Hi all
As we are nearing the end of our first reno in a while and the property is about to be put on the market (and looks like we may make a little bit out of it), my wife has decided she wants to quit her full time job to buy, reno and sell (predominantly) properties full time.
My question isnt so much whether she should do it or not but i think the best way for her to do it is to slowly decrease her hours at current job over the next few renos until she gets a bit more experience/capital behind her. Further I am not sure what the best financial vehicle is for her to use given that eventually it will be her job essentially (i.e discretionary trust, company etc etc).
Then Steve’ s last newsletter said ‘Avoid quitting to invest full time’ to make it more interesting.
Any posts from those who are in a similar boat or have done it before would be great to read!!!
Cheers
Tim
sorry forgot to add…..surely their is a better way to fund each new purchase than applying for brand new loan each time….the set up fees would be enormous and severely eat into any profit. What is the best way to set up the finances in this sort of scenario??
Cheers
Robert Kiyosaki measures financial freedom by asking the following question:
“If you were to quit your job today, how long could you survive?”Perhaps she should ask, does she have enough income to support herself for the rest of her life (perhaps from rental properties) without a job.
If so, then go for it.
If you are fortunate to be in that position, then she can afford to have any job she likes. Perhaps it’s time to write that book she’s been dreaming about, take singing lessons or dare I say, give something back to the community.Why not go to work, make good use of the company telephone, internet, email, scanning, faxing, photocopying services and enjoy the renovating on the weekend — Double edge sword.
Regards,
AC“There is nothing scarier than ignorance in action”
Hi Tim
Regretfully the Banks and lenders are wise to those investors wishing to try and renovate and invest full time and now many institutions charge deferred establishment fees or early repayment penalties on even their variable rate loan products to counter this.
Certainly application fees can be shopped around but you have to bear in mind if you are expecting to receive a residential rate of interest then you will undoubtedly expect to end up paying for it somewhere.
A mortgage broker can help you cut through the maze of lenders out there and source out those that do not charge upfront fees, early payment fees, competitive interest rates and flexible products but bear in mind that his or her commission is clawed back in full in most cases where the loan is repaid in the first 12-18 months.
Cheers
Richard Taylor
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Hi Tim,
With regards to your wife wishing to give up her job in favour of investing, is this a passion? Is it something that makes her happy? Is her current job a “once in a lifetime”? Finances aside look at the reasons to do or not to do. Yes, I realise that initially finances will be the major concern but can you “make do” on one wage? I took maternity leave for 2 consecutive children (yes I am aware of the differences!!!), and prior to leaving my job we saved all my wage to test living on one. Perhaps that is a suggestion. Since learning that we can survive, we have decided that I will not be returning to my previous work (albeit well paid) I would concentrate on PI instead. I realise this is a very different scenario to yours, (I would argue however, I have traded one full time job for two!!!!!! ; )) Just a thought…. Is your wife able to take a short (say 6 month) sabatical or leave without pay just to test the waters.
All the best to both you and your wife in this decision.
Cheers
TammyHi Tim,
Sounds like an exciting time for you both! I won’t comment other than on your query re the loan costs/set up/applications etc etc bit. If you have loans over the $250k or so (one or multiple) many of the banks offer ‘professional’ type packages that can help avoid this. It would involve paying an annual fee, which then allows you an annual fee free credit card, mortgage offset account, discounts off the ‘standard variable rate’ loan of perhaps .5 or .6 % (which makes them similar to the basic loan rate types) and a few other perks. One I recently looked at includes one free refinance per year, and no loan application fees on any amount of loans taken in future (as long as you can service them and meet lending criteria etc of course) Loan portability is another option where you can transfer the loan to another property subject to bank approval, and thus save those fees that way too. The current issue of API magazine has some excellent info on this too. (Page 78-80 if you want to have a discret flick in the newsagency..heh heh) .all the best anyway to you both. Now all I need to do is get a job as a broker..(just finished my course too, and time for a career change)[suave3]I think it really depends on your situation.
1. Does your wife have the money, time, and knowledge to invest in real estate full time?
Can you find that many opportunities to keep your wife busy for several hours a day?
2. It seems your wife wants to put all her eggs in one basket, which is the real estate market. That is good, but what happens of the real estate market crashes?
Do you have a plan B from there?
Thanks for all your replies!!! yes it is her passion and as her current job doesn’t provide the job satisfaction she would like, we thought we would look into making our hobby a bit more permanant.
It would also help out with our kiddies as well with more working from home etc etc. funnily enough it was me who got us into this real estate game and i thought it would be her trying to put the brakes on my runaway imagination, not the other way round!!! [biggrin]
We probably could live off the one wage, it would help the old child care fees too!!
The one thing i am desperately trying to avoid is going into any sort of permanant investing arrangement with a half arsed preperation and no research. Had a look at the ATO business site last night and its a great read if you are looking at having a great nights sleep!!
Thanks for all your help!!!!
Tim
Hi Tim,
I have done the same thing recently giving up a 16 year fulltime self employed job to go investing full time. I also read STeves comment about don’t go full time property investing, but after all that is said and done…I would never go back.i am the happiest and most free that I have been in 22 years. I feel liberated that I now have time to do all the things that I have so wanted for so many years…also I seem to be busier thaN I have even been, however it is more fruitful. I can now see how we can get ahead and also create a passive income so that my husband can also quit working fulltime for someone else. The plan is 5 years. Gee that was a long sentence – sorry!
Since giving up full time employment 2 weeks ago, I have been able to find more deals. I have secured 2 new money partners, set up the structures, and I have secured another 2 deals with one on the way today and another 2 maybe deals. So I guess the thing is if it is your wifes passion, she won’t let the family down. I say go girl!!!
Good luck.
Dianne BurnsWRT the question about the financing. We operate a financing strategy where we took out an initial three separate mortgages on three different properties. We then manage the investment time cycle so we are buying the next property as we are selling the reno’d property. With the right clauses in contract of sale you are able to pick the date of settlement on both so you can roll over the finance from the sold property to the purchased property by doing a substitution of security on a double settlement. Your costs reduce because there is only valuation and minor service fees to handle the substitution of security on the mortgage.
In summary, benefits of this strategy are:
– lowered change costs for each deal
– no requalification for serviceability, etc, that would happen if you went for fresh finance
– offers can be “subject to valuation” instead of “subject to finance” which for some reason seems more attractive to vendors
– you are not constantly popping up on BayCorp as a serial loan applicant.There are some limitations to this strategy but if you know and understand them, it works great:
– the size of the mortgage limits the type and value of property you can trade
– finding vendors that will give you the settlement terms needed can be tricky. We mitigate this problem by researching carefully and offering full asking or better to get the terms we need. This needs to be balanced against what it would cost for going for a fresh loan.Our $0.02 worth. Works for us.
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