How to accelerate saving up for down payment for next property

How to accelerate saving up for down payment for next property

Rental Property Investor · San Diego, CA · Member since 2020 · 44 posts · 33 votes

I would like some ideas to accelerate purchasing investment properties that isn't just saving as much money from my full time job and setting it aside to get that next 20% down payment for the next property. 

Some context - I work in the tech industry and bring in a decent tech salary, but even with that 6 figure salary and save (conservatively 10k / month), it'll still take 1-2 years to save up for 20% for a SFR / multi-family in the San Diego area (let's say 800k-900k range, if it stays that range and doesn't continue going up like crazy). It just seems like chasing a moving target - housing will continue to rise and salaries won't match that pace. In addition, I feel nearly capped career-wise, since senior developers who go the individual contributor route are capped salary-wise up to a certain point. I am also incredibly impatient and don't like the idea of being stuck in an industry where I have little interest in, just for the sake of getting that income to fund my next property (and to look good to lenders).


Besides saving up for the traditional 20% down conventional route to fund my next property, I would like to find ways to accelerate this timeline. I have considered some creative financing options and other non-traditional routes, but still feel as if I am too unfamiliar and how some creative strategies seem to be more risky.

It's like I am spending my day to day grinding through a job that I find no fulfillment or mental stimulation in, just so I can slowly make baby steps towards saving up for that next property.


If anyone is in the same shoes or has any insight or advice, I would appreciate it! 

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Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
5y

Invest in other areas where property is more affordable! $800-900k leveraged will get you a lot of real estate in most of the country, and done right it'll produce cash flow! Saving $10k/mo you could have a down payment for a new midwest or southeast single family in 3 months, 4 months if you want to be on the safe side. And that's not factoring in the snowball that cash flowing properties have!

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  • Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
    5y

    Invest in other areas where property is more affordable! $800-900k leveraged will get you a lot of real estate in most of the country, and done right it'll produce cash flow! Saving $10k/mo you could have a down payment for a new midwest or southeast single family in 3 months, 4 months if you want to be on the safe side. And that's not factoring in the snowball that cash flowing properties have!

  • Rental Property Investor · San Diego, CA · Member since 2020 · 44 posts · 33 votes
    5y

    @Taylor L.

    Thanks for the reply! I am considering looking in the southeast US (particularly FL), but am hesitant to leap into out of state investing right this moment due to not understanding the market too well and also not knowing how to manage properties long distance. However, I do plan on branching out to other locations if that particular property/market makes sense and I can find trustworthy prop managers / contractors / "boots on the ground" folks. 

    Right now I am starting off with the small fish - one property at a time. I am curious about syndication in large apartment complexes / commercial properties. How did you get your start into this niche of investing and how's your experience been? I would love to eventually make my way up there and expand to that level!

  • Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes
    5y

    FHA 3% down?

  • Real Estate Agent · San Diego, CA · Member since 2014 · 338 posts · 176 votes
    5y

    @Cathy S.

    I have a few ideas but first how much do you currently have saved? If you have been able to save $10k+ a month you should have a pretty decent amount saved towards the purchase of an investment property here in San Diego? Will this be your first property? Do you currently own or rent?

    Best way to get started here is to owner occupy a live in flip, house hack or purchase a duplex. Say 5% down, move in, create some equity, identify another property rinse and repeat. As you mentioned putting 20% down on properties just south of 1M will take a very long time to build a decent size portfolio. We see a lot of first time investors in San Diego take advantage of the strategies I mentioned. 

  • Rental Property Investor · Doylestown, PA · Member since 2008 · 1k+ posts · 1k+ votes
    5y

    @Cathy S. - partner with a money partner?  There are lots of people out there with money but no time.  Provide the time and they provide the money.  I've received millions in private lender money from individuals that don't have the time to invest but have the money.  And contrary to what many people think, these are not super wealthy individuals.  Many of them are just regular middle income people that have saved up money over the years.

  • Rental Property Investor · San Diego, CA · Member since 2020 · 44 posts · 33 votes
    5y

    Hey Mark!

    I actually just bought a duplex 3 months ago and currently living in 1 unit and renting out the other (and also in the works with the city on permitting for an ADU + JADU garage conversion). Currently, I am hustling to save up for the construction costs of the ADU/JADU, which I am aiming to have completed in 6-8 months' time if everything goes according to plan.

