biden tax changes impact on real estate investors

Yes, it takes years to reach financial independence and retire early. But it doesn’t have to take nearly that long to quit your day job and become a full-time landlord and real estate investor.

Deni and Brian talk through six steps to become a full-time real estate investor, even though you don’t yet have enough passive income to cover your living expenses.

You’d be surprised how quickly you can ditch your 9-5 job!

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What short-term fix-and-flip loan options are available nowadays?

How about long-term rental property loans?

We compare several buy-and-rehab lenders and several long-term landlord loans on LTV, interest rates, closing costs, income requirements and more.

live off rents podcast transcript

Deni: ย I am excited to talk about what we are today, which is how to take six steps to go from part-time to full-time landlord. It’s a subject that I see that comes up. People ask all the time, like how can I, how can I do this? So, I don’t have to work for my dream job or whatever? Right? Last week, if you joined us, we talked about geo arbitrage. A lot of good information Brian provided on that. I learned some myself. And please let us know where you’re joining us from. Just pop a comment right in the comments and let us know. And if you have any questions or comments, just throw them right in there. This is definitely an interaction. I don’t want to sit here and just talk, talk, talk, talk, talk. So please, please join in and give us your opinions. Or maybe if you have tips that helps other people. So, you know, let us know, sorry, my dog isn’t very annoying to me right now.

 

Brian: No flavor, right? A little color to this day. The bad guys. Tim simply says, hey guys, still here in Virginia Beach, and Tim, great to see you as always. Nice.

 

Deni: It must be nice in Virginia Beach right around now. Not too hot. Not too cold. So, Brian, why don’t you start us off and tell us what is the first step in getting to that full-time landlord part of life?

 

Brian: So, you know, most people start out as part-time landlords. They buy a rental property or two on the side of their full-time job, start building a little bit of passive income, semi-passive income on the side of their full time

 

Deni: Some people end up getting there by mistake.

 

Brian: That’s right. we’ve actually we’ve interviewed people on this on this show who, they reach financial independence within like a year and a half of buying their first rental property. Yeah, I know it’s crazy to me. So, look, working definitely helps you get there faster, right? You know, if you have that steady nine to five paychecks, in addition to that rental income that you’re building, you know, you can go out and build your portfolio faster and it’s easier to qualify for financing. And you know, there are plenty of ways in which continuing to work your full-time job is helpful and useful as you build your portfolio of rentals. But we all kind of want to be able to ditch that day job, right? I mean, that’s the goal here. Financial independence and, you know, like we’ll talk about today, you know, we’ll go through some of the stuff. You don’t need to be able to cover your entire living expenses with your rents, your net rental cash flow necessarily. And we’ll talk about how. But the first step to becoming a full-time landlord is building a deep emergency fund slash cash cushion. You know, you need a lot of cash to be able to get you through some of the ups and downs of being a landlord. You’re going to have a lot of repair bills.

 

Deni: And a lot of people. Yeah, it should be larger than because I think some people think, oh, if I have a couple hundred or whatever, they just don’t figure in, like you just said, for the larger repair. Facilities and stuff that can come out of nowhere.

 

Brian: Yeah, and property owners, in general, need a larger emergency fund, a larger cash cushion than renters do than non-landlords do. And the more properties you have, the more of a cash cushion you need. You really need a cash cushion for each property and that starts with your primary residence. If you’re a homeowner and you need, we, we have an article detailing this on our website about how much money you need as an emergency fund. You know, both as a homeowner and as a landlord, and it’s really per property. So, more properties you have, the more, more cash you set aside because you don’t know when you’re going to get hit with those huge repair bills, when you’re going to get hit with a vacancy of nasty turnover, et cetera, et cetera. So that’s step one. Set aside a cash cushion because you never know when you’re going to get hit with some of these. Step two is you really want to refine your business plan beyond what you’ve probably done for your first couple properties and your first couple of properties. You probably winged it a little bit, right? Like you probably didn’t sit down and write out of business plan. But at the very least, you know, if you want to be a full-time landlord, you need to get very clear on your goals with your real estate investing. You also need to get really clear about your competitive advantages. So, sit down and write these out. You know, how are you going to fund these, these purchases? What are your goals? Are you looking to flip half of your properties to keep some look at that dog? I love it.

