Posted by Ronald * Starr(in No CA) on July 01, 2002 at 16:23:33:
Craig-------------------
What’s not to get? He said he has two companies. Don’t you assume one of them is an IT Staffing company?
Good Investing**Ron Starr
For those who have left their job!!! - Posted by Eric
Posted by Eric on June 30, 2002 at 15:54:33:
I have made the decision to make the leap!! I wanted to give you my background and see if others who have gone for it would do it under these circumstances.
- Cash Reserve of 150k
- WLOC of 200k
- Rental Income of $2000 a month
- No house payment, car payment, or short term “stupid debt”
- 3 Years of experience with three flips under my belt and several buy and hold “right” properties
Here’s the kicker: I am leaving a 150k a year job. I hate it but it has allowed me to do REI easily. Anyway, that’s the story tell me if you guys would take the leap.
Thanks,
Eric
Re: For those who have left their job!!! - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on July 01, 2002 at 16:36:03:
Eric-----------
I’m glad you phrased your question as you did. Yes, I would quit were I in your situation. Heck, I wouldn’t have to have even half the cash reserves you do to quit.
I assume that your monthly expenses are not too high. People making as much as you do ofter spend everything and more. However, since you have no car or house debt, I assume you are a very frugal person. If so, the $2K a month will be a nice help toward your personal expenses.
I assume that you have enjoyed the real estate investing? If not, you might want to reconsider and hold on the job for a while longer, while you find out something you think you will enjoy.
If possible, I would recommend getting more lines of credit secured by your real estate. And probably by your own home, and possibly just some unsecured personal lines of credit. You might easily get a $25K personal line of credit from a bank. Or two. Or three. Or . . . To do this, you probably will have to be employed. And it might take you a month or two do this. If I were in your situation I would check with all the local banks about personal, unsecured lines of credit. Get their literature. Ask them about the policies, and the rates, maybe even go in and talk to them to get a feeling for whether you want to deal with them. Then only apply for those you think are the best. This will keep down the number of inquiries in your credit reporting files. More inquiries = lower credit score.
Since you have done more than quick resales and have several long-term rental properties, I do not worry about your success. I predict great things for you. Not everybody gets to a position where they have a $150K a year job to quit. That alone is an impressive achievement. I think you will do fine and enjoy yourself. Don’t look back.
Good Investing and Good Escaping***********Ron Starr****************
Re: For those who have left their job!!! - Posted by Jay C.
Posted by Jay C. on July 01, 2002 at 13:45:07:
Eric,
My word of advice on this subject is somewhat different than the other responses I’ve read to your question. Self-employment, be it real estate or other, is a different lifestyle. I personally have never had a J-O-B. I started investing in real estate at age 18 and I’m currently 28. There have been times in the past, however, when things did not go like I planned them, and I almost went completely broke. But being in a position where I only know one thing, real estate, I had to get up, and start back over again. Keep in mind with a job you don’t have those scares. You know when your check will be there, you know how much your check will be…I’ve got to say, there have been times in the past when I’ve looked at friends in the corporate environment, and thought, “Man, that’s gotta be a good feeling.”
If I can stress only one thing that will contribute to full-time investing success, it’s CASH RESERVES!!! Forget your monthly rental income, forget your $1mil net worth, those will not do you one bit of good if you ever have a day when you need $100k fast…Keep building your cash reserves at all times.
Fortunately, I have been able to get through those tough times over the last few years and I’m investing at a faster and more productive pace than I ever have. Never underestimate the power of cash-in-hand. I truly wish you the best of luck in the future with your investing.
Jay C.
Birmingham, AL
Re: For those who have left their job!!! - Posted by Dan-FL
Posted by Dan-FL on July 01, 2002 at 06:02:57:
I went full time 4 years ago.It was not the smartest thing to do at the time.I almost went under twice,but I made it.I had
- Cash reserve of $27,000
- Rental Income-0
- House payment and car payment.
- No experience.
- Left a $30,000 a year job.
You are in great shape,go for it.
A few questions. - Posted by Joe Eckburg
Posted by Joe Eckburg on July 01, 2002 at 01:01:01:
Congratulations on your success!
Here’s a few things I think of when I evaluate my own situation:
What are your household’s monthly expenses? I was thinking I need a passive cash flow of twice my expenses to be able to feel real comfortable about quitting my job. If you use Quicken or Money to keep track of your household expenses you can calculate your actual expenses for the past several years. I did this and was surprised how much “over budget” we went every month and year!
Does your monthly expenses include long term savings, such as college expenses, the new/used car you’ll eventually need, long term care insurance (i.e. nursing home insurance)? Does it include the not-every-month expenses like Xmas, vacations, birthday, wedding, anniv, graduation gifts, car repairs, home repairs, etc?