    I plan to pay all cash for the garage conversion, and so I'll be pretty much down to nil once that is done. I like the idea of rinsing and repeating after equity is built after some time, but I don't like feeling limited by my salary cap (the max I can get per month determined by my job). I also feel plateaued career-wise and not planning to stay in this industry long term, so I am trying to think of other ways to expedite this process.

    Originally posted by @Mark Frattini:

    @Cathy S.

    I have a few ideas but first how much do you currently have saved? If you have been able to save $10k+ a month you should have a pretty decent amount saved towards the purchase of an investment property here in San Diego? Will this be your first property? Do you currently own or rent?

    Best way to get started here is to owner occupy a live in flip, house hack or purchase a duplex. Say 5% down, move in, create some equity, identify another property rinse and repeat. As you mentioned putting 20% down on properties just south of 1M will take a very long time to build a decent size portfolio. We see a lot of first time investors in San Diego take advantage of the strategies I mentioned. 

  • Rental Property Investor · San Diego, CA · Member since 2020 · 44 posts · 33 votes
    5y

    This is something I want to look into. However, I don't know where to look and how to establish reputation when getting started. Why would random strangers trust me with their hard earned money? I guess the deal speaks for itself, but I am not sure how to go about finding folks to lend you hard / private money. Also not sure if borrowing hard/private money is better for short term projects e.g. fix and flips rather than longer term.

    Originally posted by @Salvatore Lentini:

    @Cathy S. - partner with a money partner?  There are lots of people out there with money but no time.  Provide the time and they provide the money.  I've received millions in private lender money from individuals that don't have the time to invest but have the money.  And contrary to what many people think, these are not super wealthy individuals.  Many of them are just regular middle income people that have saved up money over the years.

  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    5y
    Originally posted by @Cathy S.:

    Hey Mark!

    I actually just bought a duplex 3 months ago and currently living in 1 unit and renting out the other (and also in the works with the city on permitting for an ADU + JADU garage conversion). Currently, I am hustling to save up for the construction costs of the ADU/JADU, which I am aiming to have completed in 6-8 months' time if everything goes according to plan.

    I plan to pay all cash for the garage conversion, and so I'll be pretty much down to nil once that is done. I like the idea of rinsing and repeating after equity is built after some time, but I don't like feeling limited by my salary cap (the max I can get per month determined by my job). I also feel plateaued career-wise and not planning to stay in this industry long term, so I am trying to think of other ways to expedite this process.

    Originally posted by @Mark Frattini:

    @Cathy S.

    I have a few ideas but first how much do you currently have saved? If you have been able to save $10k+ a month you should have a pretty decent amount saved towards the purchase of an investment property here in San Diego? Will this be your first property? Do you currently own or rent?

    Best way to get started here is to owner occupy a live in flip, house hack or purchase a duplex. Say 5% down, move in, create some equity, identify another property rinse and repeat. As you mentioned putting 20% down on properties just south of 1M will take a very long time to build a decent size portfolio. We see a lot of first time investors in San Diego take advantage of the strategies I mentioned. 

     I wanted to verify that you were aware that

    • JADUs in CA require owner occupancy
    • Fannie/Freddie officially do not lend on duplexes with ADUs.  I have seen that this is not always enforced, but ...

    Together those can greatly limit your exist options (may need to sell to a owner occupied that is using non Freddie/Fannie financing).

    Add to this that most ADUs add value less than the hands off cost of the ADU addition. Make sure you understand how the ADU and JADU will be valued for any appraisals.

    Now back to your initial inquiry ... 

    There are entire books on investing for little or no money down.  Owner financing, financing that is based on value and not based on purchase price, lease options, etc.

    There are also entire books written on how to extract sweat equity such as BRRRR, leveraging under utilized zoning, parcel plits, etc. Using the BRRRR method it can be possible (but not easy) to extract all of you initial investment. I find in San Diego I can only extract all of my initial investment with an assist from appreciation, but if you trap less than 10% of ARV, that is pretty good and would allow you money to go twice as far at purchasing at 80% LTV.

