Should You Do Real Estate Full-Time?

Many self-acclaimed real estate gurus state that everyone should quit their jobs and immediately jump into full time real estate investing. They often claim incredible results from students with little experience. We would like to caution that life-changing decisions are not usually simple and that full time investing is not for everyone. Let’s discuss some pros and cons of full-time versus part-time investing.The Full-Time InvestorEntering into the real estate profession on a full-time basis offers several advantages over a part-time commitment. Being successful requires you to develop knowledge in many aspects of real estate, and more time focused on real estate leads to greater knowledge. The more your learn, the more you earn, since you do not need to rely on as many professional services or partners for help. You also learn to recognize a deal (or a dud) faster, which gives you more time to do more business or spend with your family.As a full-time investor, you work your own hours. When we say “full-time,” that may mean as little as twenty hours per week if you are good at finding deals. The rest of your time can be spent pursuing other vocations or hobbies. Or, if you are so inspired, you can work forty or more hours and use the extra cash flow to buy rental properties or diversify your holdings in the stock market. The point is that you need to satisfy your cash flow needs before you can start “investing” your money.One final point you should consider is whether you want to be “self-employed.” If you have always worked for someone else, being your own boss sounds very attractive. In some, respects, this isn’t quite the truth. Being your own boss means being an accountant, bookkeeper, stock clerk, receptionist and office manager all-in-one. You have to do deal with tax returns, payroll, office supplies, customer service, bills and all the other hassles that come with a business. You don’t have friends to chat with at the water cooler. You don’t have paid health insurance, a company car and a 401(k). You take your problems home with you every night. Sound like fun? It is, once you learn how to master your time and run your business. Being the master of your own life and career is well worth the other hassles of dealing with your own business.The Part-Time InvestorThe part-time investor holds a “regular job.” This may be by choice or for the time being until his real estate ventures are bringing in enough cash to quit his job. If it is the latter reason, don’t quit your job because the real estate “guru” told you so. Quit your job when it is not worth the income that it brings you. In other words, if you are making more money per hour flipping properties on the side, you are at the point that where your regular job is costing you money. Only then, is it time to quit!One of the advantages of starting out part-time is that you can maintain cash flow while learning the business. It may take weeks or possibly months to find your first deal. That same deal may take several months to turn around, especially if you decide to fix it and sell it retail. Think twice before telling your boss you’re leaving; you will have plenty of time to make the career switch once you have real estate experience. You may, on the other hand, like your occupation. If so, continue to work at it, and invest in real estate on the side.The best case scenario, if you are married, is to have one spouse work a regular job. The other spouse work the real estate business for creating wealth, retirement income and a nice college fund for the children. Of course, in today’s market, you could be laid off due to unforeseen circumstances. If you earn additional income flipping houses and invest the proceeds into rental properties, you will be covered if your main income is lost. This is especially the case for married women that often forego a career and raise a family, only to find themselves divorced with no means of making a living. We don’t want to sound cynical about marriage, but with a fifty-percent divorce rate in America, it never hurts to have a system for making money.Someone with a full time job tends to have little free time to focus on real estate. A part-timer should learn most of the same skills as a full timer. Thus, the key disadvantage to flipping properties on a part-time basis is that it takes sacrifice to learn the business. Something has to give; television, lazy weekends, meaningless hobbies and even some family activities must be compromised. As with any education, time spent learning about real estate will bring its own rewards, especially if the people in your life understand your goals and your plan to achieve those goals. If you are married, make sure your spouse reads this material with you and participates in the fun process of making money.Treat Real Estate as a BusinessPeople are lured to real estate because of the quick buck that it promises. Don’t hold your breath, you won’t get rich quick. An “overnight sensation” usually takes about five years. More than ninety percent of the people who take a real estate seminar quit after three months. Real estate investing should be treated with the seriousness of a career. It takes months, even years for a business to cultivate customers and have a life of its own. You need to treat it like any other business.

