A great many real estate investors do so as a part time activity, keeping their regular job or business for their life income requirements. You’ve built a nest egg that is sufficient to begin a real estate investment business. And, don’t ever forget, it’s a business whether part or full time. Not operating your investing as a business will likely result in failure and a much smaller nest egg.
However, what if you’re in a position that provides the luxury of a full time or part time real estate investing business? Which is best for you? First, let’s just say that only a tiny percentage of investors have the resources of a Donald Trump. This isn’t meant to be a discouraging article, but gaining and keeping the resources necessary to invest in real estate AND pay your life expenses can be a challenging proposition.
Even if you have been doing it part time, and you’ve been quite successful, if one or more of your properties experienced damage or other reasons for an extended period without rental income, how would it impact the other financial areas of your life. Would it simply be a negative return on those properties, or would it cause you to borrow money to pay household bills? You should never put yourself into a position where it no longer is “investing.” If it is paying living expenses, you’ve taken on extra stress that can be detrimental in many ways.
On the same negative cash flow topic, you never want to be in a position of making daily decisions under financial stress. Few humans can say that their decisions made under duress are as good as those made without stress. Most will simply aggravate their situation, accelerating their financial problems. If they are making lifestyle and daily living decisions under the stress of poor investment performance, the outcome is rarely a positive one.
One other argument for starting part time or remaining a part time real estate investor is the ability to extricate yourself from investing if your life or plans change. If your entire income is tied up in investments, it can be very difficult and costly to end the activity if you have health problems or you must make changes in where or how you live.
Notable exceptions to these cautions are retirees who have their living expenses covered by their pensions or other retirement investments. If you have liquid assets that can be tied up in real estate investment, you may be able to make this a full time activity. Just make sure that you keep it aside as a stand-alone business. If it were to experience difficulties, you do not want it to threaten your retirement resources.