Many readers have wanted to know how we're able to just up and leave traditional jobs and travel the world, live abroad, etc.
The answer is real estate ownership. I once had a goal to buy a piece of real estate every year and I did it for 5 years, starting at age 24. That has benefited me well. Here's how it went down if you'd like to hear the nitty gritty...
How I Got Into Real Estate
Buying real estate in Brooklyn at age 24, while single, was kind of an unheard of move. None of my peers owned real estate at the time, let alone in New York City. But I just liked the idea of owning my own place instead of getting roommates and paying loads of New York rent into someone else's pocket.
Now, you typically need some money to get started. Somehow I had a job that was paying decent money. Mind you, I sacrificed a LOT of ego to have that job. This was my first full time job in NY and I was a receptionist at a hedge fund. It felt so, so below me. (I had much better jobs in high school and college). ha. But who knew that receptionists at boutique financial firms could make a decent salary + a big NYC bonus + insurance and meals paid in full. It was enough to buy real estate. So I took the job. I had big plans on the side.
MY ADVICE: Proving income is necessary to get a mortgage. So if you have a job, don't waste time (It's harder to get a loan if you're self-employed.) Buckle down and buy something ASAP if you can! I think there are usually opportunities out there, no matter what the market conditions are (especially if you're buying a fixer-upper). Also, even if you don't love your job, you might find that working on your real estate projects on the side can make up for it and can be pretty darn fulfilling.
My First Purchase
So, with my receptionist job (yep!) I went on a real estate hunt all by my little self and found the TEENIEST studio in one of the nicest neighborhoods in Brooklyn, on one of the nicest brownstone blocks. I still die over that location. But the apartment was a mess. Truly a mess. It needed a lot of work. It was also the cheapest thing on the Brooklyn market (by some miracle it was about 1/3 the price of other studios on the market at the time) and I figured I could make it great. I think the real estate agent was quite surprised when I said, "What do I need to do to buy this place?" (I had no idea how it all worked.) She said, "Make an offer." So I made an offer. The listed price was $79,000 (can you imagine?), so I offered $75,000. The owner accepted. I paid 10% down. I didn't quite have enough cash in my savings yet, so I borrowed I think $3,000 from my brother. Buying that 260 square foot studio was the best financial decision I've ever made. The value of it went up and up and up and led to so many future opportunities.
MY ADVICE: Do not think you're too young to buy real estate!!! I ALWAYS tell people, BUY REAL ESTATE WHEN YOU'RE YOUNG!!! Do ANYTHING you can to get into the market. Buy whatever you can afford. When you're young, you can work your butt off and you can also get away with buying the cheapest, smallest place if you have to. It's harder to survive in a starter home when you have 1 or 2 or 3 kids and load of furnishings. Another option when you're young and single is you can easily get roommates to help you pay the mortgage. Or you can fill your extra rooms with folks from Airbnb.
My First Renovation
I knew the studio had potential. I wanted to gut renovate the bathroom and kitchen, sand and reseal the wooden floors, paint, and build a loft bed. I got two personal loans from two different banks (total for the two was $12,000) and I got to work renovating my apartment. I bought my first drill, bought gallons of paint, rented cargo vans for trips to Home Depot at 3 am, found out where lumber yards were in Brooklyn, where I could buy replacement tin ceiling tiles, and where I could buy white metal industrial kitchen cabinets from a warehouse somewhere in deep Brooklyn for $180. I dragged boxes of subway tile in a granny cart down the street until the wheels broke off and sparks were flying. I had also started dating my first husband sometime after my purchase. He helped me fix it up, which was great. I also hired a handy man friend from Utah who helped with some of the projects I couldn't do. And I hired a plumber, a tile guy, and an electrician off of Craigslist. It all came together and turned into quite a handsome little home.
And my mortgage payment was only $495!!!!! $495 in New York City!!!!!
MY ADVICE: Do. It. Yourself - as much as you can. It will make you cry, probably bawl, spit, sweat, and cry some more. It will push you to your absolute limits and you'll probably throw dishes (I did). But you'll save a TON of money and learn a lot. You'll have a massive sense of accomplishment when it's done.
Investing Some More
So, I lived in that apartment for about year. I lived very, very frugally and quickly paid off all my debts to my brother and to the banks (for the renovation loans). I also got a new job (and more money) at another hedge fund working as an administrative assistant for a CFO. Also, it turns out that interest rates PLUMMETED. So I decided to refinance the studio and take CASH OUT to buy another apartment. Yes, I actually took $23,000 cash out for a down payment on my next place. The most amazing thing is, my mortgage payment at the studio remained the same ($495!!!) One of my favorite things was to look at real estate listings up and down 7th Avenue, on Craigslist & in The NY Times. I also went to open houses like it was my job. And so when the time came, I was ripe and ready to buy the next property. I rented out my studio and began receiving my first passive income. Because of the renovations and location, I could rent it out and make $700 profit a month. Not bad. At this point, I was completely addicted to real estate!! Oh yeah, I read Retire Young Retire Rich & Rich Dad Poor Dad. That only fueled me even more to acquire assets.
