Probably one of the luckiest, stupid things I’ve ever done was to buy a house at 21 years old. I had no idea what I was doing nor do I remember the details of the terms. I was already married (NOT to Mr. Bona Fide Money) and heard that a friend of my husband’s who was our same age just bought a house. I was like, “I wanna buy a house too!” and my husband said “Well I want this new guitar I just saw at the music store.” So we bought a house and a guitar. To me, it just sounded like a fun, grown up thing to do. I had zero understanding of how mortgages worked, appreciation, equity, maintenance costs…But I did it. I got into the Portland real estate market in 1999 for a home price of $132,000. Fast forward a couple years to 2005- lost the husband, kept the house, gained a daughter, and Mr Bona Fide Money, and was able to sell it for $237,000. $105,000 of equity in 6 years!!! It was probably right around then I started paying attention to the potential value of real estate.
We were able to use that equity to get into a wonderful little ranch house in a fantastic neighborhood for $250,000. Fast forward to 2012, We sold that wonderful little ranch for…. $250,000. That’s ZERO equity in 7 years. Huh. No matter. We had a 15 year mortgage at 2.something percent on the ranch so we still had plenty of equity from my first house to keep our next mortgage low. The home we purchased next was $320,000 but was twice the size and on a lovely cul-de-sac. It was a pretty moderate jump in price for much more house. And that’s where we are now.
Now, does everyone remember 2006? (one year after I made fantastic profit on my first house) How fast property values were going up and how very easy it was to get money to buy houses? Well, we were also drunk at that party and bought 5 rental properties around the same time. Some with partners (family and friends!!), some on our own…all with minimal down payments (80/20’s!!!). Now, does everyone remember 2007-2009? Yeah. That party came to an end and the hangover was awful. We were stuck in a bunch of houses that we owed the same or less than what they were worth and we shared this burden with family members and friends that had very different financial resources and very different risk thresholds.
Luckily, they were all easily rented so that they almost covered the expenses required to hold them so that’s what we did. Just held on. For years. Eventually, the market went back up and we were able to sell all the houses we shared with partners for profit and one that we owned on our own so that we could consolidate our rental real estate portfolio into two single family homes with smallish mortgages that we share with no one but the bank.
It was not the most linear path to real estate wealth but we prefer to consider the money we spent holding those properties in the years after the crash as tuition to the university of real estate investing.
Now to put all that hard won knowledge to good use…