So many of my students tell me that they are excited and anxious to be

able to quit their day job so that they can be full time investors. I

know from personal experience that quitting your day job prematurely is

not a good idea, it’s good to keep overhead as low as possible and

build monthly cash flow, especially if you do not have a reliable

source of income from another job. Some of the most successful

investors I know have started out with an alternative cash flow stream

to live on, and let their profits run (so to speak) in the investments.

It allows your dollars to compound. It is amazing to watch how quickly

one can build equity and cash flow when you are not pulling everything

out of the investment. I also know a lot of contractors that pay

themselves to work on their property. They have consistent cash flow

from the job, plus upside in the deal. It’s a smart way to grow your

business. Remember, your bills come monthly, not just when the house

sells. Budget your available cash to finance you through your holding

period, especially if you are leaving the property vacant.

One trap many new investors get caught in is having to retail,

for cash, all of their properties. Retailing for cash can be very

lucrative, but having to retail every deal鈥攅specially if you have short

term financing鈥攃ould prove costly. While this may work for a while,

eventually the market turns, and you need to be able to weather a

downturn. If you build a good mix, you will always have some monthly

income to keep you moving during the slow times.

I myself shortly after getting started in Real Estate Investing,

Sold a profitable Janitorial business to go full time in real estate.

In retrospect I should have held onto it for several years. Having an

alternative stream of cash flow would have allowed me to make better

decisions, hold onto properties for the sake of higher profits, and

most of all when you don鈥檛 need the money you always negotiate for

yourself better

You also should consider what your current job actually pays you. Do

you have insurance? A 401k? What other benefits do you get from your

work? What would it cost you to replace those benefits?

The last thing to realize is that even if you are making enough from

your business to replace your inventory the cash flow may not be

replaced. Fir instance. Lets say you make $50k a year, just having 5

checks for $10 a year may not be the same thing as getting bi weekly

checks. Paying bills on time and having the money to pay them on time

when they are do is not as easy when you don鈥檛 get regular

checks. As a rule of thumb I don鈥檛 recommend quitting your day

job until you are making about 150% of your current income.