    There are also entire books written on what I refer to as active RE jobs such as flipping, wholesaling, Syndicator (use other peoples money - also covered in the little or no money down), etc.

    Where there is a will, there is (often) a way.


    Good luck

  • Warsaw, IN · Member since 2017 · 229 posts · 270 votes
    5y

    @Cathy Song go to a national guru RE camp-for networking. You will find more bird dogs and established mom/pop folks that have access to deals but-ran-out-of-money than you can afford, even at 10k$/month and $75k properties.

    You’ll meet dozens-you only need to find one that you trust 🙂.

  • Frankie B.Pro Member
    Member since 2019 · 20 posts · 13 votes
    5y

    Hi Cathy, you may want to consider investing out of state.  If you are WFH it can be extremely manageable. You may have a bit of initial out-of-pocket expenses with travel and lodging, but it may be worth it in the end.  

    My husband and I are high-income earners, that live in Texas.  We purchased our primary home in the DFW area and we discussed that for our first investment property that we didn't want to tie up that much cash @ 20-25% down for a property that wouldn't cash flow as much in this area.  We had some unique circumstances that allowed us to purchase our first investment property in Illinois about 4 months ago.  It was a lot cheaper than what we would've paid for locally and it's cash flowing quite nicely.  We haven't had a need to hire a property manager because we redid everything brand new, but when this lease is up, even if we did need to hire one we would be more than covered.  Keep in mind, we hired contractors that we didn't have a relationship with, so it required us to travel to IL a couple of times and stay for a few weeks at a time to ensure that the work was done appropriately.  We did need to show the property once it was ready.  That's where WFH comes in handy.

    After you get over the initial hump of doing your first out-of-state investment, you may be looking for your next out-of-state deal sooner than you thought.  

  • Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    5y

    When I was out of college in 2007 I would a lot of these Money saving ideas for the shameless… (the before)

    1. Stack Mr. Rebates shopping portal and Groupon discount codes with gift cards purchased from eBay or Safeway with more gift cards and Mr Rebates shopping portal. 
    2. Take a shower at work to save on utilities, water, and electricity – as a side benefit you go to the gym more often (do your 3S’s there, ****, shower, shave)
    3. If you work in a startup company that caters food, it’s a no brainer— eat at work and bring food home. Maybe you can even befriend someone that works there and join them for lunch from time to time. For extra credit consider a life of “intermittent fasting” and totally binge at these free meals.
    4. Wash your car in the rain. No mineral deposits left while it dries. 
    5. Costco leasing to own program
    6. Buy an Anker powerbank and charge it at work. Sadly I never got around to use them during what little time I had at home 🙁
    7. I would sign up for Microsoft play-tests so I could get a free software to then sell on eBay for money. The sad thing is that I am not even a gamer and it was completely obvious to the playtest team.
    8. Always take a pee before leaving for the day.
    9. Try to poop at the same time every day while at work… get paid to poop. Time is money and flushes cost 10 cents.
    10. There are soft drinks available at restaurants?
    11. Why are you eating at a sit down restaurant, you have to pay tip?
    12. If you must, order food to go and eat on the premises. Best of both worlds!
    13. Wear clothes with the tag on it and return it.
    14. I rode my dangerous 50cc moped in the Seattle rain so I would not have to pay $4 per galleon in 2010.
    15. Use an app like GasBuddy to find the cheapest gasoline station, better yet, double stack your Costco credit card (4% cash back on gasoline) and buy Costco gas.
    16. Cash flow, cash flow, cash flow. Also, see uncle Kohlers team for tax optimization (easily the single largest expense in your life) 
    17. This one is a bit morbid, but an important one. Set up a revocable living trust with your lawyer to avoid probate expenses following the death of your family members\
    18. Susie Orman’s advice – make coffee at home and save yourself the $5 Starbucks Vente frappucino
    19. FAST (intermittently, not forever)! Skip breakfast daily (work yourself up gradually) and when you’re ready to get to the big leagues, attempt to fast for an entire day (no breakfast, lunch or dinner)
    20. Solar panels (maybe?)
    21. Free (coffee) money, this one’s really easy ($25/quarter or $100/yr) w/ BofA and Amazon 
    22. Maximize and optimize what you’ve got BankPurely has a 1.30% APY since April (not sure if promo rate?) but most banks have 1.0+% (which is 10x the 0.1% APY rate given by most conventional brick and mortar banks like BofA, Chase, WellsFargo)
    23. Become an Uber driver or deliver post maters? (not a big fan)
    24. If you have a spare room not in use, AirBnB it from time to time
    25. Check out EventBrite or other social event platforms for free lunch/dinner/drinks
    26. Buy Mod Pizza’s mega salad for $11.27. Dinner for days!
    27. Paid online surveys (not a good use of time)
    28. Use Honey or Ebates or other discount portals for Amazon/eBay or other internet purchases to save a few %
    29. Certain credit cards provide 5x bonuses (Chase Freedom has rotating categories) and Chase Business cards are good for auto-pay things like internet with extra bonus categories
    30. Make a Ghetto Latte at Starbucks and other fun
    31. Charging up your electronics/phones/Gameboys at work before you leave for the weekend
    32. I never paid for Tinder plus or extra coffee beans on When Coffee Meets Bagel 
  • Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
    5y
    Originally posted by @Cathy S.:

