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Manage your finances to get ready for your first real estate deal!

This is Part 1 of a series on Managing Finances. After reading, don’t forget to read Part 2 and Part 3!

One of the biggest stumbling blocks for beginning real estate investors is that you realize that you have little or no money to invest. The big question is “Where do I get the money for investment?” I believe that the starting point is to get it from your savings, which you get from managing your personal finances well.

When you always have savings available for investment, you can grab opportunities as they arise. Remember: great deals and opportunities may come anytime, and you don’t want to miss out on such opportunities because you simply don’t have enough cash on hand for downpayments, and/or have little chance of getting bank financing approved. Come to think of it, how can you expect to manage the cashflow from your properties (when you already have them) if you can’t even manage your own personal finances?

Before I managed my personal finances

When I was single, I never paid attention to my personal finances and I was even able to accumulate a significant amount of credit card debt. I also remember that I was living from paycheck to paycheck, with little or no savings at all. Fortunately, I was able to get out of that hole that I had dug for myself just before I got married.

After our wedding, my wife and I were able to continue with the savings plan that we devised that helped me get out of credit card debt and save enough money for our wedding, but that was short-lived. We ended up buying a house even if we really had no plans to buy one yet. Because of the monthly amortizations, we were again back to living from paycheck to paycheck.

After some time, when I first got interested in real estate investing, I suddenly realized that I really had no money to invest and our options were very limited because we already had an existing housing loan. We were stuck in the rat-race!

The book that started it all

Sometime in August 2005, my staff who also became a good friend of mine introduced me to the book Rich Dad Poor Dad by Robert Kiyosaki. As I have said in the past, this book started everything for me. I experienced a paradigm shift and started to question the financial decisions I had made in the past.

I started to learn the differences between assets and liabilities and I also began to “pay myself first”. I can still remember the arguments my wife and I had when I would bring up the subject that our house was not an asset but a liability.

Take note that my wife is a CPA-Lawyer and believed that such thinking was nonsense (thank God this is already a thing of the past as she has already read the book herself and understands). This was also the time I first got interested in real estate investing and realized that I really had no money to invest.

Sure, I started paying myself first but I still remember that at the end of each month, I often would need to get money from our savings just to ensure all our obligations are paid. The mind shift had already started but there wasn’t much progress in our bank account.

The “Latte factor”

During the latter part of 2005, I was able to read “Automatic Millionaire” by David Bach. What I remember most about this book was the “Latte Factor”, or those little luxuries and expenses that are unnecessary which, when added up, eat up a good chunk of your money.

I applied it in real life, managed to start saving a bit, but there was still not enough money for a real estate investment as it would take time to accumulate substantial savings for this. I also tried to look for ways to “automate” my savings but this mode was not yet in place for most banks during that time.

Other Robert Kiyosaki Books

For the most part of 2006, I continued reading other books from Robert Kiyosaki like the “Cashflow Quadrant”, “Rich Dad’s Guide to Investing”, and other similar books from other authors on the same subject matter. I was like a sponge and absorbed as much information as I can. They all reinforced the importance of financial literacy.

They helped a lot because during this time I experienced having a significant pay cut when I returned to a previous company I worked for. Inspite of the pay cut, I still managed to have a positive cashflow because of financial literacy. I was able to keep money earned through bonuses as they remained intact and unspent.

At that point, I already began looking at foreclosed properties but felt I was missing opportunities because my cash on hand was not enough and I also lacked information on the “how-to’s” of foreclosed property investing in the Philippines.

Feelings of frustration

After almost a year of reading books, except for increasing my savings mainly due to my being able to save my bonuses from work, I had little to show when it came to actual results with regards to foreclosure investing.

Feelings of frustration crept in and I was thinking that what I had learned from the books I have read are really hard to apply here in the Philippines.

On December 31, 2006 however, my prayers were answered when I saw the book “Think Rich Pinoy” by Larry Gamboa at National Bookstore. I bought it and immediately started reading it. This book again made a big impact on me and my frustrations were suddenly changed into a belief that the Rich Dad principles can really be applied in the Philippine setting as Larry was actually doing it! Now all I had to do was to save enough money for my first real estate deal.

What broke the camel’s back

I continued on my quest to learn more about personal finance and stumbled upon the “How To Become Truly Rich” Seminar by Bo Sanchez which I attended last July 21, 2007. This seminar really helped establish a solid foundation inside me when it came to managing my finances and it also helped correct myths about money which I erroneously believed in at that time.

