The Lowest Thing I’ve Ever Done to Get Deals

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Real Estate Investors catch a bad rap as it is. They’ve been classified as vultures, scavengers, heartless business people who don’t care about the common homeowner.

In most cases, the opposite is usually closer to the truth. If you’re here on BiggerPockets, then you probably understand the labor, devotion and capital it can take to actually get, turn, or keep deals. Working as a real estate speculator or investor is just like any business, and comes with a failure rate like any other start-up.

What if you’re getting started, ramping up, or in an ultra-competitive market? What’s another trick in the bag to grease the wheels of your operation without being underhanded or unlawful?

Besides out hustling, buying every billboard in town, or having a massive team, the lowest thing you can do to get, keep, or sell more deals is your personal overhead.

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#1) Vehicle

Sensationalism has it’s sex appeal. Who doesn’t want to roll Sean Paul style in a $100,000 car to “really” prove how successful you are? After all, the pinnacle of achievement is the acquisition of depreciative assets, right? Check your ego and question which is more important…the lease on the Lexus or the ability to build you financial future. I know, I know, I’m quite the dud. But if you’re truly looking to become a millionaire, I suggest you pick up the book The Millionare Next Door and see how your wealthy neighbors are actually living; there’s a lot less “poppin bub” in Escalades then you think.

If/When you’re able to, pay your car off, and maintain it until such a time the expense of purchasing a new(er) car is feasible. Having a run of the mill car may actually put you more in touch with your customer base, and may keep your friends from thinking you’re going to be picking up the tab every time you’re “up in the club.” Mission accomplished.

Whether it’s $200 – $800 a month for a car payment you could save, equate what that savings could do for returns on marketing. If a mailer costs you $1, you send out an extra 200 a month, get 5 calls, 2 people interested, and 1 extra deal at an average of even $5,000, your $200/month could turn into a potential $60,000.
Now tell me that isn’t sexy.

#2) Housing

Everyone needs a place to live, and if you’re serious about your real estate investing career, than you should be mindful of your own arrangement.

If you’re single or have an understanding family, you could purchase a 4 plex with residential financing, live in one unit, and rent out the other 3 and live (most-likely) for free. Plus, the other 3 tenants are paying down the mortgage, and you save on management expenses.

Alternatively, you could also purchase a home as a primary residence, and have a roommate to help subsidize the mortgage payments. What the goal is, is to capture the tax advantages of owning your own home, without it eliminating your potential to purchase more homes. Ideally, you would be paying less out of pocket every month than what it would cost you to rent in the same area.

Just because you qualify for a $250,000 home doesn’t necessitate you maxing your credit to the hills. With square footage comes utility bills, taxes, insurance, incidentals, furniture, etc etc. If you can keep your living expenses below what you can really afford, the extra savings can go towards your real estate business.

#3) Lifestyle

Although what could be taken as a request to live like a cheapskate, is really not the case. There was a time when a had a heart to heart with an excel spreadsheet every month and my bank and credit card statements. The type of “there’s more month then there’s money” realization that had me penny-pinching, waiting tables, and wondering how the hell I was going to get out of this trap. If you’ve been there or are there, you know the mantra: DEBT SUCKS.

When you have no plan, than you’re planning to fail. If you’re in debt (and by that I mean “bad debt”, consumer debt that’s not for your financial betterment) than you’re giving yourself more of an obstacle in your real estate career. Getting out of debt will make you will behave differently, think differently, make different decisions, and critically, give you more opportunities.

You can actually live quite comfortably and still be mindful of your expenses. In fact, there’s a freedom in knowing you can afford (the new car, a bigger house, that $10,000 watch), and sitting in the fact you really don’t need it (OR that you can afford it without going into debt!) My point is, going out to dinner 5 nights a week, paying retail for everything, buying things you don’t really need, these types of things will deteriorate your income and leave your ability to do more in your RE business quite wounded.

Listen, there very well may come a time in your real estate investing operation that a bigger house, a new car, and a Patek Phillipe actually don’t affect your bottom line much anymore. Everyone’s situation is different, and I certainly don’t judge. However, there is a pervasive expectation that we as RE investors should be like the characters we see on the reality TV shows, and be egomaniac hummer-driving a***oles.

If you’re looking to take your business to another level, or even get off the starting block, one technique that can help you get lightyears ahead that others may not be willing or able to do is live below your means to help you achieve your goals.

It’s the lowest thing I’VE ever done to get deals, and I hope the insight helps someone else out there even just get one more deal this year or next!

