In the past few months I've read numerous real estate investing books. It all started with Rich Dad, Poor Dad. One concept that was discussed, in other books as well, was pay yourself first. I would be considered a high earner but I ALWAYS pay my bills first before I pay myself (I own an Engineering firm). So far I've incorporated and registered my own real estate investment company and I'm trying to come up with the downpayment on my first multifamily property (4-6 units). Most properties go for about $700k - $800k. I want to self fund the downpayment on my first deal so that I can prove myself before approaching private investors (I've owned 2 single family rentals but recently sold). Is my point of view totally wrong? Is there something I'm missing? Am I taking the long road to my goal by not paying myself first? I know once I get my first multifamily property, things will take off since I'm constantly consuming information on the subject but I just need to put it into action!

what does pay yourself first mean to you?

How much of a down payment are you trying to save?

@Anthony Winston III think of it this way. You should know what your rescue ring bills should be for the most part. Such as rent/mortgage, utilities, debt payments, etc. hopefully you are budgeting to have left over cash. Well instead of paying the bills first take that money you should have left over and put it away. Then pay the bills. Now there is nothing left over for buying that new boat or doo dad on T.V. 

Paying yourself first simply means to take your earnings and set aside some saving before spending any of it.  If someone does that, they will naturally have to reign in their spending to fit what's left.  Most people spend everything they earn regardless of how much they earn.

Thanks for the responses. I thought there was some other explanation that I misses because what you all say is exactly what I do. Pay all bills first and everything else is for savings. I just need to be more patient with saving close to $200k for my down payment.

You have to love Mr. Kiyosaki.  I remember the first time I went for a business loan.  I based my business model off of the cash flow triangle and got a huge grin from the loan officer.  (Things went very smoothly from then on).

Borrowing from the concepts laid out in "The richest man in Babylon" our expenditures will always grow to equal our income.  Unless we stop it.  Paying yourself a fixed amount first has a 2-fold effect.  You will stop frivolous spending and you will also reinforce that you get paid first.  You are the most important, the alpha.  You come before your creditors.  This aggressive mentality will fuel your ambition to take control of your life and do what needs to be done.  At the end of the day if you don't have enough money to pay your creditors then you will likely do something to get that money.  (Put in extra hours, make a few more cold calls, develop a new advertising strategy).  If the roles were reversed and you paid your creditors first and then didn't have enough money to pay yourself It is likely that one might shrug their shoulders and merely hope for the best next pay period.

This concept directly relates to your current decision.  What happens when you hit a wall or become frustrated/overwhelmed with your new project.  If you borrow the money and have an obligation to pay it back you will likely push harder then if you had already invested your own money.  

Case study: Imagine if you will 2 owners (Adam and Barry) of a singular apartment.  Adam has a monthly mortgage to a private investor while Barry owns the apartment outright.  Both apartments leases expire and are vacant.  Which owner is most likely to rent the apartment?  I have seen this, where unfortunately owners will become complacent because they don't need to rent it.  The property sits (sometimes for years) and turns into a liability.

Just my 2 cents!

You'd be amazed at how much you can cut back when you stick 30% of your income into a savings acct at the beginning of the month.  I remember those days.

Now I just let it pile up as retained earnings in my mgt corp.  When it gets to a certain amount, I 'reposition it' (buy again, pay down a higher rate mortgage, etc).  Thanks for the reminder to track better and maximize better between piles @Anthony Winston III !

That makes so much sense. I need to establish a minimum percentage amount that I pay myself. I never thought of it that way. Since my pay can sometimes quadruple between months, saving a percentage will be much easier than just saving the remaining amount after bills.

What do you mean by "bills"?  I would state this rule differently:  "spend less than you make".  Its easy to think of something like a car payment or credit card payment as a bill.  What they really are is spending.  A "bill" that's a payment on an expensive car is spending that could better be directed toward savings.  Even a house you live in is nothing but an expensive doo-dad that will suck money out of your pocket.  In both cases, buy the cheapest alternative that meets your needs.  And be careful to separate needs from wants.  That applies to everything from your residence down to what you have for lunch.

Credit card payments, if you have those ARE NOT BILLS.  The payment is simply a transfer from one account to another.  Its what you charge on the card that matters.

"Pay yourself first" means taking a chunk of money out of your income and setting it aside for the future.  When your income is lumpy I'm sure you're used to dealing with the ups and downs.  If you can figure out how to get by without drawing down savings (or running up those cards) during the lean income months, you can then pocket the entire difference when you have a good month.

Jon,

Based on your explanation, I've been paying myself for years. We've been setting aside a certain amount for the future for years now based on our retirement number. Now I'm getting to the point where I want to acquire assets that will allow us to retire really early.

Originally posted by @Anthony Winston III :

Jon,

Based on your explanation, I've been paying myself for years. We've been setting aside a certain amount for the future for years now based on our retirement number. Now I'm getting to the point where I want to acquire assets that will allow us to retire really early.

Yes, EVERYONE pays themselves first. eg. Your pay is $1,500, and you're not getting paid for another fortnight. A bill has already come in for $1,500. Aah, you have enough, so you pay it, right? Then, in two weeks time - you can eat again.

Yeah, right! The only difference with paying yourself SAVINGS as well as food (BEFORE paying bills) is: Choice! 

[I recommend that you should go to your Investors as soon as you find that hard-to-find "deal", rather than waiting until you've reached some random savings number. I reckon it's DEALS that Investors want to look at, more than your proof-of-savings philosophy. If you buy a deal yourself, your Investors might ask: why weren't we invited?]. All the best...