How We Saved $100K to Buy a House in El Salvador
Welcome to Part 2 of the 2-part mini-series on moving to El Salvador.
In Episode #2, I shared the big news that we’ve officially closed on a house in El Salvador and I’m excited to walk through more details on how exactly we did it.
I’ll be sharing more about the home itself, the specifics around how we got the money to pay it off in full, and a roadmap for how you can save up a similar amount of money.
WELCOME TO CASITA TOLAR
The property we bought is 3 miles from one of the main tourist beaches, called El Tunco. It’s up the mountain headed toward a little town called Tamanique, so if you stand in the right spot on our land you can see the ocean.
The house is a 2-story 3 bedroom/3 bath with a kitchen/living room combo, and an outdoor hangout area with a couple of outdoor showers, an outdoor bathroom, and a little storage closet. I never saw in the listing or in any of the documents an actual measurement of the living space, but if I had to guess, I’d say it’s probably 1,200-1,300 square feet.
The house itself is great, but what really sold us is the proximity to the ocean and all the spots we like to hang out, plus the fact that it came with nearly 2 acres that back up to a river.
Let's dive into how we came up with the cash to pay off the house in full (for context, the price we paid for the home and the land came to $105K; if you’ve ever bought a house in the US or researched housing or land prices, you’ll see how much less expensive it is in El Salvador).
HOW WE CAME UP WITH THE MONEY - THE SHORT STORY
If you want the short version of how we did it, it’s this: We sold a house, profited $223K, and used that money to buy the house in El Salvador.
But I hope you stick around for the long version because that’s where the lessons are. Let me start with a reminder: this is not something that happened overnight. Coming up with this money took time, patience, planning, strategic timing, and - you know what I’m about to say - investing in assets.
Saving this amount of money would have taken us years longer than it did for us to invest in assets, sell those assets, and collect the profits. Let’s break it down: If you follow me, you may know I’ve been using the same budget tool since I graduated college, which means I’ve been using it for over a decade.
It’s the first bookmark on my bookmark bar, so it’s always top of mind and it consistently ranks #1 on my most recently accessed documents. What I’m trying to say is that I use this budget calculator A LOT, and you’ll hear me talk about this particular tool many times because it really is that powerful.
THE TOOL THAT MADE ALL THE DIFFERENCE
Starting in 2012, I used my budget calculator to keep a close watch on the amount of money I was spending versus bringing in. The #1 thing this tool helps me with is always making sure that the amount of money I’m bringing in is higher than the amount of money I’m spending.
So that’s what I did starting in 2012. I found a job with a salary that I felt was on par with what other people my age with my qualifications were making, and I made sure to keep my expenses below that.
That’s the first thing this tool is great for - making sure you’re not overspending and that your cash flow stays positive. The next best thing this tool has done for me is show me how much money I could save or, better yet, invest.
Again, this tool shows you how much you’re bringing in, and how much you’re spending, and then it automatically calculates the difference between those numbers, which is the amount you can afford to save or invest each month.
Month after month, I watched my expenses, kept them as low as I could, and put the rest of my money toward my 401(k) because that’s what I thought you were supposed to do. I threw EVERYTHING I could into my 401(k) until I had an unexpected car accident that nearly sent my bank account to 0.
In case you’re not aware, any money you put into your 401(k) is essentially inaccessible until you’re nearly 60 years old. And I say essentially inaccessible because you CAN access it if you absolutely must, but you’re going to pay a hefty penalty fine so you really don’t want to touch your 401(k) until you’re about 60 unless it’s a critical emergency, which my car incident was not.
But the car thing was a good learning for me because it taught me the importance of an emergency fund, and it opened my mind up to investments beyond the 401(k) which, again, I couldn’t even access for another 40 years.
That’s when I decided I would prioritize building my emergency fund, and then I’d look into other investment opportunities outside of the 401(k). The generally accepted definition of an emergency fund is 3-6 months of living expenses - but it can be whatever you want.
