How to Save Money to Buy a House
Hey there! It’s that time again.
Time for a question and answer post for the series Your Questions My Answers.
This question was from a reader specifically asking how I saved enough money to purchase a house to flip with cash and if I had any other tips.
Of course I do! And because I’m always saving for something I am always coming up with new tips and ideas to save or make money.
So let’s get started!
Let’s talk money. Cash money. More specifically, let’s talk about how I saved enough money to buy a house to flip with cash and then I’ll throw in some more tips at the bottom for you!
So I knew about 6 months into my 4 year stint in the corporate world that corporate life wasn’t for me. My parents had flipped houses my whole life as side projects but I knew I wanted to turn “side projects” into something way more than just that. With my long term goals of owning multiple rental properties and flipping houses I knew I had to start saving, and quick (I mean, come on, I’m not going to become a real estate mogul by NOT saving.)
Even though I was in a position where I would be approved for a mortgage, the best chances for getting a house at a good price is to buy with cash. Other investors, my direct competitors, are all most likely paying with cash, especially because most competitors are seasoned investors with cash to spare.
I saved ruthlessly for three years and built up my credit to excellent status.
I stopped spending that $3 a day on coffee… which is almost $800 a year (after you subtract for having to buy coffee at home now, because let’s be real, you can’t give up coffee) so when 2015 rolled around there was an extra $2,400 towards the house right there!
Another good chunk of change I saved every year was my tax return. While other people were spending theirs on frivolous gifts or vacation for themselves, my tax return went into a savings account specifically designated for saving for a house to flip.
I also scrapped metal, stripped wire for copper, crushed aluminum cans, sold stuff on Ebay and did various tasks for my dad around his rental properties like rake leaves, clean or paint. However, the 4 years at my “corporate” job is where the bulk of my savings came from.
Once I had enough money to purchase a house I up and quit my corporate job (however, I am in no way condoning quitting your job, yet anyway). It was a hasty decision because I just couldn’t live life being so miserable anymore. Miserable to the point where I would cry in my car, by myself, the whole way home. However, this turned out to be not such a hot idea as I couldn’t find a house to flip for 6 whole months after quitting!
Warning: The following is advice you should not take. Seriously. Don’t. Now that I was jobless and living off my savings I realized I had to be even stingier (if that was possible) with my money. So that I wouldn’t deplete my flip house savings with everyday necessities like groceries, gas and pet supplies I applied for a card that had 0% APR for 21 months (and of course I found one with excellent cash back because why not get paid to use my credit card, right)?
I put everything on this card and I mean everything. To the point that I’m sure I must have annoyed merchants by putting a $4 jar of peanut butter on my credit card. But listen guys, I really caution doing this because of the temptation to purchase more than you need knowing you have 21 months to
pay it off. I only did this hoping that I would profit from the sale of my first flip before the promotional period on the credit card ended (wanna know how that turned out?).
I was eventually able to find and purchase a flip house in my area for under $100K, fix it up, and sell it for a nice profit. Which I then put right into a long term investment property!
How to Save Money
1. Stop buying coffee every day
Every dollar counts! If you buy just ONE coffee from Dunkin Donuts 5 days a week, that’s $780 a year! And what if you buy a breakfast sandwich too? That’s almost $1600 a year!
If you have a Keurig switch to k-cups to save some money… or even better, switch to reusable k-cups that you fill with your favorite coffee and clean out when you’re done. Better yet, here’s a novel idea, if multiple people drink coffee in your household (or you, ahem me, drink 5 cups on your own) go back to the “old school” way of doing things and BREW A CUP OF COFFEE, ya know, with a coffee maker with an actual coffee pot that holds like 10 cups of coffee.
2. Find odd jobs to do
Know someone who’s going away? Offer to watch their pets or their house while they’re gone! Wash cars, clean windows or tutor! There are so many opportunities to make extra cash, you just have to get creative.
Is it the winter? The next time it snows, offer to shovel sidewalks and/or driveways for extra cash. If it’s the fall, how about raking leaves or picking up sticks? Use your noggin to come up with unique ideas!
3. Sell some items
There are always things laying around the house (or garage, or yard or basement) that you don’t use or need anymore but someone else would love to have! List them for sale on craigslist, eBay or even Facebook!
4. Save 100% of “extra money”
A really good example of extra money you come across throughout the year would be tax returns. Tax returns are awesome, but they’re even more awesome when you put them in a savings account and use them to buy a flip that make you ten times that amount! So don’t splurge on a new laptop or trip… save!
5. Stop ordering out
I know this one will be hard for a lot of people. If you’re like me, there’s probably one meal you really like to order out for. For me it’s breakfast. I love going out for breakfast. Luckily for me, where I live, breakfast usually winds up being under $20 with coffee, tip and food for TWO people. But, if you’re someone who likes to eat lunch and dinner out all the time, stop it. Stop right now and go to the grocery store. Blow the dust off the stove and get cooking. You will save money, trust me.
6. Downgrade Services
If you’re really brazen, give up those monthly subscriptions or downgrade if possible. Do you really need Amazon Prime, Netflix, Cable AND Hulu? No, probably not. So weed out the ones that you can live without!
If you put some thought into it, you really can find lots of areas in life to either save money or make extra money.
What do you do when you’re trying really hard to save for something? What tips can you offer?