A 25-Year-Old Real Estate Investor Took 5 Steps to Buy First Property
- Cody Berman learned about real estate investing when he was 19. After college, he bought his first property.
- He saved and invested in index funds to make money and lived frugally to keep expenses down.
- He also took on a lot of sideline jobs and strategically bought his real estate.
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When Cody Berman was a college senior, it occurred to him that if he could find a passive income, he wouldn’t have to work for anyone. His golden ticket to financial freedom came through real estate investments.
Berman, now 25, earns $ 4,700 a month in passive income from his four rental apartments. He took six steps to achieve financial independence.
1. He learned all about real estate investing
When Berman was 19 he was introduced to real estate investing through the corporate world. He completed an internship with a private equity firm specializing in buy-and-hold investments in commercial real estate. The following year he did an internship at a commercial real estate loan bank.
While these two internships were not directly related to investing in residential real estate, they helped lay a foundation for financial and investment fundamentals. “At the time, real estate was more of an abstraction than something I could actually use for my personal financial journey,” says Berman, who lives in Massachusetts and is co-host of the FI Show.
It was only in his senior year of college that Berman rushed headlong into learning financial independence; after that, the idea of becoming a real estate investor also seemed feasible. He used everything he could to create passive income – podcasts, personal blogs, YouTube videos – and investing in rental property kept coming up.
2. He spent a lot of time researching real estate
When Berman started looking at rental properties, the first thing he did was work with his real estate agent to set up automatic notifications. In order to narrow down his search, he set certain criteria. For example, the lots had to be at least two units, be less than $ 300.00, and be in certain counties. Berman received email notifications every time new properties came up that met his criteria.
Berman spent dozens of hours analyzing different cities, studying the price-to-rent ratio, and doing a series of numbers and analyzes to figure out exactly where he wanted to invest. “Rather than going through Zillow or Realtor.com indiscriminately, it was a fantastic way to find new potential properties,” says Berman.
3. He saved aggressively
Berman saved as much as he could on a down payment on his four rental properties. In three years he saved and invested the majority of what he needed – a sum of $ 170,000. He invested the majority in Vanguard index funds and put about $ 10,000 in an Ally high-interest savings account. Since he invested primarily in index funds, he benefited from the market appreciation and the money saved grew.
During those three years, Berman worked in the commercial real estate lending business, which grossed him an average of $ 80,000 to $ 85,000 a year. However, seven months after his first job, he quit in order to give full throttle to his entrepreneurial activities. In the first year alone, Berman raked in $ 70,000 and eventually reached his annual earnings of $ 130,000.
Berman has not set any specific savings targets. He just shoveled away as much money as possible when the opportunity arose. “I honestly wasn’t thinking specifically of real estate when I was saving all that money,” says Berman. “It just seemed like a fantastic passive income tool, so I took the opportunity.”
4. He pushed himself to the side
Not only did Berman save his main job earnings, but he went out of his way to make an extra dollar. He started a sideline while studying and continued for about a year after graduating. He earned an average of about $ 1,200 in extra income.
He built websites, freelance wrote, podcasts and videos, organized a book tour, and dabbled in affiliate marketing. During the summer he had odd jobs like polishing boats, tasting alcohol, and doing some gardening.
As a serial entrepreneur, Berman has now stuck his toes into everything from helping start a platform that teaches others how to stand aside successfully, to selling his own designs and templates on Etsy, to co-founding a disc golf maker who all of them bring additional passive income.
5. He cut spending
In order to save for his rental apartments, he made the gap between his income and expenses as large as possible. “That void is everything,” says Berman. “It allows you to invest in assets you pay for without having to trade your time for money.”
In order to save for his four rental apartments, which make a total of 11 rental units (excluding the one he currently lives in), he lived modestly and paid no attention to a conspicuous new car. He cooked at home most of the time and was extremely careful with his expenses.
This helped him free up more money for his savings. In return, he bought all four properties in Massachusetts and Connecticut within a year. “Even though I bought them all in the same year, those savings had been accumulating since college,” says Berman.
For those looking to achieve financial independence, Berman recommends saving aggressively to keep the “income-spending gap” wide. “As long as you are young and flexible, do everything possible to keep this gap as wide as possible. I am definitely not saying that you lock yourself in a room, never go on vacation and never see your friends, but there is always a more sophisticated and cheaper option, “he says.
The more void you can create, the more money you have to invest and the sooner you have the opportunity to “withdraw” your residual income. Or at least just do what you want with your life.