Being frugal paid off in RE: $1k car, $1MM in RE, $140K/yr gross rents, and free couches..

[J. Martin]

I was looking for advice on starting out in being a successful real estate investor (with no capital) years back and ran across a few people who gave some of the best advice I have ever received for that scenario:

BE FRUGAL WITH YOUR MONEY (+ NETWORK! and FHA for 4plexes ;)

I started with no cash, slightly negative net worth coming out of college, a few credit cards, and a dream in my pocket.. After making some financial sacrifices along the way in my personal life, including moving more than once, I was able to build a portfolio of over $1MM in RE and $140k/yr in gross rents (my share; gross, not net) between 4 personally and partially owned properties and a master lease deal, at 30 years old. Did you make sacrifices to get started too?

I make under $100K in a stable 9-5 job in the Bay Area (which is not that much here!), and work across from people who have spent as much on their Brietling watch as I did on the downpayment for my first 4plex that is up $100K+ and giving me monthly cash flow. I settled for an inexpensive but nice pair of cufflinks for $30.

 After not having a car for years, I drove a hand-me-down beater truck w/ 250k miles, until it couldn't pass smog, and traded it for a coin-op washer & dryer for a 4plex I bought with a partner a few months ago. After that, I bought a 1991 Honda Civic for $1k, and put the rest of those savings in a partnership on a duplex with the same $100K in equity upside and lots of cash flow for less than half in cash of what most of my colleagues have spent on a car. ***NETWORKING COMES IN HANDY FOR BUILDING THE PORTFOLIO TOO!**

I invite friends out to beautiful Lake Merritt for a drink instead of going to the bar.
I skip cable and satellite TV and watch things on occasion on Hulu.
I have always received free furniture off of Craigslist or from friends, in decent condition, but of course never really what I wanted.

MY RECOMMENDATION FOR OTHERS STARTING OUT WITH LITTLE CAPITAL, OR DON'T HAVE THE EXPERIENCE OR AGE, PUT YOUR MONEY TOWARDS RE INSTEAD OF "NICE STUFF!"

I recently met a young investor like myself who said he didn't have enough money to get started in some areas he wanted to, couldn't find cash flow, but was driving a brand new Mercedes! I'm sure I'll get some flack from those who have really "made it" about enjoying your life. And I do :) But the best things in life aren't things ;) Or shiny stuff. Or new, comfy cars. *some of which I may enjoy more in the future*

But that long-term growth of income and equity in RE really can put you closer toward that goal of getting off the 9-5, and plowing your cash into RE instead of depreciating assets is a great way to get started!

ps. I finally bought my first new couch from a store after meeting my first big benchmark of $1MM in RE :) Not too expensive, but It's great! And has a fold-out bed, which I may utilize to generate some income when I AirB&B out my apartment next time I'm out of the country traveling! :)

Did you make sacrifices to get started in RE? Any advice for others getting started out?