Skimping, Scrounging and Saving for the Next Deal

First thing's first, I am still relatively new the the game by any standard. I recently closed on my second rental property and am now on the lookout for the next one. One of my original reservations, and a reservation mentioned by countless potential investors is that they are being kept back from their dreams by a lack of money. Being a capital intensive business, real estate investing can appear to be prohibitive to those that don't have many resources available to them. 

Saving up for my most recent down payment and rehab expenses was not easy. I spent almost a year finding ways to limit my spending, increase my income, gain knowledge, and identify a deal. 

Decreasing my Expenses: 

I live a relatively low heartbeat lifestyle. I drive a 2010 Chevy Malibu that's paid off and has 85,000 miles. I maybe eat out once a week, I watch what I buy for groceries, stretch out clothes as long as possible, and try to prevent any impulse purchases. This makes it sound like I do nothing fun. However, out in San Diego, there are a million things to do for fun that don't cost a dime. I spend my free time hiking, rock climbing, going to the beach, enjoying the weather on long runs and going to BBQs at my friends house. So, even when limiting spending there can always be room for more fun. I soon realized that just cutting back on the little expenses would not be enough. As the BiggerPockets Money Podcast hosts always say, you make your most progress in the expense front by watching what you spend on housing, transportation and food. On the living front, I do live in an expensive city but I took a roommate despite my being married. This is the single greatest way to save money each month, especially in a high cost city as the rents are quite substantial. A little sacrifice in the housing front goes such a long way to freeing up extra cash each month. For those that are getting started, house-hacking or even just splitting rent, are among the strongest tools to building the war-chest. 

Increasing my Income: 

You can only cut expenses so much. However, income can increase infinitely. My day job is a salary job and there aren't opportunities to pick up extra shifts for overtime pay. I had to get a bit more creative to making more money. I chose to trade my extra time for money in the form of driving for a rideshare company on weekend nights and tutoring online during weekend days. These tools admittedly place a low dollar amount on time. However, they are a short term solution to me to help get started. Other, more valuable, side hustles could be taking a side job with a real estate investor or brokerage firm, working for a property manager, or any other of a number of real estate related businesses that provide experience on top of the monetary compensation. 

Gain Knowledge:

Mentors, books, webinars, forums, podcasts, audiobooks, blogs...need I say anything else? 

Identify the Deal:

I received automatic MLS alerts from the real estate agent I began working with. Ultimately, this led to a property that had a previous offer fall through. The sellers put it back on the MLS at the right price and I had my offer accepted within a day. 

I focused this blog post on the money side of the equation to show that it takes a lot of sacrifice for those that are young or those without much money to get into the rental property space. Breaking the inertia at the front end will allow me to accelerate my growth as I build confidence, knowledge and experience.