Best Use of Your Time: Promotions or Rental Properties?
What is the best use of your time? Working to get promoted or using that time to invest in real estate? This article is to help you look at ways to get the highest and best use of your time.
A friend recently told me about her efforts to secure a promotion at work and it sparked a conversation about the financial value of time. At her workplace, colleagues at her level are all reviewed once a year for a limited number of promotions based on written performance reviews. She said the promotion would add $10,000 to her salary and she thinks she has a 50% chance of being promoted. In simple terms, a 50% chance of securing $10,000 is valued at $5,000. (This assumes there are no other non-financial perks that come with the promotion.) If she does not get promoted, she is not eligible again for another full year. So, I asked if all she thought all the extra hours of effort during the year hoping for the promotion are worth $5,000?
Place Effort in What Makes Financial Sense
Although most promotion systems are not so rigid as to only offer a very limited number of promotions once a year, it is a good example for matching the investment of time with the potential for a reward. We always want to perform at our best to excel, gain more experience, and obtain new responsibilities. However, is focusing all your efforts on the 50% chance of a $10,000 promotion a smart financial decision? It might be better to spend some of this time learning about investments such as real estate to begin generating income outside of a traditional job. There are many free online resources to help new investors learn the skills they need. You can start with our Real Estate section.
Who Has the Power, You or the Employer?
If you pursue the promotion you face the risk of getting nothing in return for your efforts. You could get promoted, but really that power rests with your employers not with you. You can try your best, but they are the final decision makers. And they decision may include more factors than just your effort, it could be office politics, nepotism, or some other office agenda that limits your ability to earn the promotion. It is a fact of life that these allocations of rewards are not always based on merit.
An Easier Way to Make $5,000
Fortunately, there are other ways to increase your probability of earning $10,000 beyond 50% and in ways that put more of the power in your hands. The first way to secure an immediate $5,000 return is through negotiation. Experienced investors have learned that it is not tremendously difficult to find a motivated seller willing to reduce the selling price of their property by $5,000.
A second option is to spend the extra time you would have allocated to working towards a promotion on finding a good buy and hold rental property to purchase. I like the security of knowing that if I do my due diligence, I will generate a solid return on a property, far more than rolling the dice and hoping for a promotion. A good buy and hold property can generate $5,000 a year in the form of cash flow, building equity, and tax deductions.
A third way is to create value. If you find a property that needs to be fixed up you can make these repairs and force up the appreciation of the property. Even simple fixes such as paint, counter tops, flooring, and light fixtures can give a property a whole new appeal.
Combine the Strategies for a Higher Return
If you combine these three strategies you can generate more than the hope for $5,000 per year and may get the full $10,000 or more per year as a return. The other benefit of focusing on investments instead promotions is that the rewards carry with you if you change jobs. These income streams are portable and go with you wherever you go. They can also serve as an important source of revenue if you lose our job or face a recession.
Remember your time is valuable and even if you love your day job, you still want to be allocating time to investments that generate a return both financially and in terms of learning the skills you need to make wiser investments. It is also worth keeping in mind, that employers stop paying once you quit your job. But, investments continue paying out long after you have quit your job.