ForeclosuresMass - ForeclosuresMass Monthly - Interview with the Expert - You Quit Your Day Job. Now What? (February 2007)

A former full-time property manager, Derek Ebrecht closed his first deal in February 2005 and then took a bold step: he quit his job. We caught up with him at his office to ask his advice for investors considering that next big step: moving from part-time to full-time investor.

ForeclosuresMass Monthly: Derek, did you do any planning before you quit your job to become a full-time investor?

Derek Ebrecht: I tell everyone, "Don't do it the way I did." With my first deal, I made more money than I had all year - so I figured, "Heck, why not do this full-time?"

Although I didn't plan on quitting my job, the fact that I did was a prime motivator. I literally had to sink or swim. How and when you quit should be based on your comfort level with risk.

* Next 37 17 investors only!

I've met people who have quit with just $5K in the bank - which is too risky and not something I recommend. Other people feel more comfortable with a business plan or LLC in place and 3 - 6 months of salary saved - which is a better strategy because it can take that long for deals to come in.

FMM: What challenges did you first encounter when you started your business?

DE: Working consistently and regularly. The first few months were hard because I didn't have any structure or routines in place. When you work for someone else, you dream about being your own boss, working your own schedule, and taking days off when you want to. What happens when you quit your job, however, is now you're your own boss. That means you have to motivate yourself. If you're used to a structured workday, the lack of structure can be challenging.

DE: Yes. I've learned to schedule blocks of work time every day. I also perform tasks at specific times.

FMM: What is your office set-up like? Do you have a dedicated office and/or a phone and fax line?

DE: That's correct. I'm a licensed agent with a local real estate company but I work the majority of my time at my home office. I do have a dedicated office and phone line, a desk, etc. Having these things is important because they give you the sense that you're running a business and not simply dabbling in a hobby.

DE: That's a good question. I do not currently have one. It's another tool in an investor's arsenal that can be great for lead generation and deals. You don't need a website to get started but you should definitely consider having one when you're doing a larger volume of properties in a year.

FMM: Often times, entrepreneurs who begin a business are a little fuzzy on business basics. Do you recommend investors take a business course before or shortly after going out on their own?

DE: Definitely. Running a real estate business is just like running any other business. You have to understand cash flow, basic accounting principles, marketing, etc. And like any business, you need to build your support network.

I've learned that it pays to build a team of professionals whom you trust - which isn't as easy as it sounds. You'll need to network and perform due diligence. You need, at the minimum, a real estate agent, a competent CPA, and a real estate attorney. Don't think you can manage everything yourself or that you should in order to save money.

It's also important to build relationships with contractors because you can lose a lot of money if you don't know what you're doing with regard to upgrading properties and working with "the trades."

FMM: You mentioned marketing. Do you market yourself and if so, what marketing tactics do you use?

DE: Another great question. I started off door knocking - in fact, it works so well I go door knocking each time ForeclosuresMass releases the new listings. I also do direct mail letters to homeowners. You can also put ads in newspapers or local circulars that read, "If you need to sell your house quickly, I'm in a position to make that happen" with your name and phone number.

DE: You bet! Networking is very important, whether you're a part-time or full-time investor. Why? Because you meet people and build those important relationships. Once people know and trust you, they begin to let you know when something is going down.

I also manage a real estate investing group - we have about 100 people and meet four times a month. And, I attend ForeclosuresMass' monthly networking meetings as well as others around the state. And for 2007, I'm thinking about joining a local BNI (Business Networking International) group.

FMM: What other advice do you have for investors contemplating moving from part-time to full-time?

DE: One, don't quit your job until you have your first deal under your belt. Two, educate yourself on the real estate market and in what area you'll specialize -- some people focus on foreclosures, others on commercial properties. And three, learn how to find a deal and evaluate it so you don't lose money. Remember, you make your profit when you buy a property. The property either generates cash flow or you buy it at a significant discount and then turn it over quickly for profit.

Derek Ebrecht is a licensed Massachusetts Real Estate Agent and investor. He works in the greater Boston area and can be reached at derekebrecht@hotmail.com.