Over the years, many aspiring real estate investors have come to me for guidance. They typically have pages of questions, which I patiently answer. Here is a real estate investing question I am often asked:
Q. I’m married and have a family of four to feed and house. I hate my job (or my job is okay, but leading nowhere). I am so excited about real estate that I want to do deals full-time. When should I leave my job?
A. I wouldn’t turn in my two weeks’ notice just yet. Your job provides many benefits:
- Predictable steady income
- Employee benefits: including health insurance and paid time off
- Contact with other human beings
- Good performance on the job, which enhances one’s sense of self-esteem.
Real estate offers some terrific benefits: income, wealth accumulation, total control of your time, enhanced self-esteem, potentially making the world a better place, and it’s lots of fun. Each of us has to make our own decision based on our specific life situation and on our self-knowledge.
When To Quit Your Job & Invest Full Time
I would not leave a job except under the following conditions:
** Your real estate income after taxes is equal to the job income after taxes (be sure to include the cost of health insurance).
**Your real estate income after taxes isn’t as much as you made from the job, but is enough to meet your living expenses.
**Your spouse works and willingly agrees to allow you to seek a real estate fortune, foregoing your paycheck. The working spouse in this situation might set a time frame for you to produce results. If this is the case, put your heart into your efforts. In my own experience, my hard-working wife was far from delighted when I reported to her the details of my work day. She didn’t really like to hear how much I enjoyed my one-hour nap or my hour of thinking about the purpose of life when she’d had a tough day at the office. As an option, you might leave your job while your spouse works full-time, but bring in some income through part-time employment.
** You strongly believe and are totally confident that you could earn more money making real estate deals in a year than you could from your job. Ideally, you have enough money socked away that you could meet your living expenses for a long time. Incidentally, I view a job as an income-producing asset. If you earn $40,000 per year and anticipate you could earn a 10% rate of return, an asset worth $400,000 producing $40,000 a year of income produces as much as your job. I’d rather have a real estate investment than a job. You could be in the unfortunate position of being unemployed and longing to do real estate, but a job provides you with predictable cash flow. If you are uncertain which direction to go, find a job for the time being and work toward eventually having enough real estate income to leave the job.