From that point onwards, I believed that there was nothing wrong with striving to become rich if the ultimate purpose is to use it to help others. This somehow completed the pieces of the puzzle and suddenly I felt a heavy burden got lifted from me.

The money jars

At the same time, I was also listening to an audio recording of T. Harv Eker’s Millionaire Mind Intensive program. I also learned so much from listening to Harv Eker and one of the most remarkable things I learned was the concept of setting up “money jars” that would actually represent bank accounts for my financial freedom account, long term savings for spending account, education account, tithe, my “play” account, and expenses.

I would say that this was a big turning point in my quest to manage my finances as this broke the camel’s back, so to speak. Want to find out what results I got? I’ll discuss these in the next part of this series on how to manage finances so don’t miss it!

Head on over to Part 2 or Part 3 of this series.

—–

To our success and financial freedom!

Jay Castillo
Real Estate Investor

Real Estate Broker License #: 20056
Blog: https://www.foreclosurephilippines.com
Follow me in Twitter:http://twitter.com/jay_castillo
Find us in Facebook:Foreclosure Philippines facebook page

Text by Jay Castillo and Cherry Castillo. Copyright © 2009-2010 All rights reserved.

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About Jay Castillo
People encounter problems and make mistakes when buying foreclosed properties, and Jay wants to help people avoid those problems/ mistakes. Jay encountered a lot of those, which is why he started this blog in 2008 to serve as a guide where he shares lessons learned, and how to overcome challenges you may encounter when investing foreclosed properties in the Philippines … [Read more]
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Leave a Comment

41 thoughts on “Manage your finances to get ready for your first real estate deal!”

  1. Pingback: 4 Reasons Why We Need To Be Financially Literate Real Estate Investors
  2. Hi Jay,
    Your website is very positive and I am already a subscriber of your site. I am interested in Real Estate investing and would prefer to keep in contact thru email. Kindly send me your email contact add.

    Thank you
    Ronnie

    Reply
    • Hi Ronnie, I believe I got an email from you (or is that your wife?) and replied already. Let’s continue talking through email. Thanks for subscribing!

      Reply
  3. Pingback: How NOT to invest in foreclosures — Foreclosure Investing Philippines
  4. I am also thinking of venturing in real estate. My former co-worker and friend is now working with SMDC. SM Development Corps. current project is SM Blue Residences in the intersection of Katipunan Ave. and Aurora Blvd. If interested you can contact Agnes Orengo at +63 9064922512 / +63 9083754256 for more info.

    Site is good investment for student rental units since it is within the areas of Ateneo, PSBA, Mirriam, and UP.

    Reply
  5. Wow that is a lot of reading, but as they say it is more expensive to be financially ignorant. So read and attend seminars if you can, surf the net for free e-books, blogs, and other sources. Learn and apply

    Reply
  6. Excellent post. I keep forgetting to check out Rich dad poor dad. I work as a web designer and earn extra income for my tutoring services on an online learning marketplace (U-2-Me).You might want to check it out. I have included the link with my name. Doing everything I can really to get that first deal.

    Reply
  7. Pingback: How I track my expenses and manage my money
  8. Pingback: An invitation to Bo Sanchez’ How To Become Truly Rich Seminar and Why we need to fail!
  9. Pingback: Reader Q and A #1: How can I apply for a loan and thus finance my first deal?
  10. sir jay and sir bryan,

    this is kind of out of the topic already but i didn’t know where to share it, so i’ll just post it here.hope you wouldn’t mind. 🙂

    i bought tracy tajano’s “think rich- quick”. and i tried acting on what i have read there.

    i texted everyone that i am involved in real estate, i buy and sell houses even though i haven’t started yet.
    so one of my friends has been selling their house for quite a while now, and i inquired about it. her family is still selling it, and i said i’ll help her find a buyer. i am trying tracy’s wholesaling technique. now i don’t quite know what steps to take, so i first asked her the asking price.

    i don’t know what to do next! i need your help.
    should i bring a broker or agent? how do i deal with the document stuffs?

    so this is my first shot at real estate. it doesn’t really matter if i make money on it, what i want to have is the experience.

