In 1995, my wife Laura and I bought 40 acres of land for $800 an acre ($37,000 total, with closing costs). Using some of our savings and part of a bonus, we were able to make the down payment on the land. After four years of owning the land, we sold it for almost double what we had originally paid, and we used a 1031 exchange to defer taxes.
Around the same time, my income had increased a bit, and I started looking for another piece of land to buy. I eventually found 5 acres of land on sale for $40,000, which was a lot at the time. The property was beautiful and had a ton of curb appeal, so we bought it. After 12 months of holding the land, we sold it for $64,000, which we chose to pay a capital gains tax on.
With the equity from the first piece of property, we made a down payment on the property we currently live on. With the equity from the second piece of property, we performed repairs on the house that was already on the property. That house then became our first rental property, generating about $230 a month in free cash flow. The monthly rental income helped us with the property’s payment, and the house is still one of our rental properties today!
I think it’s important to mention that sometimes when we’re trying to figure out how we can afford an opportunity, the solution is already baked in there. To make the payments on our property, for example, we used the rental income from the property’s existing house. While this seems like a simple solution in hindsight, it took some creative effort and risk in the moment.
As I worked in the construction market during the following years, I had a firsthand perspective of appreciation values and market fluctuations, and I continued investing in real estate. Anytime we had extra money, we would use it to buy more rental properties.