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  • Writer's pictureSujata Shyam

How I started investing with No Savings

In 2010, I was an MBA graduate student with virtually no savings.  What I did have was the belief that I could do just about anything.

I loved going to lunchtime presentations hosted by my business school about inspiring people who were making things happen. 

I found myself at a talk by Jessica Jackley, the founder of Kiva.org (microlending nonprofit). Jackley was speaking to a room full of idealistic business school students who wanted to use their degree for entrepreneurship.

Today, Kiva is one of the most well-known microlending organizations in the world.  However, Jessica told a story of humble beginnings.  In fact, she was amazingly scrappy starting Kiva.org.

One tactic she used was funding her budding organization with her student loans.  When you are a student, you can get tuition loans.  And- you can also get “living loans,” to pay for your room and board.

Well, Jessica proudly told us about how she leveraged this source of financing to build the first Kiva website.  In fact, that was her one piece of advice to all of us, “Use your student loans to get your venture started!”

This was pretty mindblowing to those of us in the audience.  Our initial reaction was that it was “against the rules” to use student loans for starting a business.

However, it didn’t take me too long to adjust my mindset.

Jessica’s advice made sense to me. As a grad student, I wasn’t going to get any other type of loan easily.  What I did have was checkbook control over my living loans.  In fact, I had $30K available.

I left that presentation with a mission.

So I brainstormed all the entrepreneurial things I could do with $30K, ideally less.

Not knowing how it would turn out, I teamed up with my friend and we started tossing ideas around. We both liked real estate and we knew Pittsburgh was a place with many vacant houses. It also has several universities, hospitals, and a growing tech sector. In short, we understood that there was opportunity in the Pittsburgh real estate market.

We diligently studied strategies to find houses, and we got motivated to go back to Pittsburgh and find a property to buy.

We started with a tactic called “driving for dollars.” It’s pretty simple –  you drive around a neighborhood of interest and look for houses that have the potential for fixing up.

On a gray, snowy afternoon in the dead of winter, we drove nearly every street in the Lawrenceville neighborhood. I carefully noted the address of every house that looked like it was either trashed or had some room for improvement.  Once we had a list of properties we were interested in, we would have to track down the owner and make an offer.

As the drive continued, I started to get a dose of reality. All of these houses looked like they were in such poor condition that, we novices, would be getting in way over our heads. We stuck with the process though and pressed on through the slushy streets of Lawrenceville. Right as we were about to turn it in, we happened across a “For Sale By Owner” sign on a house that looked in reasonable condition.

We called the owner, and were astounded to find out that all he wanted for the property was $19,500. Even we knew that was a deal. So, we each put in $15,000 (which I proudly withdrew from my student loan account), and we purchased that house, which was a mere 2 miles from downtown Pittsburgh.

We spent money on materials, and a couple of subs. We also spent our summer putting “sweat equity” into the place. I was also going to school full time at night. Needless to say, it was a long summer of house renovating during the day and class and homework in the evenings and at night.

It was less than glamorous most of the time. There were many sweltering and dirty afternoons cleaning out this place.  Often I had the feeling of spinning my wheels. We were both new to home renovations and we screwed up plenty of times and wasted several days at a time. We bumbled through it, and we got it done!

We rented the house out for 6 years and eventually sold it for 5 times what we purchased it for, long after having paid ourselves back for the purchase price.

I still remember the day I paid back the last of my student loans. It was a couple of years before we sold the house. I had left my job and I was 9 months into a trip around the world. I was at a ranch in the middle of Patagonia, and using the money we had saved from our monthly cash flow, I paid off the last of my student loans from my iPhone 5, about 4 years after graduation.

And that is the story of how I started real estate investing with Zero Savings.

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