    @Taylor L.

    Thanks for the reply! I am considering looking in the southeast US (particularly FL), but am hesitant to leap into out of state investing right this moment due to not understanding the market too well and also not knowing how to manage properties long distance. However, I do plan on branching out to other locations if that particular property/market makes sense and I can find trustworthy prop managers / contractors / "boots on the ground" folks. 

    Right now I am starting off with the small fish - one property at a time. I am curious about syndication in large apartment complexes / commercial properties. How did you get your start into this niche of investing and how's your experience been? I would love to eventually make my way up there and expand to that level!

     It always starts somewhere! Syndication has been great and it continues to grow. I started in the niche by passively investing and having a mentor to learn the ropes. If it's something you want to do, you'll make it happen.

  • Real Estate Consultant · Denver, CO · Member since 2021 · 661 posts · 389 votes
    5y

    @Cathy Song Depending on the terms of your loan and how long you have owned the property there may be addiitonal options. You may be able to movein with a friend or relative for a while and pay them less than what you can rent out your unit for. Then, do a cost segregtion study on the property and greatly reduce or eliminate any state and federal taxes you would owe on the passive income generated on the rental. This tax relief can be significant...6% to 10% of your purchase price in after-tax cash-flow...taxes you do not have to pay. 

  • USA · Member since 2014 · 119 posts · 102 votes
    5y

    @Cathy S. I 100% understand where you're coming from. I'm a tech worker in the Bay, there is 0% chance I will be able to save up enough personal money to put down 20% on anything, period. I agree, the traditional saving up for 20% down is wayyy too slow for what I want to do. But, if you want to do something different, you have to think about it differently, and be comfortable with doing non-traditional things. What I am talking about is a mindset shift, of embracing doing what it takes to get what you want.

    Instead of "WHY would strangers trust me with their money" it becomes "HOW do I structure mutually-beneficial deals so others WANT to give me their money." 

    Instead of "I am hesitant to invest out of state..." it becomes "HOW do I invest out of state, WHAT systems and processes do I need to learn to be successful?"

    1. First, establish what it is you want. Sounds to me like you are feeling less than fulfilled with your job, and don't want to be stuck in the daily grind for years on end while trying to accumulate properties. Often times, a goal is to "replace my W2 income" but you need to make it uniquely you.

    2. Then, think of WHY you want it. This is your motivation, your reason for compelling you to do anything in the first place.

    3. Establish a goal, fueled by your WHY, to get you to what you WANT. The goal should be S.M.A.R.T. - Specific, Measureable, Achievable, Realistic, and Timeline. 

    4. Working backwards from where you want to be, and where you are now, to establish the steps you need to take.

    I know this isn't exactly what you were asking for. But I believe if you take these steps you will find the answer you are looking for. For me, sometimes I get stuck focusing on one thing like "how do I save up more money" when sometimes the answer is something different entirely, like "don't save up more money, use other people's money." And then if that is the answer, how do I go about executing that.

    If you found this useful at all, send me a PM I'd be happy to hop of a phone call and chat. I think I can offer some fellow newbie perspective. Just a short while ago I was thinking the same things as you, and felt very stuck.

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