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Transitioning From a Full-Time Employee to a Full-Time Investor

Updated: May 17

Not too long ago, the American dream was to get married, buy a single-family home, have a couple of kids and a dog, and find a good company to work for. The goal was to get hired and stay on until you reached the retirement age of 65. At that time, you could take your social security and your retirement pension and live comfortably. It certainly wouldn’t bring you a lavish lifestyle, but at least your working days would be behind you.

Of course, there were several variables that had to be in place. First, the company you worked for had to stay profitable, so your job remained secure and the ideal matching retirement fund contributions would be made. In addition, you had to hope that you would maintain your good health so that you’d be around when the time came to retire. If not, there would be some insurmountable barriers to enjoying a pleasant retirement.

A Different American Dream

In the 1990’s, the American dream of the 1960’s ’70’s and ’80’s began to change. Many people wanted to work for themselves. Entrepreneurship skyrocketed. People began changing jobs often, leaving the area they grew up in, and began moving to another part of the country. The new American dream also began changing as people increasingly developed a strong desire for an earlier retirement. Sixty-five years was too old to start enjoying life, forty-five sounded much better.

The question was, how could anyone make that happen? Once people realized that it was possible to give up their guaranteed paycheck and become a full-time investor, all bets were off. The new American dream was born, and passive investing took off. However, while many people began investing, they also realized that it takes time to build wealth. There wasn’t a “fast lane” to that early retirement.

Passive Income Takes Time to Build

I’d like to share an example of why it takes time to build enough wealth for that early of a retirement. Let’s say you’ve worked for a company for 20 years, you’re in your mid-40’s and you’ve managed to save $500,000. While that’s a substantial sum, it’s not enough to retire on at 45 or 48 years old.

Here’s why: current cash-on-cash returns are about 7%. That means your $500,000 would earn you $35,000 per year - hardly enough to say goodbye to your W2 job. So instead, you invest that money in a multifamily real estate syndication and wait for 3 to 5 years during the hold period. After 5 years, you’ve earned $35,000 per year, or another $175,000.

In addition, there would be appreciation on the real estate asset. All of sudden, your $500,000 is now $850,000, and if you reinvested all the money you’ve made at 7% cash-on-cash return, you’d be earning $60,000 per year, which is a lot closer to your goal. Plus, if you wait a little longer and continue to reinvest your earnings and income, you’d be receiving $150,000 per year, more than enough to say goodbye to that 9 to 5 job. My point here is that it takes time to build wealth to allow you to live comfortably from passive income.

Real Estate Investing

I know real estate, having worked as a multifamily operator and investor, which is why I’m using that as an example of how you can transition from an employee to a passive investor. So, I’ll provide some more examples of how to get into early retirement mode with real estate.

1. Buy Single Family Homes

Many investors start their journey by purchasing single-family homes. Buying a single-family home, one home at a time, scales up very slowly. There’s a lot of work involved, from finding the right property, to arranging financing, to renovating the home for a higher rent, and of course to finding tenants and leasing the home. That’s where more management time comes into play, because unless you have a property manager, you’re the one the tenant will call when the toilet doesn’t work.

Even if you have enough funds to buy 10 single-family homes, they are simply more doors, more responsibility, and more management time on your part. The average return on each single-family home is only about $300 per month, which is hardly a large amount of money. It’ll be hard to make this a path to enjoying an early retirement. Another major con is that you will need to do the work yourself, from screening tenants to calling the plumber at midnight…

2. Buy Small Multifamily Properties

Many investors who previously started buying single-family homes decided it was simply too much work and began investing in small, multifamily properties. While this may sound like a much better proposition than buying single family homes, you’re merely trading one problem for another.

Let’s take a look at the math. A small, multifamily property isn’t really much different than purchasing 10 single-family homes. There are still 10 doors in each (unless it’s a smaller multifamily property, and you’re still the landlord). If there’s a problem with one of the units, you’re going to get the call. If there’s a problem in multiple units, you’ll be spending your time calling service contractors to fix the problems. You’ll also be spending time showing, leasing, and collecting rent on the multiple units.

If the return on each unit is $300 after expenses, you’re still only generating $36,000 per year. Your costs for upkeep, renovation, new appliances, painting and all the other items that go into maintaining a property will climb. It’s going to be a lot of work on your end for a return that unfortunately won’t be funding your early retirement.