    joi

    Reply
  11. hi! i am so glad to be here on your website. i am an 18y/o college student and i want to be financially independent and rich too 🙂 i also noticed you cite a lot of things from Robert Kiyosaki and his book Rich Dad Poor Dad. I consider it my “financial bible”. I first got to read it when i was about 15 but only finished the other half lately.

    i am really interested in many topics that you have here, e.g. being financially free, investing, etc. and mainly on real estate investing. this is what i want to do soon. i am trying to learn everything to be financially prepared when it’s time formy first real estate deal. 🙂

    joi

    Reply
    • Hi Joi! I’m so happy to see you already have the goal to be financially free at such a young age! Yes, Rich Dad Poor Dad is also the book that started it all for me. Good luck on your first deal, please keep us posted!

      Reply
      • hi sir jay,

        yes thank you, im also really happy that i could do it at my age. well, i realized that my real estate dreams would have to be in the next 5 years or more, because of time constraints and my capabilities. (e.g. credit card holders must at least be 21 so that’s two years away from building my credit standing – for borrowing/mortgage/financing purposes)

        so in the mean time, i took baby steps and invested my money in UITFs instead of letting it rot in my savings account.

        sir, i really need all the help that i can get and so i read your posts. 🙂 i am inspired by people like you who are already financially free.

        so this is my financial plan, just thought of sharing:
        i am going to graduate BSA this summer, then take the cpa board exam. after, whether i pass or not, i want to focus more on learning the how – to’s of real estate investing. i plan on attending seminars and talks given by top filipino mentors. i am also thinking of asking assistance from my mother (in time) to let me use her Pagibig housing loan.

        i know it might sound too ambitious, but the bigger the dreams, the better :))
        sir, it would be so wonderful if you could you share your experiences when you were just starting out – especially on the financing aspect. 🙂 thanks again for this wonderful blog.

        joi

        Reply
        • Hi Joi,

          I am very impressed as you are pursuing financial freedom at a young age. I believe no age is too young or too old. And don’t be afraid to dream big! In fact, dreaming big is a necessary step to achieve your goals as this inspires you to strive hard.:)

          I just pray that you would achieve your goals sooner. We are in the same journey.
          .-= Bryan Uy´s last blog ..Self Evaluation: Tell Me Who Your Friends Are =-.

          Reply
          • hi sir bryan,

            wow thanks so much.. thank you for believing in my dreams. and hoping i could achieve them sooner. some people tell me it’s difficult or laugh me off when i tell them my plans. hahaha. but belief and action are the keys. 🙂

            i have read some of your blogs already! you are one of my aspirations esp. in achieving financial freedom! (and acquiring properties :)) i want to meet you someday and share my would-be accomplishments.

            good day sir 🙂
            .-= joi 429´s last blog ..why? =-.

            Reply
        • That’s the way to do it, start early and decisively! Just like Bryan, I only wish you the best and hope and pray that you will achieve all your goals.

          As for the financing aspect, I really did everything by the book, I really had to pass the bank’s credit investigation and used bank financing for the foreclosed properties I purchased.

          I guess what matters is you make sure you analyze a property very well, meaning you make sure that the numbers say that the property is worth buying as it will produce a nice positive cashflow.

          Maybe I’ll tackle other forms of creative financing once I am able to try them so I can give first hand experience. 🙂

          Reply
  12. Pingback: No more excuses – Be a successful real estate investor!
  13. Pingback: To all OFW’s: Need To Earn Passive Income And Come Back Home For Good? Try Foreclosed Property Investing!
  14. Pingback: I failed to grab my first real estate investment property… so what?!
  15. Pingback: Manage your finances by becoming your own Chief Financial Officer
  16. Great stuff again Jay!

    It is true that reading increases your KNOWLEDGE, which is very important to be successful in anything.

    You mentioned that even after gaining knowledge from reading these wonderful books, you actually felt discouraged because you’re not sure if it will work in the Philippines. Then you met Larry Gamboa… who actaully made Robert Kiyosaki’s system work in the Philippines. This is really the BELIEF part…knowing that someone has done it before.

    There’s another thing missing here in that even if you know how to do it (KNOWLEDGE) because someone else has done it before (BELIEF), if one DOES NOT ACT on it, then all these knowledge and belief will never make you succeed! It just won’t.

