I Hate My Job so I am ready to Quit!
That is often posted when a new investor has a first deal in the works. On one hand it is understandable if you’re in a dead end job working for almost nothing compared to the payday on a good rehab. I myself have had some very bad jobs. One of those jobs was working in the maintenance department of a catfish processing plant. It was a nasty job and management treated us like we should be happy working for them. But hey it paid the bills until a better job came along.
I recommend that every investor hangs on to a job until they get a few deals done. Now the question what would I think is a good time to walk away? First you need to know that you can continue to keep the income coming in. Anybody can get lucky once. Second you need a big cash reserve. Third if you will need financing you will have to have a plan that will give you access to money. Icing on the cake would be to pay off a lot of those small bills. Now lets break these down.
First cash flow.
If you are doing rentals how many do you need to pay your bills and still have some left to put into your reserve fund? If it takes all of your positive cash flow to live what will you do when someone does not pay? Evection takes time then you have to get the unit ready and find a new tenant.
If you’re a rehabber your income will come in lumps. You may not find a deal for a month then it may take three or four months to complete the deal. First you have to do the rehab and find a buyer then your looking at a month or more to close. What are you going to live on during that time? Or worse what if you have to sell at a loss?
Second reserve funds.
This will keep you from going in the hole when the unexpected comes up. The roof on one of your units has to be replaced or a rehab cost more than expected. Try going to a hard moneylender for another $5,000 when you have already maxed out the ARV.
Financing.
If you can show two years of good income form doing deals then this is not a problem. But perhaps you have private investors lined up. Or you have a hard money lender who will lend to you without a job. Yes some hard moneylenders want you to have a job.
Debt.
We all have debt that requires payments. If you have income from real estate and a job then you can pay off some of those. This will help your credit rating and lower the amount of cash you have to have every month. By lowering your monthly out flow it will lower the size of your needed cash reserve.
But you want to show your jerk of a boss of by quitting right? Well he does not really care if you quit he can hire someone else. Now if you want to really get under his skin stay around. Think about this, after you get bills paid down and a cash reserve built up. Time will come for you to buy a new car to replace that piece of crap you have been driving. You will be able to buy something nicer that what your boss drives. You could take better vacations than he does. You could do all of this without going deeper into debt.
Now your boss would no longer have power over your income. How would you like your job then?
Now for the other side of the coin. If your day job is costing you more money than it is bringing in then you may need to consider going out early. But please don’t jump ship without thinking. And never burn your bridges, some day you may have to go back to work and need a reference.
Also have you heard the saying “The more you make the more it takes”? It is true.
THANKS for that SOUND advice. It means so much to me for I am at that crossroads......
“The more you make the more it takes”?
Great Article - but what does that mean???
As your income increases so will your lifestyle.
Also as your income goes up you will pay a higher % in taxes.
I have found that saying "the more you make the more it takes' To be true only in a slightly different way. I have done fairly decent I think in REI I find the more money making potential there is for me, the more it takes for me to close the deals and get everything done. Examle. I have an investor that put in an order for me to do rehab four sfr's for rentals for him. my payday out of that should be roughly50-55K. My problem? with my J-O-B I have NO time to complete the deals and get the work done even with subs doing part of the work. So I have to take more time away from my family to get it done. If I could walk away from my Job to do this full time I would in a heartbeat but the family has to have a roof overthier head so I have to wait a bit.
Joe