This is no pep talk. I’m not talking about never give up; keep plugging away, everything will work out.  No, I mean, Don’t Quit Your Job.  All the gurus say Make Big Money – Quit Your Job!  From my perspective, after years of doing this business, I don’t see how it is possible, when you first start out, to make enough money in real estate to support yourself.  It takes a few years, I’d say at least four, to get really good at this business, to learn everything that there is to learn, to make enough money on a consistent basis to support your basic needs. 

My job provides money to pay my mortgage, feed a family of four, health insurance, clothes, cell phones, gas, and car payments.  Those are my bare minimums.  I am one of the most frugal people you will ever meet, and still I need at least $3500 a month to just get by.  My real estate business costs about $1000 per month to do advertising, phone bills, title searches, postage, envelopes, and printing.

If I quit my job today, and I assure you, I have come very close to quitting every single minute of every single day for the past ten years, how would I replace my $4500 per month expenses right away?  How do I not become a foreclosure that you all send letters to, trying to “steal” my equity?  Could I consistently generate that much income, month after month, because I would now have an extra 160 hours per month?

The easiest way to generate big chunks of money, without cash or credit, is to wholesale houses.  Find a junker, find the owner, negotiate a deal, find an investor buyer, close deal, and collect money.  I’ve done about 3 of these deals in the past 4 years, and picked up $5000 each time.  They were easy deals, but each one took about 3 months to get to the closing table.  Each of these deals fell into my lap; I was not actively marketing for them.  I would have starved for 45 months if I had depended on wholesaling to provide me money.  If I had actively looked for these types of deals would I have found more?  Probably. But, would I have been able to find one each and every single month?  I doubt it.  It has taken me years to understand how to market for deals.  It takes time, money, organization, and lots of persistence.  When I was first starting out 4 years ago, I did not have any of this knowledge.  Do You?  Do you know enough to wholesale enough houses every month to cover your basic living expenses?  How many of these deals have you done?  Ask yourself these hard questions before you tell your boss goodbye.  Don’t quit and assume Everything Will Work Out All Right. 

What about Rehabs?  My success rate with rehabs is pretty low.  I’ve done quite a few, and I still don’t seem to make a lot of money doing it.  It is not my best way to make money.  The problem with rehabs is the time involved. The time to fix up and time to sell can eat up months and months.  Your bills don’t wait while the rehab is not generating income for you.  And while you are rehabbing, who is paying the additional bills that the house generates, like gas, electric, water, insurance?  Nothing hurts more than charging a ton of stuff at Home Depot on your credit card, and then paying a $200 bill for gas, and $50 for electricity, and having to shell out $1000 for vacant house insurance.  I’m sure that a lot of you out there are much better at rehabs than me, but you have to admit that there is a long time waiting for your payday.  The question you have to ask yourself is, Can I consistently find deals to rehab, wait months for any money, and have enough reserves to pay the bills that come along?

What about Rentals?  I’ve done better with rentals than with my other endeavors.  As hard as I tried to NEVER be a landlord, I just keep finding these great deals that I want to keep.  But, in order to finance these deals, to get an excellent, long term, low rate mortgage, I HAD TO HAVE A JOB.  Lenders just don’t seem to want to lend money to unemployed people. Even with a low interest rate, and buying these houses at half of retail price, I still only cash flow about $250/month per house.  I would need about 20 of these houses to keep me alive. And that figure assumes that I would never have a vacancy, an eviction, or repair costs. That’s not going to happen.  Could you produce enough rental income to keep yourself going if you quit your job tomorrow?      

The fashionable guru theory these days is lease/optioning.  You get a sizable down payment from a tenant/buyer, collect rent from them for 1 year, then they magically refinance with a new mortgage and you pick up a sizable chunk of money.  These types of deals will make you rich in the long run, but they don’t generate a lot of cash in the short run.  I have heard from a lot of people that only 20-40% of these properties ever get cashed out by these tenant/buyers in a given year’s time.  Lease/optioning is just a fancy way to RENT a house.  Sometimes you get lucky and pick up a chunk of money, most of the time, you are still just a glorified landlord trying to live off of the monthly cash flow.  Don’t get me wrong, I love lease/optioning houses. I offer every renter the opportunity to buy my rental house.  I just don’t try to live off of the hopes/dreams/promises of people who have bad credit.  The only way I could depend on living off of the income generated by tenants cashing me out of my houses would be for me to own 20 houses, and wait for 3 of them to cash out every year.  Do you have enough lease/option houses filled with tenants ready to cash you out real soon, so you can quit your job?

Do you want to know my strategy?  I still don’t have one.  I continue to do a little of all the above techniques.  I’ve thrown in some short sales, and options.  I make good money in spurts, never in a consistent manner.  My job does hold me back a lot, and it irritates me a lot, but thank goodness I have it.  I will know when I can safely quit because I will have all my bills covered, and my income from real estate will be consistent, and dependable.  I will not endanger all that I have worked for just to have 5 minutes of seeing my boss’s face turn red.

When you get ready to leave the security of your paycheck, and benefits, you better be exactly sure what your expenses are, and how you are going to pay them from income generated from real estate.  Don’t assume everything is going to work out, just because the gurus say it will, and “Gosh darn it, I’m so tired of this stinking job, I’ll make it work!”  There are worse things that can happen to you than having to get up early everyday to slave away at a job you hate. 

Laura Duncan