EMERGENCY FUND 101
Basically, you need to decide if you suddenly lost all forms of income unexpectedly, how long do you think it would take you to find another job or source of income? At the time, I was more conservative coming out of my car accident scare, so I decided to save up 6 months of my living expenses.
So you know what I did? I consulted my favorite tool - the budget calculator.
I looked at it to get a quick view of what it cost me to survive for a month, and I multiplied that number by 6, and that was my emergency fund goal. To make sure I stuck to it, I set up a monthly auto draft from my checking account to my savings account.
I didn’t stop investing in my 401(k) completely because my company offered a 4% match, which just means if I put up to 4% of my monthly paycheck into my 401(k), my company would deposit the same amount into my 401(k).
Some companies do this as an incentive for you to invest in your retirement fund, and if you’re not sure if your company does this, I suggest you ask, or if you know your company DOES do this and you’re not taking advantage of it - you’re literally leaving money on the table.
Thanks to my budget calculator, I knew that I could afford to save or invest 14% of my monthly paycheck and, prior to my car incident, I’d been putting the full 14% into my 401(k). However, once I decided to prioritize my emergency fund, I reduced my 401(k) contribution to 4% so I could take full advantage of my company match, and for the remaining 10%, I set up a monthly auto-draft from my Checking Account to my Savings Account.
I’ve since learned there are better places to keep your Emergency Fund, but I’ll cover that more in-depth in another episode because today is about telling the story of the events that led up to the El Salvador house and, the truth is, when I first built my emergency fund, I just kept it in my bank savings account - and there’s nothing wrong with that if that’s where you’d like to start.
Because I knew my Emergency Fund goal and how much I could afford to auto-draft to my savings each month, it was pretty simple to calculate how long it would take me to reach my goal, which then told me how long I had to figure out what I wanted to invest in AFTER my Emergency Fund was complete - because, once the emergency fund was complete, I needed somewhere else for that monthly auto-deposit to go.
SAY HELLO TO YOUR FINANCIAL SUPERPOWER
Around that time, two important things happened: one was that my company offered a free financial class for its employees, and the other was that one of the executives I admired announced she was retiring early. So I enrolled in the free financial class (and still have the workbook from the class to this day), and I set up a meeting with the executive who was retiring early to ask her how she did it.
From these two experiences, one lesson bubbled up to the top - and that's the power of investing (your financial superpower).
From there, I started reading books about investing and became interested in buying a house rather than renting an apartment because I finally understood that paying rent was essentially handing over money I’d never see again, whereas paying a mortgage was putting money into something that I could eventually make more money on later.
Unfortunately, I’d just finished funding my emergency fund, and I didn’t have a lot of money laying around to put toward a down payment on a house. So I decided to start investing in the stock market. However, I was working full-time and had an active social life, so I didn’t have a ton of time to research my own stocks.
I started thinking about this and realized that I wasn’t picking my own stocks to invest in for my 401(k) – my employer had a deal worked out with a company called Financial Engines who would invest our money into our 401(k) on our behalf for a small fee of $5 per paycheck.
So I thought: I wonder if there are companies who do the same thing for other investments, outside of 401(k)s? And there are.
After researching a few of them, I decided to invest my money through a company called Ellevest. I set up an account, told them how much money I made, how much I could afford to auto-deposit with them each month, and set up some different goals: one of which was to buy a house. And, through my monthly auto-deposits to Ellevest, I started saving for my first down payment on a house.
OUR HOUSE-HUNTING STRATEGY
In 2014 I decided to switch employers and I was very intentional about negotiating a raise, ultimately securing a 17% increase in salary… but the key is: I basically pretended I didn’t get a raise at all. Instead, I increased the amount of money I was auto-depositing into Ellevest each month as much as possible based on my new salary while keeping my living expenses the same.
Doing this accelerated the amount of money I was making in my investments, and I saw my down payment fund grow much more quickly. And that’s when the fun part began - I started house hunting!