Does your net “rental income” take into account routine and deferred maintenance, vacancies, property tax increases, insurance increases, and the “you won’t believe what happened at one of my rental houses” expenses, etc. Can you work another year or two and use your income to pay off a few of your rentals so your cashflow will be even higher?
Do you have replacement cost insurance on your rentals? Actual cash value (ACV) insurance is cheaper but not as good. Did you know 95% of insurance claims are for partials. If you have ACV insurance and your rental house catches on fire, hope like h*ll it burns to the ground.
Will the bank providing the working LOC pull the plug if they find out you are “unemployed.”
Do you have your system in place? That is, properties held in trust, LLCs as beneficiaries, a management company (S or C) to draw off income and provide for health insurance, life insurance, retirement plan, cars, etc.
Do you have your team in place? Lawyer, Accountant, Financial Planner, Estate Planner, Realtor, Insurance Agent, Banker, HandyMan, Property Manager.
Could your system run without you? If you died, what happens? Are your wife or children knowledgable enough to take over?
Let me know what you think.
Joe.
What are you waiting for? - Posted by Rob FL
Posted by Rob FL on June 30, 2002 at 21:47:11:
You are in a very strong position, assuming your monthly bills aren’t extremely high. I think most people would be happy to go full-time if they had half the finanical position you just stated.
Do Both Till You Can’t Take It - Posted by Scott Ashbaugh (MI)
Posted by Scott Ashbaugh (MI) on June 30, 2002 at 21:17:50:
Eric, I was in your situation. I did both at the same time as i was trying to crank up my real estate biz and working full time. I was lucky in that i had a good paying job and one taht let me run around a lot too and answer phones as needed. Unfortunately, with 3 corporate mergers, I was permanently laid off. I was going to go like a mad man with my real estate business until I couldn’t afford to stay at my full time job. Still my plan, if it works out that way…
I think you have done an excellent job at getting ready! Great debt position and great job on getting the line of credit too! Crank it up and make sure you are covered for taxes, insurence, every conceivable bill, and a nice big cushion in case things go too slowly.
Re: For those who have left their job!!! - Posted by Dave T
Posted by Dave T on June 30, 2002 at 20:29:20:
Four years ago (August 1998), I was in a similar situation. I had accumulated a portfolio of rental properties, a sizable stock portfolio, and more than adequate cash reserves. I had reached a point where my “passive” income was sufficient to meet my lifestyle needs for the rest of my life (even if I lived another 51 years – my 100th birthday).
I left the corporate workplace and have never looked back. Since my “retirement”, my real estate investment pace did not change. I am still doing about as many deals per year in “retirement” as I previously did in my spare time. The difference now is that I have much more quality time with my wife now that those 60 hour work weeks are a distant memory.
Re: For those who have left their job!!! - Posted by MattY_IL
Posted by MattY_IL on June 30, 2002 at 19:43:18:
Eric,
Sounds like you have made a fantastic “go” of it so far. Question I have for you is, if you have done this well without giving up your employment, benefits, “security” etc., what more will you bring to leaving that all behind? It sounds as if you’ve been able to do something part time that alot of would-be investors try for when they don’t have the security and have left their j.o.b.
I guess what I’m really wondering is will you do that much more if you were doing this full time? What are you missing by not being at it 24/7 now? Can you continue working where you’re at and continue to succeed this well or is something there prohibiting you from taking full advantage of your new business?
All in all it sounds as if you have a wonderful start. I wish I had the opportunity to wait and build up as much as you did but a layoff forced me into this full time, (best thing that ever happened to me in my honest opinion) but full time isn’t for everybody.
There’s alot to consider that you won’t find out here in the message forums like the pressure that builds when cash flow gets tight and houses haven’t sold. Other things are health insurance, life insurance, business setup etc. Have you gotten all of these lined up yet?
If you have setup your business as if you were already a full-time employee of your own company then I would say, you’ve gotten what you need from this other firm, take the jump. If not, wait it out a little longer and get yourself in position so that if things do get rough you don’t have to take a paper route to make ends meet.
Just my .02 and wish I had done it that way first. I’m hitting harder times now and wish I had setup the way I’m mentioning.
Good luck and happy investing.
Matt Yohnk
MPD Investments Inc.
myohnk@mpd-investments.com
Re: For those who have left their job!!! - Posted by Stacy (AZ)
Posted by Stacy (AZ) on June 30, 2002 at 19:11:14:
In a word, yep.