What do you think? Did you chop expenses when you got started, drive a beater car until you struck it rich, or get a second job to help pay for marketing? I want to hear what you guys have done to get an edge on your outlay and a leg up on the competition!

Photo: Ben

About Author

Tracy Royce

Tracy (G+) is an Arizona Short Sale Realtor, Investor, Rehabber, and Foreclosure Expert. She also is an avid blogger, vlogger and consultant on all things Arizona Foreclosures.

20 Comments

  1. Really nice article Tracy, thank you. Every reminder to use a bit of humility is helpful!

    I for one am in the beginning stages of getting a Real Estate Sales Associate license a la Marc Ferguson to help fund my deals.

    I have big dreams but I am certainly not going to spend big until I “can”.

    • Keep it real for awhile Doug. There are certainly those that advocate to “act as if”…but it sure seems a lot riskier. It’s easier to dream big and keep the dream alive when you aren’t drowning in debt. Here’s to your success!

  2. Tracy…
    I like to look at everything on an annual or cash basis. Then I ask myself if it is really worth that much money. Would I really hand over $70,000 cash for “that” car? Especially considering it would take at least $91,000 before tax earnings to do it. Would I hand over $1,300 cash for a gym membership ($110/mo.). Or would $120 cash ($10/mo.) feel about right? I do pay for the gym but I drive a 1994 Ford Crown Victoria.

    Thanks for a post of reason,

    Bliss

  3. Bliss, that’s such a smart way of looking at it. I think most people boil it down to a monthly payment and say “I can afford that!” without really considering how much it’s costing them in terms of annual income, etc. If you’re using your gym membership, than that’s a great investment…in you!

  4. Sharon Vornholt

    Nice post Tracy.

    We live in the land of abundance and for so many folks, they believe they have to have the newest, best and most expensive all the time. I agree with you completely about being able to live comfortably without a mountain of (bad) debt.

    I told someone recently that if they looked at their money and made a game out of seeing how they could stretch it; how they could reduce expenses, they would be amazed at how much more they would actually have at the end of the month. I’m not talking about penny pinching either; just smart shopping. Just the act of comparing prices before buying and by changing their habit of impulse shopping I know they would see a huge difference. It always amazes me when someone just walks into a store and buys a big ticket item without even comparing prices.

    Sharon

  5. Haha! the CAR!! I have never owned a new car- most I’ve ever spent on a car so far is actually 3.5k…BUT around 2004 I became obsessed with the idea of driving a biodiesel fueled car, so I bought a 1982 Mercedes 300TD for $1800. I was instantly self conscious when I drove it over to my investment property because, even though it was old and actually pretty mechanically decrepit, it looked good and expensive. And driving around looking at properties in lower priced neighborhoods? Forget about it. People would come out and hang over their fences watching me. Eventually I made it a point to drive hubby’s Civic hatchback on any of those excursions.

  6. I read that book and it’s amazing true. I’m in the market and see the people who really have money and the ones who look like they do. I drive and 2001 Taurus and 89 work truck and love no payments. Just put under contract a three unit and a single family. Real estate is better than advertised. God bless you all…..ps I do look on craigslist at dodge vipers but can’t justify when there are so many good deals not seen in the market in many many years.

    • Nice, Brad, hope you 3 plex works out for you. Don’t you feel so rich driving your free car around and knowing your investments are growing?? And there’s nothing wrong with wanting a slick ride…heck, at some point it may make sense because you want it, can afford it, and it makes your life more fun!

  7. Michael Lemieux on

    Nice post Tracy. I’ve thought the same as Jean Bolger, when we do the drive for dollars, I take my ’93 4×4 pick-up instead of my wife’s car. Although, as soon as I’m a little more successful I think I’m going to upgrade to a ten year old truck.
    p.s. really enjoyed your podcast also.

  8. Great article! I figure your personal house should be about 10% of your income not the 28% most people can qualify for.

    I do like my cars, but I have gotten to a place to where I can afford them now and still invest. I had a 91 mustang as my primary car for years and years. It was and still is a pretty cool mustang though.

    • Hi Mark, I think you’re right on about %’s. I actually used to get a kick out of comparing the national averages for budget items (housing, etc), and take pride in the fact that mine were below that ( given the fact I wasn’t living in a box and taking the bus 😉

      With your Mustang…I can understand having a fun car as your main car. I certainly have items I will spend more on because they mean more, plus knowing other items I can save tremendously on. I think life can be a “this AND that”, not necessarily “this because I can’t have that” in all cases. It’s just being mindful of your personal finances and giving yourself liberties in some areas because life/investing shouldn’t be a drudge!

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