I want to mention that, in addition to investing, I think switching employers every few years and negotiating a salary increase is one of the most important things you can do. I share more at the end of the episode on how to decide when it’s time to switch employers and how to negotiate a raise.
Cory and I were not married or engaged at the time I started looking at houses, so I decided to buy the house on my own. To start, I went online and found a calculator where I entered my salary and toggled the dials until the monthly mortgage payment matched around what I was paying in rent for my apartment and, based on that, it told me the house values I should look for, as well as an estimated down payment which helped solidify the goal I was working toward in my Ellevest investment account.
Armed with my house price range, I started looking at homes in my desired area of South Austin. This was in 2015, so the housing market in Austin wasn’t nearly as insane as it is now, however, the prices I was seeing suggested that an Austin address was still highly valued.
For example, I toured a house in South Austin and then toured the exact same house 3 miles south in Buda, which is the next little town bordering up to the south end of Austin, but the house with the Austin address was $100K more expensive than the same house with the Buda address. So I bought the house 3 miles south in Buda.
At the time, I couldn’t keep up with the resale market - even then, houses were selling within a few days of being on the market, so I ended up buying a new-build in a neighborhood called Sunfield. The house price was $217K for a 1,500 square foot single story on a small lot.
It was July 2015 when I signed the documents and I used my Ellevest investment account to pay the down payment and all closing costs.
The house was built, we moved in right after Cory’s birthday in December 2015, and we lived there until July 2019. I chose a fixed-rate mortgage to make sure the monthly payment didn’t vary, so for the 3½ years we were there our monthly payment was around $1,700, give or take a bit for escrow.
During that time, just like always, I consulted my budget calculator every month to make sure our living expenses stayed well below our income, and we put everything that was left over into Ellevest.
BECOMING SHORT-TERM RENTAL HOSTS
In 2017, Cory started dabbling in cryptocurrency, which was kept separate from our investments in Ellevest, and we set a specific budget for him to use because we did not count on crypto as our sole investment. And in 2018, Cory quit his 9-to-5 to start his own supplement business, and we used some of the money from Ellevest to put toward buying an initial round of inventory, which he then sold for a profit.
In 2019, I decided to change employers again and, for the second time, I was very intentional about negotiating a raise, this time securing a 33% salary increase. This is almost double what I negotiated the first time I asked for what I needed, which means as you start doing this and getting comfortable doing it, you’ll get better each time you make the ask.
Also in 2019, my parents decided to retire and downsize, which meant putting my childhood home on the market. This felt very emotional for me, so Cory and I started talking about the possibility of buying the house from them, and whether we should sell our current home in Buda.
We'd been watching the value of our home in Buda and, by 2019, it had only increased in value by about $15-30K. But Austin was starting to grow even more rapidly so Cory felt the Buda House was worth holding onto because, eventually, he thought we’d make a better profit on it. I'm glad we followed his instinct.
By then we were married, so we prepared to go in on the purchase of my parents' house together, but when applying for the loan, we learned that because Cory hadn’t yet been in business for 2 years, they wouldn’t consider his income. This really stunk because he worked hard that first year and even turned a profit, although it takes most businesses 2 years to become profitable.
But one of the perks of this deal was that we were buying from family, so things on that side of the arrangement were a bit more flexible. What ended up happening is I went in on the loan with only my salary and the highest loan I could be approved for was $400K, so that’s the price my parents sold us the house at even though it was slightly below the appraised value.
But luckily that price point allowed my parents to pay off their new home and have a bit left over, and allowed me to be approved for the loan at my new salary level.
So we used money that had been growing in our Ellevest account to pay $20K to cover the down payment and closing costs and got busy moving in and deciding what we were going to do to generate enough money to cover the cost of two mortgages.
