It’s a fairly common misconception that one can simply quit their day job, become a full time real estate investor and get rich quick. The late night infomercials say it can be done easily, so why not you too? Real estate investing can be a get rich program if done right, but it can be a get poor program if done wrong.
Most of us spend years perfecting our trade or craft. Life is about learning, making mistakes and always improving. Investing is about planning for your future and wisely investing 10% to 20% of your earnings into safe, secure vehicles that produce a good return. Investing is not meant to take the place of your job, it is meant to supplement your income and to secure a comfortable retirement. Only over time will income from investments replace the income from your job.
Quitting your day job prematurely will actually hinder your ability to invest. Conventional lenders look for at least 2 years of employment history in the same or similar field. Without the ability to borrow and leverage your investment dollar, you lose the ability to maximize your return on investment. Paying cash becomes your only option, and your path to achieving wealth becomes an uphill climb.
Many of the real estate “gurus” paint an unrealistic picture of the path to wealth in real estate. In most cases the only one who gets rich quick is the “guru” himself, selling you his surefire path to wealth DVD for only $$$. Have you ever heard the expression: “If it sounds too good to be true, it probably is?” If someone is telling you that you can quit your day job after investing only $ for their “proven success program,” you should change the channel and put your credit card away.
Be the best you that you can be whether a doctor, lawyer, craftsman, teacher, etc. Discipline yourself to live on 80% or less of your take home pay. Save money by paying yourself at least 10% first of what you make and investing it wisely. Look for investment vehicles with strong track records of steady growth. You will need multiple streams of income to retire well.
The income from your job is the critical ingredient to help fuel your investments. Without steady pay you are forcing yourself to make quick and desperate decisions. Even if you have plenty of money saved, that won’t matter when a lender goes to qualify you for financing. It’s not he or she who makes the most money that wins; it is he or she who saves and invests it wisely that wins.
Quote of the week: “You are worth what you’ve saved, not the millions you’ve made.”