Real Estate Marketing & Beyond
Ask Brian is a weekly column by Real Estate Expert Brian Kline. If you have questions on real estate investing, DIY, home buying/selling, or other housing inquiries please email your questions to [email protected].
Special note from Brian: I receive a note from Amy and Caleb offering to write most of this column. They share a great story that I hope you enjoy reading and learning from.
Hi Brian,
I’m Amy and my husband is Caleb. We’re pretty much a middle income and run of the mill couple near Columbus, Ohio that decided to become real estate investment partners about seven years ago, even before we were married. Actually, we didn’t decide to become investors at that time, we only decided to buy our first house together. We did get married and still own the house. We turned it into a rental about four years ago when we bought the house we live in now. Both of us were very young when we bought the first house. I was 21 and Caleb was 23. Now, we are in our early 30s and wiser about real estate investing. We don’t know if you’ll agree but we thought you could share our first-time homebuyer story that became our investor story?
Buying that first house was nerving racking both because neither of us had done it before and we were putting almost every nickel and dime that we had into closing the deal. Our experience was no different from what other first time buyers go through. We saved our pennies until they became nickels, quarters, and dollars that eventually added up to about $5,900. That was about 6% of the $97,500 purchase price. We had to get approved for a mortgage, lock in the interest rate, and show that we had the down payment… typical process. We relied on advice from our parents because they own homes. But they had been in their homes for 15 years or more. The process had changed a little and their memory wasn’t completely accurate but it was comforting to be able to discuss what was going on with trusted family members. We also took advice from our real estate agent and other professionals that we worked with. Wanting to learn as much as we could, we read several guides about buying a first house. We got a lot of education in a short time.
Here’s our story. We took our time looking at houses. We looked at more than 20 and our agent showed us neighborhoods that we didn’t know anything about. We wanted as much house as we could get with our limited budget but the ones that interested us needed lots of repairs. I was reluctant to spend all of our money on a broken house but Caleb insisted we consider them because he had helped his father maintain and remodel his childhood home. What eventually convinced me to go along with a rehab came from what I learned by reading about real estate. Specifically, we could quickly build equity by making repairs and improvements to a neglected house. We talked about it for at least two weeks before deciding to take the plunge.
That’s when we shifted our priority to looking for a fixer. Within a couple more weeks, we found a small house (1,000 square feet) that nicely fit within our budget. It needed plenty of work but Caleb was sure he could tackle it with my help. The existing features of the property had big selling points for us. Every room had large windows that brought in plenty of sunlight and both the kitchen and family room had hardwood floors (under the old carpet in the family room). Although the house was small, it had a large fenced backyard that we thought had lots of opportunities.
Then we got deep into the negotiation and inspection process. The market was still soft at the time, the seller was ready to sell, and our agent did a great job helping us navigate making several offers and evaluating counteroffers. It took about three weeks before we had a signed purchase contract. Then came the inspection, title report, and appraisal. There were no issues with the title report and the appraisal came in a couple thousand above the sale price. As you’d expect, quite a few issues came up from the home inspection report. Most of the issues we already knew about from the owner’s disclosure and our own observation (worn out carpet, paint, damaged kitchen counters, old appliances, etc.) but the inspector found a few that we didn’t catch (a wall-mounted heating unit in the bathroom didn’t work, damaged electrical wiring in the garage rafters, and a few other more minor items). We tried to negotiate some more with the seller to make repairs but in the end, all we got him to agree to was hauling away some debris in the backyard. We were happy because we got a good price and had already planned to make upgrades.
The day we got the keys, we took another walk through our first house. We were excited and the house was completely empty of furniture but full of our imagination. But, I can’t forget how bad the bathroom looked now that it was empty. It hadn’t seen a coat of paint or fresh caulking in many years. In our excitement, we decided to gut the bathroom by taking out the sink vanity and tub liners right down to the wall. We were really homeowners and we wanted to make it our own.
Once again, we scraped our pennies together and did a lot of work over the next couple of years. We repainted every square inch, had the carpets replaced, and change all of the light fixtures. Caleb lived up to his promise by remodeling the entire bathroom, replacing the old dark wood trim (including a new mantle over the fireplace), and replacing the kitchen counters (added a backsplash too). Money was tight but we took out a small loan to buy a new refrigerator and stove. Fortunately, we didn’t need to do anything as challenging as replacing the furnace or roof. Our home was still small but not it looked and felt like our own.
We stayed in our home until our baby boy was born. After finishing all of the hard work, we lived there for about two years. By then, both of us had grown in our careers. We were easily covering the mortgage and the equity added substantially to our net worth. Even with a newborn son, we could easily afford a bigger and better home. At first, we were going to sell and use the equity to buy the nicest new home that we could afford. But after talking, we became kind of nostalgic about our first home and all the work we had put into it. We also liked having all of that equity in the bank. After some more discussion, we decided to turn that house into a rental and buy up to something a little less extravagant. Today, we live in a nicer home, became landlords, own the equity in both, and have added a little to our monthly income. We’re proud of going from scarred young adults buying a first home that we then turned it into a rental in seven short years. We haven’t done it yet but we will be adding more rentals to our small investment portfolio!
Please share any comments that you have. Including your personal story.
Our weekly Ask Brian column welcomes questions from readers of all experience levels with residential real estate. Please email your questions or inquiries to [email protected].