A couple of our friends had been using their home as an AirBnB in a town nearby and it seemed like they were making decent money, so we decided to give it a shot, and by August 2019, we had our first guests. We typically charged about $80/night, but we’d increase the price for big events like Austin City Limits or South by Southwest, which are both music festivals here in Austin.
Based on occupancy and price point, we did not have enough money to hire a company to run our AirBnB for us or to clean it, so Cory and I managed communication with the guests, house upkeep, and - or least favorite thing - cleaning.
Every time a guest checked out, we’d go over, wash 4 beds’ worth of sheets, clean you-don't-even-wanna-know-what out of all the bathrooms, sweep, vacuum, remake the beds, and make sure the trash was out. And I’m glad we had the experience because we learned a lot, but it was exhausting and stressful and, in the end, we lost money.
We came very close to breaking even and our AirBnB efforts covered the mortgage, but once you added in all the bills, the HOA fees, the insurance, and our time and effort - we were still in the red.
Plus, the unexpected nature of AirBnB is tough. I remember waking up the morning of a holiday to a last-minute booking and having to rush over to clean before they arrived. We also did it once before the funeral of a dear friend. It’s just not how you want to spend your time.
BECOMING LANDLORDS
So we were very grateful in February 2020 when we signed on our first long-term tenants, who moved in March 15, 2020 - literally days before the pandemic lockdown started. We got incredibly lucky with this because AirBnB bookings came screeching to a halt.
We had long-term tenants from March 2020 - March 2022 and, for the most part, it went smoothly; it was definitely much easier than running an AirBnB. Plus the income was consistent, and we rarely had to go to the house at all.
I left my corporate tech job in July 2021 to pursue this passion project full-time. It was a calculated risk, but one I was willing to take, and I’m so glad I did. Financially, I felt good about taking the leap of leaving my paycheck mainly because of our investments.
We had 2 houses that were appreciating and one of our mortgages was being covered by our tenants. We had investments in Ellevest that had grown nicely over the years and were continuing to grow. Our cryptocurrency investments were also growing, although with more volatility than our stocks. And Cory’s supplement business was also bringing in money.
And on top of that, we still had an emergency fund that meant if all our sources of income unexpectedly came to a halt, we’d be OK for 6 full months.
So I started spending my time helping organize some things on the backend of the supplement business, we made some updates to our rental house, and we did a bunch of traveling to El Salvador.
This brings us to Spring 2022.
SELLING OUR FIRST PROPERTY
After an unexpected flood in our rental home in Fall 2021 that took a lot of time to fix and caused a lot of stress, we started playing with the idea of selling the Buda House and looking for other investments.
And that’s when we learned about a tax rule that’s informally called the ‘2-of-the-last-5-years’ rule, which states that if you lived in a house as your primary residence for 2 of the last 5 years, you can sell that home and collect the profits without paying the hefty capital gains tax.
We looked at the calendar and realized we’d only qualify for that if we sold the house by August. So we decided to pull the trigger. Our tenants’ lease was up in March 2022, which felt like perfect timing for us to make any other updates needed, and get the house on the market by summer.
So we worked like dogs on that house every single day for a full month and got it listed and sold by April. And I am SO glad we held onto it because, in that time, the house appreciated well beyond that $15-30K range we were seeing back in 2019 when we’d first considered selling it…
So that little house that we originally bought for $217K was sold for $440K, leaving us with a profit of $223K, minus realtor fees and other closing costs. Again, I'm so glad we listened to Cory's gut instinct when it came to holding onto this house.
This means in 6 years we profited $223K and, financially speaking, all we had to do was cover the initial $10K fee upfront, the $1,700 monthly mortgage payment for the ~3 years we lived in the home as our primary residence. Otherwise, our tenants were paying our mortgage for us, which freed up the money that we had previously been using to pay the mortgage, meaning we could invest that money in other things while we continued gaining equity in the home, and the home continued to increase in value.
