Don’t Quit Your Day Job – Yet!

As the economy continues to struggle, more and more people seem to be looking to investing in real estate as a means of supplementing or replacing their current jobs.¬† The lure of making “millions” investing in real estate has never seemed so attractive, as housing prices continue to fall, and the stock market seems stuck in neutral.¬† Compared to a dead-end job, or no job at all, the life of a successful real estate investor presents a very attractive alternative!

The problem, of course, is that success — in any venture — requires hard work, dedication, and mastering the fundamentals.¬† Many new investors want to jump in with both feet, and ignore the lessons of those who have gone before them.¬† It is no coincidence that the Bankruptcy courts are facing serious backlogs as more and more lenders are aggressively pursuing delinquent borrowers.¬† The difference between success and failure is part skill and part luck.¬† It takes skill to put yourself into a position to seize the opportunities that luck presents.

The Wall St. Journal recently published a “Small Business Calculator” which contained a checklist of many expense categories for starting a new business.¬† Notably, the first expense category was labled “Legal” and referenced setting up the proper legal structure, licenses and registrations required for your business.¬† In an accompanying article, the WSJ suggested a way to get “free” legal advice — asking a law school class to use your business plan as a “case study.”¬† Go ahead — and good luck!

One sure way to waste your money is set up a legal structure for your business without first putting together a Plan.¬† Your Plan should contain both personal and financial goals.¬† Your financial goals should support your personal goals, not the other way around.¬† If your personal goal is to seek financial security through real estate investing, you need to determine if this is going to be a full-time or part-time endeavor.¬† As one real estate broker recently quipped:¬† “I was looking forward to the weekend, ut then remembered I work on weekends!”¬† Your goals — and your plan — should be realistic!

In a separate article, I describe what I call the “Five P’s of Prudent Investing.”¬† The first “P” is “Plan.” The other factors to consider are “Property, People, Payment and Patience.”¬† If you are seriously considering real estate investing as a new career, you really need to evaluate these five factors before you tell your current boss “Good Bye,” and long before you walk into a lawyer’s office to help you sort out the mess you got yourself into.

It is definitely fun — and potentially profitable — to become a real estate investor.¬† But you need to consider all of the factors and plan ahead.¬† Also, if you plan to make money, treat it as a business, not a hobby.¬† Consult with a legal, tax, and real estate professional before you write that big check!