Should You Do Real Estate Full-Time?

Many self-acclaimed real estate gurus state that everyone should quit their jobs and immediately jump into full time real estate investing. They often claim incredible results from students with little experience. We would like to caution that life-changing decisions are not usually simple and that full time investing is not for everyone. Let’s discuss some pros and cons of full-time versus part-time investing.The Full-Time InvestorEntering into the real estate profession on a full-time basis offers several advantages over a part-time commitment. Being successful requires you to develop knowledge in many aspects of real estate, and more time focused on real estate leads to greater knowledge. The more your learn, the more you earn, since you do not need to rely on as many professional services or partners for help. You also learn to recognize a deal (or a dud) faster, which gives you more time to do more business or spend with your family.As a full-time investor, you work your own hours. When we say “full-time,” that may mean as little as twenty hours per week if you are good at finding deals. The rest of your time can be spent pursuing other vocations or hobbies. Or, if you are so inspired, you can work forty or more hours and use the extra cash flow to buy rental properties or diversify your holdings in the stock market. The point is that you need to satisfy your cash flow needs before you can start “investing” your money.One final point you should consider is whether you want to be “self-employed.” If you have always worked for someone else, being your own boss sounds very attractive. In some, respects, this isn’t quite the truth. Being your own boss means being an accountant, bookkeeper, stock clerk, receptionist and office manager all-in-one. You have to do deal with tax returns, payroll, office supplies, customer service, bills and all the other hassles that come with a business. You don’t have friends to chat with at the water cooler. You don’t have paid health insurance, a company car and a 401(k). You take your problems home with you every night. Sound like fun? It is, once you learn how to master your time and run your business. Being the master of your own life and career is well worth the other hassles of dealing with your own business.The Part-Time InvestorThe part-time investor holds a “regular job.” This may be by choice or for the time being until his real estate ventures are bringing in enough cash to quit his job. If it is the latter reason, don’t quit your job because the real estate “guru” told you so. Quit your job when it is not worth the income that it brings you. In other words, if you are making more money per hour flipping properties on the side, you are at the point that where your regular job is costing you money. Only then, is it time to quit!One of the advantages of starting out part-time is that you can maintain cash flow while learning the business. It may take weeks or possibly months to find your first deal. That same deal may take several months to turn around, especially if you decide to fix it and sell it retail. Think twice before telling your boss you’re leaving; you will have plenty of time to make the career switch once you have real estate experience. You may, on the other hand, like your occupation. If so, continue to work at it, and invest in real estate on the side.The best case scenario, if you are married, is to have one spouse work a regular job. The other spouse work the real estate business for creating wealth, retirement income and a nice college fund for the children. Of course, in today’s market, you could be laid off due to unforeseen circumstances. If you earn additional income flipping houses and invest the proceeds into rental properties, you will be covered if your main income is lost. This is especially the case for married women that often forego a career and raise a family, only to find themselves divorced with no means of making a living. We don’t want to sound cynical about marriage, but with a fifty-percent divorce rate in America, it never hurts to have a system for making money.Someone with a full time job tends to have little free time to focus on real estate. A part-timer should learn most of the same skills as a full timer. Thus, the key disadvantage to flipping properties on a part-time basis is that it takes sacrifice to learn the business. Something has to give; television, lazy weekends, meaningless hobbies and even some family activities must be compromised. As with any education, time spent learning about real estate will bring its own rewards, especially if the people in your life understand your goals and your plan to achieve those goals. If you are married, make sure your spouse reads this material with you and participates in the fun process of making money.Treat Real Estate as a BusinessPeople are lured to real estate because of the quick buck that it promises. Don’t hold your breath, you won’t get rich quick. An “overnight sensation” usually takes about five years. More than ninety percent of the people who take a real estate seminar quit after three months. Real estate investing should be treated with the seriousness of a career. It takes months, even years for a business to cultivate customers and have a life of its own. You need to treat it like any other business.

How and What to Monitor in Your Real Estate Business

To enjoy your real estate business success, it is imperative to conduct business activity monitoring. Unless you keep an eye on all business activities, you cannot take it to the next level. In the real estate business, you may be involved in a variety of activities. For example, you can have your own property or rental properties to manage. You may be offering services on contractual basis. You may also be involved as an agent or broker in this business and your areas of service might cover buying or selling properties, renting out property and so forth. You may also offer real estate escrow agent services or real estate appraising solutions.Whatever the nature of your services, you need to identify the Key Performance Indicators or KPIs of the business. KPIs determine the success or failure of a business. In simple terms, you can use KPIs as a business activity monitoring tool. KPI is a technical term used by the business fraternity.A real estate business typically comprises two revenue streams; sales and property management. In order to measure the performance of your sales department, you need to take into account the percentage of appraisals that becomes listings, sales percentage of the listings, percentage paid by the client for advertising, percentage of business generated through referrals or old clients and the margin of profit. In order to gauge these, you also need to see how many property transactions were made successfully from the initiated transactions. You need to check the average value of the transactions that are done and compare the number of transactions accomplished by the agency or through auctions. You have to compare the initial listing price with the signing/contract price.There are other also activities that you also have to monitor in the case of sales income. These include; the average selling price of the property in terms of per square meter, value of sold residential properties, number of properties listed in your magazine and average percentage of the discount rates offered to buyers who purchased properties from the agency. Basically, you need to judge sales performance from every angle in order to get accurate estimates for your business.In the area of Property Management, you will again need to identify some of the Key Performance Indicators (KPI). These include but are not limited to; the total number of properties managed, profitability, number of properties handled by each property manager, duration of vacancy and rent arrears. Property management is considered a safe business because it allows you to reasonably accurately predict both income and expenditure.If you want your business to grow and get stronger, you must conduct continuous business activity monitoring and measure these Key Performance Indicators on a regular basis.