MY FAVORITE ASSET CLASS
While the stock market is the easiest asset to start investing in and that’s what I used to help save for a down payment, in my experience, real estate has been my favorite asset class and where we’ve seen the largest growth. It’s also fun because you have so many options of what to do with real estate and how to make money on it and you PHYSICALLY have the asset; it’s something you can see and touch and feel, which isn’t the case with some of the other assets like stocks.
Speaking of real estate - many people have been asking us if we’re going to sell the house we’re currently living in in Austin, and the answer is no! Similar to what we did with our first house, we’re going to leverage this asset to produce cash flow. We’ve been busy cleaning it out and re-decorating it as we prepare to put it on AirBnB… but this time, we’ll have a company managing it for us.
So, again, the idea here is that we’ll have other people paying our mortgage on our behalf and, in this case, we’re aiming to make more money than what our mortgage requires each month so we can have extra cash at the end of the month to use for our living expenses in El Salvador, and, of course, to put into other investments.
The key is intentionally putting money into things that can then produce more money.
HOW YOU CAN SAVE A BIG CHUNK OF CHANGE
So there you have it - the full story of how we bought our house in El Salvador. But here’s the lesson...
It took time to find my groove when it came to monthly saving and investing through a company I trusted. It took time for those investments to grow to a point where I could afford that initial down payment. And it took time to research homes in my budget, and how to turn the home I bought into an investment that gained cash flow beyond just building equity.
Like anything in life, it took some work.
If this makes you feel overwhelmed and discouraged, let me help you reframe your mind because the good news is you’re not alone... most of us start around the same place.
I know we all grew up in different life circumstances but what I mean is that, if you’re reading this, chances are your family isn’t ultra-wealthy and, at some point, either now or soon, you’ll be responsible for paying for your own life and needs.
Accomplishing that can typically be done by following the roadmap I laid out for you today.
To summarize:
Make sure you know how much money you’re making versus spending
If you’re making more than you’re spending, start investing the difference. If you’re spending more than you’re making, you’ll need to spend less or make more… and if you want to make more, ask for a raise or find another job with a higher pay rate
Once you start making more than you’re spending, calculate the difference between those numbers and set up an auto-draft for that amount to build up your emergency fund (3-6 months of your living expenses). Once that’s done, re-route your auto-draft to an investment account.
NEXT STEPS
Regardless of where you’re at in this journey, I have free resources that can help you master whatever step you’re currently on so you can move on to the next one.
If you’re confused about how much money you’re bringing in versus spending - take a look at my Repeatable Monthly Budget Calculator. It’s the one you’ve heard the most about during this episode. I also have a free printable PDF version that you can print each month and manually do your own math.
If you’re already making more than you’re spending, that’s fantastic because you are officially ready to set up an auto-draft to build up your emergency fund, and then your investments later. Subtract the amount you’re spending each month from the amount you’re making each month, and set up a monthly auto-transfer for that amount from your Checking to your Savings account until you’ve got 3-6 months worth of your living expenses saved, then switch your auto-deposit to go to an investment account.
If you’re spending more than you’re making you’ll need to do one of two things: You’ll either need to reduce your spending, or you’ll need to increase your income. Generally I tell people if the difference feels small, you can probably get by with cutting some expenses, but if the difference is larger, you’re likely going to need to make more money. Ideally, you’ll do both. Here's how:
Check out my Make More Money Starter Kit for specific instructions on the strategies I used to first secure a 17% salary increase, and then a 33% salary increase
Take a look at the Money Saving Cheat Sheet for 30 practical ideas on how to naturally incorporate saving into your life + 2 big ticket items for serious saving
LEARN MORE
Remember - the worst thing you can do is take no action at all. Just try taking one step today to move toward the place where you’re auto-investing each month.
And, honestly, I think the key is just getting organized… which the Repeatable Monthly Budget Calculator specifically can really help you do.
You can do this. It just takes small daily decisions and actions mixed with a large dose of patience and persistence… but it all adds up to ultimately become life-changing.
So don't wait. Take your first step today.
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