Setting Up Your Small Real Estate Business for Success

It is said that 80% of all small businesses fail within their first 5 years. There are many reasons for this, ranging from people simply being lazy to people not knowing what to do in order to prepare a business for success. Oftentimes, new business owners think that they can open the business and, with a couple of customers, profits will flow in; they do not understand that it takes much more than a few good customers and some snazzy business cards to create a solid foundation for a new business.Although this article focuses on a real estate investing business, the tips can be used in any line of work. Before opening any LLCs or corporations, the primary individual needs to sit down and write out a concrete business plan, including financial goals and timelines for his new endeavor. Without goals, nothing will prosper. Alan Lakein, the well-known time management icon, said: “Failing to plan is planning to fail.” This is true in more than a business plan, also. The lesson can be carried into any new investment. In the world of real estate, it is very easy to walk into a deal with no idea how you are going to get out of it. You have already put your own money into purchasing the property, and likely to repair or enhance it. Now, what do you do if the property sits for months and months with a “For Sale” sign in the front yard, but no one expresses interest in buying it? You are out the money you have put into it, and now you must maintain and continue to hold without profits. This is a sinkhole which can be avoided if you have some defined goals before stepping into ownership. Smart investors will have plans A, B, and C for every deal they approach, so they have an exit strategy in any given situation.Another important part of creating a firm foundation for your business is to operate – at least in the beginning – on a shoestring budget. Since most new business owners are paying out of pocket at the start, it is smart to keep the overhead to a minimum. A good rule of thumb is that if what you are looking to purchase will not immediately put money in your pocket, save you time, and/or replace something you have that does not or is not working, do not buy it! A brand new business does not need the latest in handheld computers or furniture to operate profitably. The Rich Dad Education group released a great board game several years ago, called Cashflow. In this game, players work around a wheel of paychecks, unexpected expenses, and small investment opportunities until they can get out of the Rat Race and onto bigger investment chances, where they become financially independent using passive income.One of the most frustrating squares to land on while in the Rat Race is called a Doo-Dad square. When a player lands here they must pick up a Doo-Dad card and pay whatever it tells them to. Doo-Dads range from coffee with friends to a $17,000 boat, and you never know what you might get. When setting up your new office or buying pretty accessories, think about if you really need that item or if it is just another Doo-Dad that you may regret. A beginning real estate investor needs only a few items to get started: a telephone and voicemail, a functional computer, basic computing software (such as Microsoft Office), the Internet, and a printer at the minimum, though I would recommend a printer/copier/scanner combination unit. Most other things at the opening of your business are Doo-Dads.Being organized is crucial to a successful business. Struggling to find important paperwork, references, contacts, and other documents or resources can lead to anything from losing a deal to going under. One way to avoid wasting time and energy and maintain organization is to ensure that you are not reinventing the wheel. Technology is huge in today’s world; even if you are uncomfortable using or understanding it, the fact is that it is essential for a time-efficient business model, and worth your while to learn about it. In real estate, there are thousands of technological tools that can make and investor’s life simpler and easy to organize. Automated calling services exist where you can record a short message and the program will call 1,000 potential buyers/sellers. There are virtual assistants who work hard and well (at an extremely affordable rate) doing your busywork, such as creating spreadsheets, making flyers, organizing paperwork and files, prioritizing emails, and paying bills. Microsoft Publisher has dozens of templates you can customize to your exact specifications. Documents are easy to create and sort in Microsoft Word, so you can just open and print them off. In Microsoft Excel, it has never been easier to make spreadsheets involving complex formulas, graphs, and diagrams which you can save and search for later. There are so many ways to incorporate technology into your business that it would be foolish to stick to old-fashioned methods that take more time and energy away from what matters.A great-yet-simple organizational idea that I recently read in Thomas J. Lucier’s book, “The No-Nonsense Real Estate Investor’s Kit,” is to keep a Deal Book for every real estate property you are working on. Lucier uses 1-inch thick 3-ring binders, which have plastic overlays on front, back, and spine. He labels the book with the property’s street address on the front and spine of the book, for easy-reference, and keeps every paper relevant to said property inside, in sheet-protected pages. This is makes accessing records relating to that property extremely easy, and it looks professional when he has meetings with owners, bankers, loaners, et cetera. Once the deal is closed, he holds on to the binder for as long as he owns the property.As you can see, there are so many ways and more to form a concrete basis for your new business. However, the basics still apply: keep things simple and use what is already there and available to you. Do not neglect to plan. If you go into this new endeavor with a good, solid goal of what you want and how you plan to get there, the chances are pretty high that you will have success in your new adventure.