What would you do if you were me? Seeking expert advice.

[kaebr]

Hi there,



I am relative new comer to REI as a profession, but have been reading up on it for years. I am now 6-10 months away from being out of a day job and starting to focus on REI as that is what I intend to do from here on out.



Our (my wife and I) current situation is that we own our house outright (value approx $100k). We have about $5,000 in liquid assests.



I will leave it there, I am looking for opinions and scenerios from people who have been doing this for a few years to see what options we have. Our ultimate goal is to build a nice portfolio of rental units, but I think we will likely have to flips along the way to get money for down payments.



Anyways, I truly appreciate any suggestions, including good books to read.



Thanks

 

[tsokalski]

First of all you will need a day job to qualify for the mortgages, bank will not borrow on 0 income. You will also need a minimum of 20% down for rental. We started our investing with keeping our jobs and buying our first property. We now own 8 and the cash flow supplements my income so that I concentrate on finding more properties, manage them and JV partners. Start one step at a time, first get your first property..

 

[bizaro86]

[quote user=tsokalski]First of all you will need a day job to qualify for the mortgages, bank will not borrow on 0 income. You will also need a minimum of 20% down for rental. We started our investing with keeping our jobs and buying our first property. We now own 8 and the cash flow supplements my income so that I concentrate on finding more properties, manage them and JV partners. Start one step at a time, first get your first property..




I agree with this. I think your financial position is precarious for someone considering leaving their job. If you do this, you'll need to find JV partners to come up with the downpayment AND qualify for the mortgages in their name. I'd make sure you have a good supply of people committed to doing both of these things and have done at least a few for practice before you leave the world of full time employment.



Regards,



Michael

 

[Sherilynn]

Just in case leaving your job was not your choice, I have a few things to add.



I agree with the above in that you should try to find a new job in order to qualify for mortgages and as extra security, because it usually takes a while before your RE investments will replace a full time income.



However while you still have this job, you could apply for a home equity line of credit (HELOC) against your home. That way you will have access to down payment money when you find a suitable property.



Along those lines, you could buy a property or two now using the HELOC as down payment and while you still have verifiable income.



Keep in mind that this is risky without another source of income. If you have a catastrophe at a property (whether yours or your rentals) or an extended vacancy, it could be difficult to manage without your job income. Maintain a large chunk of your HELOC as an emergency fund.



Also, flips always cost more money and take more time than people think they will. And the money gained is fully taxable as income and not as capital gains. There is more risk with not necessarily more reward.

 

[davidajones]

Congrats on owning your house outright and having 5000 of liquid assets. That's a great place to start as you go through a job transition. And what a great question to ask. Hope you get lots of responses.



You left out a couple of key details (is your wife working, can you live off her income, what region are you in, can you go back to work, pensions? severance etc)



A few suggestions:



1 Put all your effort into getting a job. Real estate investing is much easier when you have a job and a hell of a lot more fun. ( I wish I knew what skills you have, maybe go after a job working for a Property Management company so you can learn. )

2 Maybe do something creative like rent your house and become a Super in a small building to learn?

2 Treat that 5000 dollars as a buffer until you have landed a job AND worked it for 3 months.

3 Think forward to when you have a job and how you will start to invest in Real Estate. Attend REIN meetings

4 Go get a Line of Credit set up on your house while you are employed BUT don't use it until you have a new job.

5 Get job, buy a 100,000 townhouse and rent it, borrow some more money from relatives for downpayment and learn.



There will be no cash flow in the first year of most investments and you need a bit of a reserve.



Good luck !



Dave

 

[kaebr]

Thanks for the replies so far, I appreciate the input and suggestions. As someone guessed, the departure from my job is not one of my choice. I was actually supposed to be laid off in July, but it has now been pushed to October. Once I found out I was getting laid off is when I really started getting down to business on Real Estate.





My original plan was do to some flips while still working using equity and private lenders to build a nice emergency fund for when I do get laid off. From there, I will continue to work on flips and take our living expenses out from the proceeds. Any additional profits would build toward down payments on rental units.



My wife does work but it is not enough to support us on its own. My EI will cover the difference for several months, but I am hoping to get a few flips done and not have to worry too much about the EI if I end up losing it by being classified as self-employed.



I am not too concerned about paying full taxes on the proceeds from flipping as if I got a new job I would have to pay full taxes on the proceeds from that as well.



I have been talking with three brokers who deal mostly with private lenders, and they all seem eager to lend me their 15% money, which I agree is high, but its a situation where I have to do what I have to do.



I do like the idea of getting involved with a property management business to learn the ropes, so I may look into this a little bit, though I am not sure what kind of salary this work would provide.



Also, to answer a question someone asked, I am located in New Brunswick.

 

[Alvaro Sanchez]

As real estate investing can be done on the side, I would suggest to focus on getting a solid job offer/employment so that you can secure some income for the family. This would allow you more flexibility and open more doors for financing. You would still have plenty of time to work on your flips or RE investment.

 

[Thomas Beyer]

[quote user=davidajones]A few suggestions:



1 Put all your effort into getting a job. Real estate investing is much easier when you have a job and a hell of a lot more fun. ( I wish I knew what skills you have, maybe go after a job working for a Property Management company so you can learn. )

2 Maybe do something creative like rent your house and become a Super in a small building to learn?

2 Treat that 5000 dollars as a buffer until you have landed a job AND worked it for 3 months.

3 Think forward to when you have a job and how you will start to invest in Real Estate. Attend REIN meetings

4 Go get a Line of Credit set up on your house while you are employed BUT don't use it until you have a new job.

5 Get job, buy a 100,000 townhouse and rent it, borrow some more money from relatives for downpayment and learn.


VERY good suggestions in here !

 

[Aneta]

I would add also, if getting a new job is the route you want to go, try keeping it in the same industry/profession/field of work. Lenders like to see consistency and experience, if you start in a new field altogether, there is no history. Good luck!

 

[kaebr]

Thanks for the suggestion Anetta, I may consider that also. I am going to try to get away with not getting the new job and focusing on flips. But this will only be my route if I can get a couple flips done before I am laid off. I have 5 months and a couple private lenders on board so it is just a matter of finding a couple projects where the numbers work. If I cannot build a nice coushin to fall back on before I get laid off than I am considering a related field job, or trying to get in with a property management firm.



If I did go the property management firm route, do you think I would be better to tell them I am there to work my ass off and absorb as much as possible as I will be acquiring my own rental properties, or would this be more of a turn off and have them viewing me as potential future competition?



Thanks again for everyone who responded. It is nice to get advice from people who walk the walk, and not just talk the talk.