Should You Do Real Estate Full-Time?
by Bill Bronchick
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 Investor
Entering 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 Investor
The 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 Business
People 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.
Bio:
William Bronchick, CEO of Legalwiz Publications, is a Nationally-known attorney,
author, entrepreneur and speaker. Mr. Bronchick has been practicing law and real
estate since 1990, having been involved in over 600 transactions. He has
appeared as a guest on numerous radio and television talk shows including CNBC
Power Lunch. He has been featured in Who's Who in American Business, Money
Magazine, the Los Angeles Times and the Denver Business Journal. William
Bronchick has served as President of the Colorado Association of Real Estate
Investors since 1996.