, etc expected at a large office.

In short, my job actually pays more than $1,000 LESS per year than my 2 apartment buildings. Thus, I need to acquire 2 more apartment buildings and quit. And that's what he did.

• Your job is wreaking so much havoc on your mental health or family life that your choices are: go crazy, get divorced, or alienate your kids forever; quit and have no income; or quit and give the real estate thing a try. This is a risky proposition, but sometimes desperation is a great motivator. And worst case scenario, you can always get another job if real estate doesn't do it for you.

Quitting your job is a very personal decision. It's always scary-but it's also exciting, fulfilling, and fun. Take it from a woman who's gone to work at home in her bunny slippers every day since she was 24.

Source: www.regoddess.com

 

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