Best Savings Methods to Save 40k in 2 years on a 60k Salary?

Question

I'm recently out of college and looking to start investing in RE. After reading David Greene's Boor on BRRRR, I'm looking to get startedt as soon as I can put away enough in savings to outright buy a property to rehab. Based on my current budgets and goals, putting away another 40k in the next 2 years should get me going. I'm always looking for ways to increase my savings rate, but my question is this: What are the best types of accounts to save incremental installments of money for a time period of about two years?

Options I've considered:

Savings Accounts @1%
Money Market Accounts @2.15%
1yr CD's @2.65%

Options I've considered:

• Savings Accounts @1%
• Money Market Accounts @2.15%
• 1yr CD's @2.65%

Jonathan Bombaci · Answer

How much are you spending on rent? How much on your Car? For most people their two biggest expenses are housing and transportation. If you can figure out how to reduce your spending in those two categories you'll be able to save more. At most you're talking about a 1-2% return difference in the options you listed. On $40k that's only $800 a year. Your rent is probably more than $800 a month, if you can find a way to live for free you could save $800 a month instead of trying to squeeze an additional couple points out of your return and earn an additional $800 a year.

Have you considered househacking a multi-family property that needs updating? You can live for free in one of the apartments while getting a jump on a BRRRR project. IF you plan to live in it you can purchase up to a 4 family property with a FHA residential loan for just 3.5% down payment and some cities offer downpayment assistance for first time home buyers. Ask your agent or lender about it, i've seen people househack a property, get the seller to pay closing costs, and the city to give them the downpayment. They literally get a property for $0 out of pocket and end up paying less per month to live in something they own than they did when they rented.

Read Scott Trench's book set for life. It'll get you started in real estate investing sooner than you had planned.

Anthony M Schlitt · Answer

@Jonathan Bombaci -- Love the suggestions. Fortunately, I've paid off my car, but you're near spot on with rent. The 40k in two years is sort of my secondary REI goal right now. I'm currently in the military and anticipate moving to my next duty station within the next few months. Very much on board with househacking then.

I plan on using a VA loan to purchase my first property and would strongly consider a small multifamily should an opportunity to purchase one come my may. Expensive coastal markets and owner-occupancy rules look like they're going to prevent me from using the VA loan too aggressively (at least initially with my time in the Navy) which is what's driving me to considering BRRRRing back home in the Midwest after the first property.

Really appreciate the book recommendation too. Currently working through David Greene's Long Distance REI book, but I'll add Scott Trench's to the list next!

Tom Makinen · Answer

You can go on peerstreet and invest in some short term notes. I have seen them between 3-12 months at 5-10% APR. They are short and liquid enough that I think it is a valuable tool. Obviously stock market has some crazy swings. You can hit it big or lose 20%, but it is liquid.

I am also doing lendingclub, but after my 4 years of testing. I think I am officially out on it. People are just too unreliable, way too many dishonest jerks out there. My return in 4 years of play A-C notes net me only about 6%. The money is not liquid and you can say bye to it for 3 years once I put it in. It's too long, too risky, too little return.

Anthony M Schlitt · Answer

@Tom Mackinen

I actually hadn't considered P2P lending at all. I'm not too familiar with peerstreet, but I'll definitely consider looking into it if you can get returns like that in such a short time span. Thanks for the tip!

Best Savings Methods to Save 40k in 2 years on a 60k Salary?

4 Replies