I often tell people I am a full time real estate investor. The reality is that is a lie. There is no such thing as a full time real estate investor. You see, “full time” implies you are doing work. Investing implies your money is working for you. Working is not investing.
Since this is my only job, I guess I have to call it full time. Flipping houses, rehabbing, wholesaling are all work. If you ever managed a rehab and tried to keep your contractor on schedule you know what I mean. But how many people, who want to invest in real estate, watch “Flip This House” on TV and decide to rehab houses? That is not investing, it’s a job. It may be a very well paying job. You may make more on evenings and weekends than you make in your 9 to 5, but it’s still a job. I am not saying that is a bad thing. Making big bucks doing a rehab is a good thing. Investing is what you should do with you big checks when you get them.
I guess I am as guilty as anyone about calling the entire real estate field “investing.” Many people think they are investing when they really have a part time job. Take rentals for example, that is investing. Oh, unless of course you manage them yourself. Now we are back to it being a job. Many people manage their rentals themselves because there would be no money left over if they paid a management firm. What that means is their cash investment in their rental provides NO CASH FLOW. The only reason they have cash flow is they are doing the work of managing the property themselves. Heck, they could manage rentals for other people. They wouldn’t have to buy the property and take the risk of owning real estate.
Don’t get me wrong, there is nothing wrong with managing your own rentals. Just recognize that the money you invest in the property should have a return AND the time you spend managing should also have a return. If the only return comes from managing the property, that means your cash investment is giving you no return.
My ultimate goal is to have enough passive income so I can sit on the beach drinking Pina coladas while waiting for the checks to roll in. That is why I am moving in the direction of Commercial real estate – this is truly passive income. Single family rentals can be passive too if you have good management in place. But if you manage them yourself, don’t fool yourself, you have an extra part time job.