3. Join a Syndication

Joining a syndication is where you’ll start to accumulate the wealth you need to fund your retirement and give up that 9 to 5 job. Passive investing is just that - passive, which means that you won’t have any role or responsibility in managing the property - from leasing to repairs to collections.

Most sponsors are created through a Limited Liability Corporation (LLC), so you’ll own shares in the multifamily property. It’s important to vet the syndicator so you know you have similar investment goals relating to risk tolerance, returns, and income. You’ll also need to do some research on the actual investment, as each one is different.

When it comes to working with a sponsor, ask about their track record to ensure that they’ve been successful in their previous syndications, which isn’t a guarantee that your participation will enjoy success, but it’s a guideline that shows the syndicator has the experience and knowledge to successfully buy and manage multifamily properties.

A Closer Look at Income and Expenses

As a passive investor in multifamily properties, you’ll earn income in several ways. First, there’s income from rent and fees, which could include washers and dryers in the unit, fitness facilities, and other amenities. Once expenses are deducted, the net operating income (NOI) is distributed to investors. After the hold period, which for our properties is generally 3 to 5 years, the property is sold and if there’s any appreciation after associated fees and costs are deducted, those funds are also distributed to investors.

In addition to income, passive investors also enjoy some exceptional tax benefits. I can’t think of many investments where you’re going to pay little or no taxes on the profits you earn from cash flow (with the exception of gains tax when the property is sold). Since the property income is your biggest source of ongoing profits, it makes sense to generate as much income as possible. We use a “value-add” business model, where we purchase Class B properties in good locations and then renovate the units to increase rental income.

You can then offset those profits through accelerated depreciation, called cost segregation, and expenses. Ongoing expenses include all types of property management and maintenance, including staff, property managers, and other items. Capital expenditures, called Capex, are large one-time expenses like a new HVAC system or roof. The IRS allows you to deduct the capital expenditures from the property’s income. Additionally, if you want to shelter profits made when the property sells, you can reinvest your funds using a 1031 Exchange.


The concept of leaving a solid company and paycheck in exchange for becoming a passive investor is intriguing and inviting to many. It’s the new American dream. Unlike the old American dream, people no longer want to stay in the same job until they reach retirement age, usually 65, and then live off a pension and social security. The only caveat is that it will take time to get to the point where you’ll be able to replace your income from your salary with income from your real estate investments.

As long as you’re willing to reinvest the profits you earn from investing in multifamily properties, it can be done. Some investors think starting with single-family homes is the smart move, but the math proves them wrong. At most you’ll earn $300 per month for each single-family home you own and rent to tenants, and you’ll have the burden of handling all of the management of the property on your own.

Small multifamily properties are another way to earn ongoing income, but the problems are the same as with single-family homes. The answer is to join a syndication, where you earn monthly income and then earn profits when the property sells. In addition to earning money by investing in a syndication, there are also many tax benefits to joining a syndication that purchases multifamily properties. Just be sure to vet the syndicator and research the deal before committing to any investment.

About Ellie Perlman

photo of ellie perlman

Ellie Perlman is the founder of Blue Lake Capital, a commercial real estate investment firm specializing in multifamily investing throughout the United States. At Blue Lake Capital, Ellie partners with both institutional and individual investors to grow their wealth by achieving double-digit returns by investing alongside her in exclusive multifamily deals they usually don't have access to.

A defining factor of Blue Lake Capital’s strategy is founded in utilizing machine learning/artificial intelligence throughout the course of all acquisitions and asset management. This advanced technology enables the company to produce accurate and data-driven forecasting for all assets on a market, property, and even tenant basis. In doing so, Blue Lake is able to lead commercial investments with the full capabilities of today’s technology.

Ellie is the founding host of REady2Scale, a podcast that highlights the assets, processes, and strategies for the multiple approaches to successful real estate investing.

She started her career as a commercial real estate lawyer, leading real estate transactions for one of Israel’s leading development companies. Later, as a property manager for Israel’s largest energy company, she oversaw properties worth over $100MM. Additionally, Ellie is an experienced entrepreneur who helped build and scale companies by improving their business operations.

Ellie holds a Masters in Law from Bar-Ilan University in Israel and an MBA from MIT Sloan School of Management.

You can read more about Blue Lake Capital and Ellie Perlman at

*The content provided on this website, including all downloadable resources, is for informational purposes only and should not be interpreted as financial advice. Furthermore, this material does not constitute an offer to sell or a solicitation of an offer to buy any securities.


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