It seems like for a lot of people, the dream is to quit a job they hate and become a full-time property investor. But might it actually be better to find a different job you actually like, and keep property as a part-time activity?
Some people are, of course, going to be genuinely in love with property and want to make a full-time career out of it as soon as possible – and that’s fine. But I recently wrote about the compounding benefits of buying just one property a year alongside a full-time job, and I wanted to write a companion piece about some of the other benefits of having property as a highly profitable hobby rather than a full-time occupation.
This is the most obvious point, which I focused on last time: as you’re not living off your rents, you can reinvest your profits back into making more purchases and thus grow your portfolio faster than you’d otherwise be able to.
Using a model like the one I outlined, you can save up your profits until you’ve got a deposit to buy another property, then that property generates extra rents which help you to save up faster next time. You’re building a rental income snowball to help you grow your portfolio, because you don’t need to dip into it to fund your lifestyle.
Whether it makes any sense to you or not, most lenders won’t count income derived from property when they’re calculating their minimum income requirements. There are lenders without minimum income requirements, but by having a dependable source of earned income you’ll always have access to the greatest choice of deals.
Because lenders only really like to lend to people who don’t need to borrow. Go figure.
I’m Captain Cashflow, but if you don’t need the income now (because you’ve got a job paying the bills), you’re free to adopt a strategy that lends itself to more deferred gains.
For example, you can buy a property which only makes a small monthly profit, but where there’s scope to add significant value (or get significant rental uplift) by extending or reconfiguring. Even if you need to save up for a year before you can do the work and realise the gains, that’s fine: you can just put tenants in to cover your costs in the meantime.
With limited time to do research, or a job that prevents you from leaping into action the minute a tenant calls, these constraints force you to put systems in place. These systems turn your portfolio into a proper business, rather than just an ad-hoc part-time job for you.
With these systems in place you’ll either be able to work more efficiently, or delegate the systems to someone else to execute. Documenting and systemising your business isn’t much fun and no-one does it until they have to…so the sooner you’re forced to, the better.
Like your job or not, it’s probably teaching you useful skills and bringing you into contact with people you wouldn’t otherwise have met – both of which can come in very useful with your property investments.
Take Jonathan, who I spoke to for the Property Geek Podcast. He got off to a flying start with his first couple of major refurb projects, despite having a full-time job, because he worked as a project manager – so keeping a team on time and on budget was second nature to him.
Then I met another investor recently who didn’t like her job and it didn’t have much of a skills overlap with investing…but one of her colleagues became fascinated by her property activities and put in the money to finance a deal she wouldn’t otherwise have been able to do.
The more time you have to dwell on every detail and research every possible strategy or deal, the more danger there is of over-thinking everything and overriding a gut instinct that might otherwise have served you well. You might even end up going more slowly than you would have done if you’d had less time.
There’s also the opposite problem: sometimes the best thing to do is nothing, but it’s hard to do nothing when there isn’t anything else to keep you busy. If there are no great deals available at the moment, you might feel compelled to convince yourself that a less-than-perfect deal is still worth going for – just to make it feel like you’re not wasting time.
Of course, there are many advantages to focusing solely on property too, and it’s totally a question of personal preferences and circumstances as to which is best. It just feels like being a part-time investor is sometimes seen as second-class – it’s not as glamorous, I suppose – so I wanted to point out that there are many hidden benefits to compensate.