 

Brian: For those of you listening, Andy Serkis went right up and stuck his tongue into her ear. Anyway, where were we? So, you know, right? Competitive advantages and goals you need to write these out. And you also, you know, as the third and related step to that is you need to create contingency plans for those goals. So maybe you’re your primary plan is to flip half of the properties you do and the other half you do like the bird deals or the buy, refinance or buy, renovate, rent, refinance, repeat, you know, renovating properties and keeping them as rentals. But you know you might want to have. You might want to keep. You may end up having to keep some of those as rental properties, even if you were planning on flipping them. And you also want contingency plans for forms of income, so it helps to flip the occasional house to get that influx of cash. It helps to wholesale the occasional property to get that influx of cash, whether that’s for your personal expenses once you quit your day job, whether that’s for investing capital, for other deals. So, step three is really creating these contingency plans, these ways to keep earning income without your full-time job and contingency plans for your real estate deals.

 

Brian: You know, if Plan A doesn’t work out what’s Plan B, you know, if you’re if your goal is to buy short-term rentals to run on Airbnb, if that doesn’t work out, will it make money as a long-term rental? Right. So, you want to have those contingency plans in place? Step four is building your team and particularly contractors. Now your team doesn’t end at contractors. You know you really want to. You want to have at least one or two good realtors in the market where you invest people who specialize in working with investors, you know you should have a good home inspector that you work with. You should have a good property manager. You know, even if you plan on self-managing, it helps to have some of these people in place again as a contingency. real estate attorney and with contractors, you need everybody, you know, so you need a low-cost handyman. You need roofers and electricians and plumbers and HVAC guys. And you know, you need all of these different specialists and not just one of each specialist. You need several of each because your primary person may not be available when you need them. You know when that furnace fails in January, you know your first choice, your second choice. They may not be available. You might need to go to that, that third choice or even fourth choice. So, you really want to build that Rolodex or times.

 

Deni: I don’t know if everybody else, I’m sure they are having what’s going on now in my area, but I mean, I’m, you know, I can’t even order an oven without it taking months. It’s crazy right now out there. So, you definitely and finding plumbers, electricians, and whatnot, they’re so backed up. So, it is good to have. I was going to say Rolodex that really ages me, but.

 

Brian: Well, I mean, it’s entered our cultural lexicon, right? So, I mean, people know what we mean, right? Your virtual Rolodex, whatever. Yeah, you really need to build that team in particular with contractors. Step five is you want to become an expert on the housing market where you invest now. That might be where you live. You know, you might invest where you live, or you might invest out of state or in some, you know, far distant city may even invest in another country. But wherever you invest, it really helps to get to know that housing market really well, getting to know it inside and out.

 

Deni: What are some things you can do? To get to know your area better.

 

Brian: You can look up information like crime rates and school quality on websites like City Datacom and there’s there are several similar websites like that where you can see that kind of neighborhood-level data. That’s really useful. Obviously, Zillow is a great resource for checking out both the market sales prices and market rents. Craigslist is an oldie but goodie for checking out market rents as well. So, yeah, I mean, do as much research as you can and talk to people who operate there, you know if you’re out of state. Talk to realtors who specialize in working with investors in that market and talk to them about the best neighborhoods for landlords and for real estate investors neighborhoods to avoid whether because they’re too high or too low. So, yeah, you talk to people on the ground there and combine that with your online research as well.

 

Deni: Another thing that I suggest to a lot of people is to if you can if you’re near the neighborhood. Obviously, if you’re investing from a distance, you can’t. But if you’re not far, go ahead and drive at different times of the day and night to see what could you be surprised with? That tells you. And you would be surprised what information you can get from the postman that. You got a warrant out and all kinds of stuff.

 

Brian: So, yeah, you know, so locals or, you know, people who really operate in that local market. You know, you said the postman is a good example, but also, you know, local bartenders, local baristas, you know, people who live and work in that area and who spend all day talking to people who live in that neighborhood can be a really good source of information as well.

 

Deni: Absolutely.