    It’s like hoping to win a lottery without buying a ticket! Oops, some of you (including myself), don’t bet on the lotto, so here’s another example to explain what I mean that ACTION is NECESSARY for success! Say you are thirsty. Even if you know and believe that there’s cold water in the refrigerator, if you don’t actually stand up from your couch, walk down the hall and get that bottle of water, you’ll never quench your thirst. That’s ACTION working for you and this same formula will help you achieve anything!

    I talked about this in my post: http://investingpinoy.blogspot.com/2009/07/success-knowledge-belief-action.html

    Thanks again bro for the wonderful post!

    Bryan Uy
    http://www.investingpinoy.blogspot.com

    Reply
    • How about those working overseas, is there a possibility for us to invest even if we are not home based? How can we invest in real state like of those foreclosed properties?

      Reply
      • Hi Angie, good question! may I ask if you have any trusted relative or friend that is based locally that can do the legwork for you? You would need someone to at least do the due diligence for you before you buy, and then manage the investment for you at the start, which you can later outsource to property managers. Thanks for visiting!

        Reply
  17. According to me people want to spend money but don’t use it wisely, we all want to save it but don’t have some perfect way to save it. For all this problem what we have to do is just manage your money, let’s check out some ways for that, you should have list of your income and expenses, have some source to earn extra income and at the end have some patience, all this ways will help us to manage money wisely. For more details on how to manage your money refer http://www.prime-targeting.com/tips-on-how-to-manage-your-money/

    Reply
  18. very inspiring!
    the money jars work! the latte factor works!
    but would banks provide automatic saving from your salary in RP?

    Reply
    • The local banks probably does not provide that kind of service but I think it all comes down to financial discipline. If you really need to separate your savings from your monthly budget, you can open another (joint) account and use the internet function to move the funds manually using their internet facility to that account, then maybe from time to time put them in short-term TDs. I myself maintain multiple accounts at BPI. At Citi, they have the multi-money account that can be used the same way though I think this is not available from Citibank in the Philippines.

      Reply
        • Hi Jay & Tony, sorry to butt in to your blogs but you can check with BPI they already have this service where you can automatically deduct an amount you specify at a date you will also specify, monthly or weekly. I think they call it BPI Save-UP. I have enrolled in it 2 months ago. You can check with BPI for more specific details.

          Reply
          • Hi Bele, thanks for the info. However I can’t make use of BPI’s ADA feature because my payroll account is with another bank. 🙁

            Reply
    • Hi Derek, nice to see you here again. I’ll also visit your ning site more often. I already inquired about some banks Auto Transfers of funds but it seems complicated and inflexible so I just opted to the the transfers myself through internet/phone banking.

      Reply
  19. Hi Jay,

    You have a very nice little spot here. Tons of information that are helpful. I will be dropping by more often.

    Regarding the a “house is not an asset” thing, I think the problem is that not that your wife didn’t understand you. The problem is the deliberate attempt by Kiyosaki to confuse the terms through ambiguity. If you think harder, you’d find out that your wife’s CPA-lawyer education is correct in accounting principles terms – a house is indeed an asset, while Kiyosaki’s use of the words “asset” and “liability” is not in accounting terms and is correct as well. There are no mutually exclusive meaning. IMO, there’s no reason to be ambiguous because the goal, i.e., financial literacy is a good goal. If you are going to bring your financial literacy quest to a higher goal that will eventually include bookkeeping, it will be you who will have a problem if you insist on Kiyosakiesque thinking.

    IMO, you cannot substitute knowledge you gained from motivational books to real financial literacy knowledge. They must complement each other rather than one repudiating the other.

    Keep the nice write-ups coming. Cheers!

    Tony

    Reply
    • Hi Dinah, thanks! More to come with part 2 of this post, I hope to share as much tips, info, and tools I am using. To our financial freedom!

      Reply
    • Hi Jon, thanks! I still can’t thank you enough for mentoring us way back in 2007! Just to give a background for everyone, Jon is the Doctor Jon Abaquin a.k.a. “Doctor Rent” who was also featured in Larry Gamboa’s book “Think Rich Pinoy!”.

      Reply
  20. Nice post Jay! I would also love to have my very first real estate deal when time comes. Salute to your blog for an increasing alexa rank. 🙂

    Reply
    • Thanks Tyrone, with your connections with some SPV’s, I’m sure that will be soon. Wow, thanks for the heads-up, seems my alexa ranking is about to breach the 300k mark, thanks!

      Reply

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