In Part 1 of this story, I provided steps 1, 2, & 3 of a 12-month transition from a regular $100,000 per year job to a career as a full-time real estate investor.
As I began to write this edition, I realized that the details and advice in the rest of the story were MUCH bigger than I had anticipated. This is good for you because I have a lot of juicy details to share, but please stick with me and get comfortable. What you are about to read is loaded with many of my best ideas to launch a new real estate business.
This article is organized into the following sections:
Recap of My Story and My Strategy
Step #4: Build My Team and Network
Step #5: Create a Profile For Good Deals
Step #6: Create a Marketing Plan to Find Deals
Step #7: Take MASSIVE Action, Get Feedback, Take Action Again
I hope you’ll find my story helpful and thought-provoking. Let me know what you think in the comments section at the bottom.
Recap of My Story and My Strategy
Before we start, let me remind you that this is not an actual job transition. I am already a full-time real estate investor and have been since 2003 when I graduated from college. I make my living by flipping houses, managing our portfolio of 60+ rentals, wholesaling a few deals, creating notes, master leasing, and providing consulting for other local investors.
This article tells you what I would do if I were a beginner wanting to replace a regular job earning $100,000 per year. My goal in this story is to earn some real estate income this year while still at my old job. This will give me a running start for next year as I jump in full time.
After getting my mind right (Step 1), taking a 3-month education crash course (Step 2), and creating a business plan (Step 3), I have now decided my basic strategy.
I will use three sources to earn new income:
Fix-and-flip real estate at retail prices
Wholesale real estate for small mark-ups to other investors
Refer traditional listings or buyers to well-chosen brokers for referral commissions
That order will represent the priority and relative amounts of income I will likely generate from each source.
My goals during the transition year (while I’m still working) are the following:
1 flip deal @ $20,000 net profit = $20,000
1 wholesale deal @ $5,000 net profit = $5,000
3 referral commissions. My earned referral commision = .525% (25% of a 3% commission x 70% my cut from my broker). Average of $150,000 sales x .525% = $787.5 x 3 sales = $2,362.50
So, my goal this year for a part time gross income (before operating expenses) is $27,000+. If I can do that, I will be more confident that I can ramp up to much more the following year when I take the leap to full time.
The next step in my new business process is to build my team and my network.
Step #4: Build My Team & Network
“The main ingredient of stardom is the rest of your team.” – John Wooden
The one ingredient that has contributed to my success in the past more than any other has been a strong team. So, in order to start over, leave a regular job, and go full-time into a real estate investment business, I must focus an enormous amount of energy on identifying and recruiting excellent team members.
Related: How to Quit Your Job & Invest in Real Estate Full Time: Steps 1, 2, & 3!
Building my team starts with the realization that I am the leader. When the thought of being the team leader scares me a bit, I revisit some of my favorite resources to rebuild my leadership muscles:
The 7 Habits of Highly Effective People, Stephen Covey (My copy is dog eared, marked-up, and highlighted.)
Wooden: A Lifetime of Observations and Reflections On and Off the Court, John Wooden and Steve Jamison (Wooden is the best coach of all time, and his sports lessons apply very well to life and business.)
The Tribes We Lead, TED Video by entrepreneur and blogger Seth Godin (Your team is your tribe, and Godin explains how to lead with vision and attract people to your cause.)
Now that I am focused on my role as the leader of my team, I must decide what roles I need to fill.
Here is a list of my most important members, why they’re important, and how I plan to recruit the right people for this role:
Team Member #1: Money Sources for Fix-Flip Deals
Without money sources, the rest of my team members won’t matter, so I start early and spend a lot of time and energy in this area.
My goal is to have at least $315,000 of short-term capital that can be quickly used to buy good deals. My target retail price for flips is between $150,000 – $225,000. Since my investments will be no more than 70% of full value, $315,000 in capital should be enough to start working on two flips simultaneously ($225,000 x .7 = $157,500 x 2 = $315,000).
My wife and I have approximately $50,000 saved to invest in our new venture. So, I decide to seek out additional funds from two more team members.
First, I build a local banking relationship with a lender who offers a home equity line of credit (HELOC). Seven years ago, my wife and I paid $150,000 for a cosmetic fixer-upper house. We put 20% down and have paid some extra towards principal, so we currently only owe $95,000. After our improvements, the current value of the house is $225,000.
I talked to three different local lenders, and because of our good credit, income, and equity, the best deal we were offered was a line of credit for up to 85% of our home’s value. This means we will have access to $96,250 ($191,250 – $95,000) from this one source. I have also decided to open my business …read more