 

Brian: All right. So, step six is systematizing your business. You know, again, with one or two or three rental properties, you can get away with kind of winging it as you ramp this up. And you know, if you want to become a full-time landlord, you really need to have systems in place for everything and you want to automate as much as you possibly can. So that includes getting really efficient in turning over your units because every day that that property sits vacant is going to cost you money both on your mortgage, on your property taxes, on your insurance, on your utilities. You also want to especially systematize processes like tenant screening, rent collection, evictions or a big one, you know, if you are not. If you do not manage your rental properties as efficiently and as in the machine-like way that mortgage lenders manage their loans, then you’re doing it wrong. If someone is late, they get a late notice if they go past the grace period. They get an eviction morning notice and so on and so forth. If you don’t have systems in place for these things, you need them in place. And of course, we offer landlord software that you can. But we’re not the only people out there, of course. So, you know, check us out, obviously, check out the competitors as well.

 

Deni: There is a link.

 

Brian: There we go. And Tim says, I’ve been using my 401 K as my cash cushion, which can work, and that offers some efficiencies because your money is still out there working for you and earning you a return, even while serving as a part of your emergency fund. You do want some cash set aside as your emergency fund, but you can also layer on top of that emergency fund things like unused credit cards that you can turn to things like short term investments that are not very volatile and that you can tap really easily can also pad out your emergency fund. So, you know, Tim raises a good point that your emergency fund doesn’t have to be just money. Sitting in your savings account in cash

 

Deni: Can be working.

 

Brian: Yeah, it can be working for you anyway. Deni, is there anything else that you want to go over before we call this episode complete?

 

Deni: I think that you definitely don’t want to beat yourself up for any mistakes because I think that there is unfortunately a way to learn and you’re going to make mistakes. So, understand and know that and don’t say, oh my God, I’m not, you know, forget it. I’m done with this because it is going to happen because there are scenarios that change in every matter, you know what I mean?

 

Brian: It’s just the cost of education. Think of it as tuition. We have all made mistakes. I’ve made some extremely expensive mistakes in my real estate investments. But if you quit investing after that, then those mistakes, those learning opportunities go to waste. So, think of it as tuition. It’s the cost of education in real estate investing. So as a quick recap, six steps to go from being a part-time landlord to a full-time landlord. One. Build a deep emergency fund and cash cushion. Merely chiming in in the background there. Step two is refining your business plan. Get very clear on your goals. Get very clear in your competitive advantages. Step three Create income contingency plans you know whether that’s flipping houses or wholesaling deals or starting a side hustle. Find other ways to bring in income when you need it, both for your personal expenses and for your investing capital. Step four Build your team, and particularly contractors of all stripes. Step five Become an expert on the housing market where you invest and step six systematize your business and automate as much as you possibly can. All right, on that note, please rate and review us on iTunes or Stitcher or wherever else you listen to podcasts. Tim Dooley says very successful local landlord questions why I would need a team. Well, you know, none of us are experts in everything, right? I mean, even someone who is a good roofer may not know anything about wiring, so you still need an electrician. Right? There are things that you don’t have the expertise to do, and there are things you don’t have the time to do, even if you do have the expertise

 

Deni: And you would be surprised the things that you learn just from building a good team.

 

Brian: Absolutely. And you know, one of the things that we do with our co-investing initiative. You know, Denny and I are both very experienced real estate investors and we still have a team we partner with other real estate investors who are experts on their local housing markets. So, you know, Drew Surjit, for example, is an expert on the Michigan housing market where he invests. So, we partner him with him for his local expertise and for his labor, you know, going out and fine. He knows how to find deals in that market. You can manage the deals as the boots on the ground. So, you know, those partners are really important, even if you do have the expertise. And Tim says both you guys and the other virtual mentor encouragement towards your partners. He says I do know I need a team with a smiley face. I hear you. All right. On that note, we’re going to wrap things up. We will see you next Tuesday at 2:00 p.m. Eastern, 11:00 a.m. Pacific. Stay in touch. Shoot us a message over messenger or email topic ideas. Send us topic ideas to let us know what you want to hear about. We’ll see you next week.

 

Deni: Have a great day. Bye.

 

 

 

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