Receiving key to home

Saving For a First Home, and Then Some

Feb 20, 2020
Empower Insights

How one college grad socked away a down payment in six years

Logan Allec graduated from college in 2009 with $35,000 in student loans — and headed into a job market pinched by the recession. “It felt overwhelming,” he says. But Allec, now a certified public accountant and owner of the personal finance website Money Done Right, was determined to buy a home as soon as possible. “I thought, ‘How am I going to do this?’” That's when he began seriously considering how to save money to buy a house.

He started by taking the first decent job he found: an entry-level position at an accounting firm that paid $48,000 a year. That doesn’t go far in Los Angeles, but the work was hourly, so he racked up overtime. “A lot of my peers couldn’t wait to get out of the office, but I was asking the partners to give me all the work they had,” he says.

On weekends he took on side hustles like transcribing interviews and fixing up his landlady’s home. To cut his costs, he moved into a room in a house with three other guys, paying only $275 a month.

Allec was saving money while college buddies were going out

Allec, now 30, saved every penny. His best move was refinancing his student loans, which got the interest down from 6.8% to an introductory rate of 1.9%. (That rate will eventually go up, but in the short term, it bought him thousands of dollars in savings.) “I wish I’d done that sooner,” he says.

Allec lost touch with some of his college buddies because they were always going out, and he was staying home to save money. “Eventually I found new friends who were just as cheap as I was,” he says.

Still, it took years to find an affordable property. Homes in LA were selling for $1 million, with all-cash offers. “I couldn’t compete with that,” he says.

Finally, he settled on a four-unit home in move-in condition outside city limits, with three tenants already in place — so he’d have rental income and a place to call his own. The price was $450,000. He got an FHA loan that required only a 3.5 % down payment, or about $15,000. After six years of saving, he had that plus enough for closing costs.

His tenants paid a total of $2,600 in monthly rent, against his mortgage, insurance and tax payment of $2,900. Then he rented out the second bedroom in his own unit for another $600, giving him a monthly profit of $300 that he could use for upkeep on the building and other costs.

Allec’s tightwad lifestyle paid off in another way when one of his frugal friends introduced him to the woman who became his wife. Now the couple and their baby live in her house — so he rents out all four units of his place.

The couple is now saving for retirement — their own, for sure, but also his parents’. “They don’t have much savings,” says Allec, “so I’d like to buy them a house for their retirement.”

Being able to save money to buy a house isn't just a reality for CPA's like Allec.

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