How to Save Money for a Down Payment, From Investors Who Did It

  • Insiders spoke to successful real estate investors who started with practically nothing.
  • Their tips for saving for a down payment include setting goals and tracking your expenses.
  • They also focused on increasing revenue to save more and reach their goals faster.

Buying a property requires upfront cash – in most cases, you need money for a down payment and closing costs. Also, it’s smart to have an emergency fund for any maintenance issues or unexpected costs that might arise.

If you are in debt or have nothing to spare, buying a property is not completely out of the question. A lot of real estate investors that Insiders spoke to started out in the red or with no money in savings.

Here are three strategies successful investors have used to save enough money to afford their first home. Insider verified each investor’s claims regarding ownership of the property and payment of the debt.

1. Set a clear and specific goal

Sean Allen lived in the red for years before taking seriously his debt and investing in real estate.

The turning point for him came when he thought about what he wanted his future to be. His vision was clear – to build wealth through real estate – and to do that, he needed to eliminate his high-interest debt and then save for a down payment.

“Sit back and view,” advised Allen, who has paid off $ 81,000 in debt over 1.5 years, owns six properties in California and North Carolina, and has amassed net worth of over $ 1 million. “What do you really see yourself doing at 30, 40 or 50? Ask yourself if what you are doing now aligns with that vision. Because every decision you make will bring you closer to or further away from that vision.”

sean allen

Allen and her boyfriend.

Courtesy of Sean Allen

Take it one step further and create a vision board, he said. Then, write down specific goals that will help you make your vision a reality. If you want to save enough to afford a down payment on a home, calculate exactly how much you will need based on house prices in your area. If you want to put 10% off a $ 200,000 home, for example, that’s $ 20,000. So, set a goal for when you want to have that money. If you want to buy in a year, that means you need to save around $ 1,700 per month.

“I’ve always had a written goal plan with a vision statement,” Allen said. “Goals lead you towards your vision, so write them down.”

2. Evaluate your spending habits

Another step Allen took was to keep his expenses in check.

He started by tracking his finances, he said, “I put together a spreadsheet that tracks bills and income so I could see where my money was going and how I could plan better.”

Tracking his expenses helped him better understand where he could cut. For example, after looking at his credit card statements, he found 28 recurring charges and cut them down to the 18 or so he really needed. Plus, it eliminated costly travel habits: “I stopped spending money on plane tickets and took the Greyhound. I drove a rundown car that didn’t have a car ticket. I went up to 340,000 miles. Nobody would have rode with me but saved a lot of money. “

New York-based investors Ali and Josh Lupo, who also started deep in debt before buying their first property, say keeping track of their expenses has been incredibly revealing.

“A few years ago, we thought we had a good idea of ​​what we were doing and spending, but when we started tracking it, we realized our numbers were completely out of place,” Josh said.

Once they figured out where their money was going, they were able to implement lifestyle changes that allowed them to cut back significantly, Ali added: “Is it really important to have a good idea of: how much do I earn each month? How much do I earn expenses? What debts do I have? What assets do I have? You want to get an idea of ​​where your money is going so that you can optimize it. “

3. Overtime work

The more money you have, the more you can set aside for your future home.

Most of the real estate investors Insider spoke to, including Allen and the Lupos, spent extra hours on their daily work or started a hustle and bustle to reach their goals faster.

Allen renewed his resume business, Sean’s Resume Shop, which he started in 2013, and earned certification as a career coach. He has brought in up to $ 2,200 a month by doing career coaching and helping people write their resumes, he said. Besides, he still earned a salary from his full-time job.

He continued to coach even after paying off his debt. The additional money helped him grow his real estate portfolio.

Seattle-based investor Mike Newton, who had nothing to his name before building a 10-unit portfolio, worked overtime when he was saving up for his first property.

Mike Newton

Washington state soldier and real estate investor Mike Newton.

Courtesy of Mike Newton

“I worked 90 hours a week and saved every penny until I had the money I needed,” said Newton, who works full-time in law enforcement as a state agent and member of the SWAT team.

The combination of increasing his income and living frugally saved him $ 30,000 in about six months, enough to cover the initial costs of his first home.

Dion McNeeley, who also resides and invests in Washington state, lived from pay to pay for years before he could afford to invest in real estate. Thanks to overtime and various side jobs, he saved $ 20,000 over two years to buy his first real estate investment. He now has a 16-unit real estate portfolio and considers himself financially independent.

Think beyond your daily work, McNeeley encouraged: “The mistake many people make is selling their lives one hour at a time and not realizing that you make a lot more money when you get paid for the value you produce.”

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