Re: For those who have left their job!!! - Posted by jeff
Posted by jeff on June 30, 2002 at 19:10:30:
if i had 150K in reserve id never say the word job again, let alone actually have to set another alarm clock. id probably end up broke in 3 months, but id have a heck of a time while it lasted. LOL
seriously though, the question is, how did yuo get these reserves and become debt free? was it with REI or with your 150K job? if yuor job provided all this then maybe yuo shouldnt rely on a nonperforming REI career. if REI gave you your rise to the top then go for it.
i havent succeeded in REI enough yet to quit my job, but once the day comes that REI can support me for the rest of my life, the job is GONE.
good luck.
Re: For those who have left their job!!! - Posted by michaela
Posted by michaela on June 30, 2002 at 18:15:27:
i’d do it in a heartbeat, but then i’m known for taking chances and leanding on my feet. i did it with a whole lot in reserve and i found over and over, making the commitment to something, makes me pull something to me.good luck - go for it!
for what it’s worth, that my opinion
michaela
Re: For those who have left their job!!! - Posted by Steve D
Posted by Steve D on July 01, 2002 at 10:12:49:
Similar here - I quit my job 6 years ago to start a company:
- Cash reserve: none
- Income: none
- No debt (owned car, rented apartment)
- Several years experience, but still not enough.
- Left a $75k/yr job, I was 25 at the time.
I quit my job in Aug 96. My first paycheck from the company I set up was Dec 31st 96, by which time I’d run up ~15k of credit card debt (business and personal expenses).
October 98 I paid cash for a new Porsche 911 (well, wrote a check actually).
Early 2000 net worth exceeded $1m for first time on paper.
Then the recession hit, hit my company extremely hard, went from +75k profit one month to -$80k loss the next month - it hit that fast. Made me realize I’d spent way too much money on toys (seven vehicles total), and I was too dependant upon one income stream - all eggs in one basket. First company is still going, it will make it throught the recession and come out stronger than before, but I’ve spent the last 18 months focusing hard on diversifying my income streams, I’ve set up a second company thats profitable already, and got involved in REI.
Looking back, I could have done things much better - absolutely no regrets about leaving my job, but I could have managed things a little more wisely, and I’d be in a lot stronger position now (I’m not in a bad position by any means, but if I’d have played things differently I could have been finacially independant at 30!). Still, I had a lot of fun, and thats just as important.
Today I can’t imagine ever going back to working for someone else, selling my valuable time. I’d rather be poor and happy (there have been times in the past 18 months where I’ve been loosing ~$30k/month for several months, and I could have easily shut down the company and got a $90k/year job, but it just had no appeal).
The most valuable thing I’ve learnt, is cash IS king. I built the company from an initial $1,050 investment, with clients that took anywhere from 60 days to 150 days to pay, so I’ve always had, and still have, strong cash reserves and access to WLOC’s - a lot of my competition has gone out of business because they couldn’t afford to continue.
Just make sure you keep strong cash reserves (if all your income streams dried up tomorrow, make sure you have (a) 6 months cash reserve, and (b) a plan on how to restore those income streams within 6 months).
Re: For those who have left their job!!! - Posted by Zee ¶
Posted by Zee ¶ on July 01, 2002 at 02:37:22:
Matt,
I notice you have incorporated your REI efforts. Did you do that immediately upon going into it, or, was that something you did long after getting a few deals under your belt?
Why did you incorporate, rather then do things some other way?
Nice web site, BTW. I especially liked “Button Five”, plus the info and links to AmeriDream and The Nehmiah Project".
Re: For those who have left their job!!! - Posted by Eric
Posted by Eric on June 30, 2002 at 19:21:03:
Jeff,
My reserve came from REI. I did it part time and simply wrote tired landlords and out of state owners in my own neighborhood. Granted, I live in a historic neighborhood with rapidly appreciating values but my niche has been very successful. Historic neighborhoods with out of state owners do not understand what is occurring with their own property. Thanks for the reply.
-Eric
Re: For those who have left their job!!! - Posted by Dan-Fl
Posted by Dan-Fl on July 01, 2002 at 19:07:18:
Sounds like you have had one heck of a ride.I’m glad to here that your doing so well and have made it through the rain.
Your e-mail is for an IT Staffing Company? - Posted by Craig
Posted by Craig on July 01, 2002 at 14:49:46:
I don’t get it?
Re: For those who have left their job!!! - Posted by Wolfman in TX
Posted by Wolfman in TX on June 30, 2002 at 23:28:53:
Eric, are you contacting “tired” landlords per the Joe Kaiser course? If so, what changes have you made, if not Joe’s program, perhaps you can share with me whow you find, approach them, and any tidbits. I am currently going after this segment also and just got my first landlord signed and am L/Oing the property, although I may have found a cash buyer the first day. Speaking of leaving the job, I was laid off and halfheartedly looked for another job while trying to get some RE going and now am broke and in debt but at least (under)employed and trying to endure it while working RE to someday get into a position similar to yours and kiss the job goodbye, life is too short to spend it where you don’t enjoy it.