MY ADVICE: ALWAYS pay attention to interest rates and let them work in your favor!! And, if you're interested in obtaining real estate assets at anytime in the future, you should be looking at listings NOW like it's your job. This is how you can be prepared to make smart decisions and get good deals.
Make Low Offers & Negotiate
That second apartment I wanted was listed for $275,000 (this was in 2002, mind you.) This was actually out of my price range, but I figured that it never hurts to make a low offer to just see what might happen. My husband at the time thought I was crazy, but I offered $215,000. ha. Why not. The offer was declined and we kept looking. But I noticed that the apartment continued to have open houses (watch for that!!) It turns out that buyers kept passing on it as it didn't have good closet space. And so, I went in with another offer: $225,000. This was declined as well, but I haggled back and forth and I got the apartment for $235,000 in a FRENZIED market when most places were going over asking. Not bad. I was pleased.
MY ADVICE: Make an offer on just about EVERY apartment/home you would even consider, even if the price feels embarrassingly low. I say EVERY home has a price that you WOULD pay, right? If you're making the effort to see a home, you might as well follow through with an offer. You never know what position a seller might be in and it's a way you could perhaps get a great deal.
I continued to live extremely frugally as I wanted to renovate my second apartment and also buy more real estate. I also got promoted again as the Personal Assistant to the CEO. My income and bonuses went up and up and up and I saved every dollar possible, including all of my bonuses. I never spent one dollar of those bonuses. I even had another couple live in my living room for 7 months. They paid about half of my mortgage which helped pay for renovations.
MY ADVICE: Cut corners in every possible way when you're trying to save money. Cut back or eliminate travel. Buy used clothing or none at all. Buy used furniture. Limit dining out or find VERY CHEAP restaurants. Buy used cars or have none at all. Eliminate all extra monthly expenses like gym memberships, magazines, etc. Cut back or eliminate expensive gifts and hobbies. Have potlucks instead of fancy dinner parties. I did all these things for years and it hugely paid off. For thousands of ideas on how to save money, check out one of my favorite blogs: And Then We Saved.
Invest in a Market That Suits You
Pretty soon I bought my next asset: a fourplex in Salt Lake City. And then I bought a second fourplex, also in Salt Lake City. For me, this turned out to not be my cup of tea. In New York, my renters were responsible professionals making big money. Just about everybody rents in NYC and just about everybody has income of some kind (otherwise you can't survive there long). My rental apartment would rent in about 10 minutes after posting it on Craigslist. In Salt Lake City, on the other hand, the rental market was different. At the time, homes didn't rent as quickly + the type of people who were renting our apartments had risky financials (unstable jobs, low income, etc.) While not everyone with a low paying job will have trouble paying their rent, in my case most of them did. And too often my apartments were getting severely damaged by renters. Not only that, the renters would often TAKE things when they left. One renter left in the middle of the night and filled their camper with our appliances and even the hot water heater! Ugh. And so, I wanted out. I definitely had a better experience with the New York market and New York renters. We soon put the fourplexes up for sell. Luckily we still made a very decent profit on both of them. (Note: I have a friend in New York who started out his real estate career by buying LOADS of fourplexes in Salt Lake. He has done very, very well for himself. So I guess it just depends on what investment market suit you. I'm all about NYC.)
MY ADVICE: In my experience, owning in New York City is like owning a piece of gold. It's ALWAYS in demand and being a landlord there is a dream. If you ever live there, you should try really, really hard to buy something. I would recommend, however, to buy apartments you can later rent out in case you need to/want to. Most co-ops do not let you rent out and I think those could be a little more risky unless you're VERY confident in the market conditions and know you'll be ok to flip it when you move. Of course there are good markets all over the country. Think about what niche might suit you and go for it.
I was soon in the market for my 5th real estate purchase, a two bedroom in Brooklyn. This was going to be the home I settled in for awhile. This home was much nicer and larger than my first two homes. I felt really, really lucky to be in a position to buy it. It's only because of the real estate profits that I was able to buy it at all. I renovated it and it has been the best home and sanctuary to me after the divorce, while being single again, and while dating Danny. The rental profit I now make on that apartment is what is financing our sabbatical abroad.
Unfortunately, my real estate investments stopped for a few years because of the divorce and other ventures. Divorce was financially a big blow to my savings, which was a really difficult thing to face as I had worked so hard. Infertility treatments also put things on the hold. But oh well. Life doesn't ALWAYS turn out so perfectly.
MY ADVICE: Know that rough patches WILL pass. Even though you may experience set backs to your goals or may need to put them on hold for a time, opportunities WILL arise again in the future. I am currently wanting to get back in the real estate game sometime this year. I've been looking at buildings in Brooklyn like it's my job. :)
Do any of you have an interest in real estate? Obviously I love this stuff. Any tips, advice, or book recommendations would pretty much make me giddy. I've even thought about getting a masters in real estate at NYU or getting my broker license so I could broker my own deals. It would also be fun to bring investors together to work on some projects.