The Real-Life Plan That Can Make Quitting Your Day Job a Reality

By Russell Westcott

Is it possible, by way of real estate investing, to quit your day job in ten years? The answer is a resounding “yes!”

QUESTION: What separates the people who succeed in leaving their day job from those who realize nothing more than a pipe dream? THIS:

— They have a solid plan, and more importantly, take action to enact that plan.
— They are driven by something greater than themselves (they have a strong why).
— They commit to their plan long-term and do not let short-term challenges knock them off their path.
— They consistently evaluate and correct their actions to ensure forward motion.
— They are persistent and have a willingness to do whatever it takes – ethically and legally – to accomplish their goals.

This can be accomplished, but it starts with a rock-solid, proven method. Below you will find a ten-year plan and detailed action steps that will lead you down the path to “Freedom 55”.

The Plan: (adjust your numbers to match your personal goals)

The Goal: Replace annual income of $60,000 year.
Strategy: Own 10 free & clear (no mortgage) properties within ten years.
Assumptions: Average monthly rents: $1,000

50% Operating Expense Ratio

Net Cash Flow: $500 ($1,000 @50%)

Tactics: Purchase 6 properties per year – one property every second month.

Purchase 30 properties in five years.

Hold 30 properties until the end of year ten.

Sell 20 properties.

Take the proceeds from the sale of the 20 properties and pay out investors, taxes and mortgages on the remaining 10 properties.

Own 10 free & clear properties ($500 *10 properties = $5,000 *12 months = $60,000).

To accomplish this goal you have to segment your actions into three phases:

1) Acquisition Phase
2) Management Phase
3) Preservation Phase

Within each phase, the specific actions are as follows:

1. Acquisition Phase (years 0 – 5):
— Educate yourself and TAKE ACTION.
— Surround yourself with like-minded individuals; network and connect with real estate experts.
— Build a strong real estate team of professionals (mortgage broker, lawyer, property manager, etc.).
— Leverage will be key during this phase.
— Keep your job – this will be critical (bank financing). Banks like job stability and income verification.
— A strong relationship with your mortgage broker is essential to success.
— Establish relationships with banks that your mortgage broker does not have access to (credit unions, second-tier banks, etc.).
— Build a network of private lenders and RRSP lenders (second mortgages).
— Build a network of Joint Venture partners (money partners).
— During this phase, access to capital and access to mortgages will be your greatest hurdle to overcome. All your actions should be focused on being able to qualify for more mortgages and attracting more investors.
— Brand yourself as an expert in real estate and develop an expertise. Build your C.C.I. Confidence, Credibility and Integrity – be known as someone who makes investors money and has access to great deals.
— Market yourself and attract money partners – this is imperative to staying on target.
— For the first five years you will buy 30 properties – 6 properties per year, or one every second month.

2. Management Phase (years 6 – 10):
— This phase occurs after you have accomplished your target of 30 properties in the first five years.
— Impeccable management will be your #1 goal.
— Learn everything about being an effective business operator (i.e. Landlord).
— Self-manage or work with a professional property management company.
? Keep your properties well-maintained and clean (no over-the-top renovations).
— Perfect your marketing system for attracting quality tenants.
— Become a master of the local landlord and tenant laws.
— Keep your properties occupied with equity building tenants.
— Do not pull out any cash flow from the properties – use the income from your job to maintain your lifestyle. Keep all extra cash flow in reserve accounts.
— Aggressively pay down the mortgages on all your properties with the excess cash flow.
— Begin building your network of potential buyers for when the time comes to sell your properties.
— Master the art of selling strategies.
— Get qualified tax advice from your accountants Edinburgh before starting the sales process.
— Implement a selling strategy: This could be a combination strategy of private sale (to other investors or Joint Venture partners), selling through a qualified Realtor, selling to your tenants or selling via Rent to own (this strategy may require more time).
— Hold your properties until the end of Year Ten, then begin readying the properties for sale.
— Sell 20 properties:
o Pay out your investors and pay the tax bill. Take the remaining proceeds from the sale and pay off the mortgages on the remaining 10 properties until you own them outright.

3. Preservation Phase (years 10+):
— Implement the tax strategy that you outlined with your tax expert.
— Strategically pay down mortgages on the remaining 10 properties with the proceeds from the sale of your 20 properties.
— 10 free & clear properties generating your annual income ($500 *10 properties = $5,000 *12 months = $60,000).
— Continue to self-manage or transition all properties to a professional property management company.
— Start making the transition away from your day job.
— Initiate a proposal to your employer to provide them contract or consulting work (if applicable). This will allow you to work on projects you choose and may create more flexibility.
— You have now created a $60,000/ year income from your property portfolio.
— Continue to impeccably manage your assets for maximum cash flow.

Risks to the Plan:
— Economic shocks– this can be anything from declining values, to dropping rents, to out-migration, to your tenants losing their jobs and not paying rent. Economic shocks happen, having support and a long term perspective will help you hang on for the long term
— Investment partners want out early– sometimes circumstances change and investment partners timelines change. Having a steady stream of investment capital will be the life-blood to your business
— Lack of access to mortgages – as mortgage rules change having access to money partners that can qualify for mortgages and having direct access to private money will be key to overcoming this risk
— Your personal commitment – for some people 10 years is a long time and they can not commit to the long term. Having a strong team and a strong why, will keep help you preserve through the challenges you will encounter.

What Is Next:

Now that you have built a solid foundation, what comes next? By following the three phase plan above, you now have more choice and the opportunity to participate in whichever activities suit you.

After executing this plan, most people have become full-time real estate investors and have an incredible system and infrastructure to support their business.

You might decide to start over again with the same three phase plan (Acquisition/Management/Preservation) and instead of relying on your day job for your income, you rely on the financial security of 10 free & clear properties feeding your new ambition.

You will be starting from the front of the pack as you now have more than a decade of success, failure, connections and business experience to your name. Just think – after ten years of education, surrounding yourself with the best of the best, becoming an expert and doing whatever it takes to be a successful real estate investor, you will be able to call yourself an “overnight success”.