Baby's First Real Estate Deal
I broke into the Austin housing market in 2013.
Here's how, in feelings, then numbers.
2013: After renting in the recently gentrifying East Side for 4 years, I couldn't imagine living anywhere else. Investors and hipsters were flocking to the East Side. The landlord of our pre-fab college house hiked the rent each year, and although, looking back, we were paying close to nothing, my four roommates and I couldn't hack it.
Lucky to have a mom with the same blind confidence I have, she immediately supported my purchase plan and threw in enough money for me to put 3.5% down. I asked the bank for a loan, SURE that they would laugh. 'A single teacher? $43,000/year, HA! AND you have student loans?? Get out.'
Apparently, they like money, and they approved me up to $250,000. (s/o to my lender, Bill Holleman at Prime Lending!)
I put 10 offers on houses in my dream zip code (78702). Many of them were essentially tear downs, but my aforementioned blind confidence destroyed logic. I was sure I could make them livable, somehow. Luckily, I was beat out by cash offers every time. Alas, people in that crazy market didn't want take a chance on a buyer with only $8,000 to secure her bid (Today, 3.5% is accepted all the time!). At this point in my life, someone having $200,000 cash was beyond my wildest dreams.
I widened my search a little bit farther east. With a well-thought-out pitch, I asked extended family to lend me enough money to put 20% down and ended up offering $15,000 above asking on a little 2/1 in 78721, my second choice zip. With a whopping $36,000 down payment and a sweet letter to the owners from a poor teacher, my offer won. As a current realtor myself, I look back on my first purchase and think about how wild and reckless I was, compared to clients I work with now.
I resolved to pay back the down payment loan to family at a rapid pace. I got a roommate to pay me $550/month & I was a homeowner for $600/month included taxes and insurance. I started making $1000 monthly payments to my family so they knew I was serious.
In my recent years, I've learned that supplementing mortgage with a roommate is called house hacking. In 2013, buying a second house was not even a glimmer in my eye. I had already made it. I was a homeowner.
Specs: 78721, blue and yellow 2/1, recently "renovated", pre-inspected, fenced yard, big deck, 2 pomegranate trees, central air, gross carpet in one bedroom
Asking Price: $165,000
Offer Price: $180,000 (approved up to $250,000, so I was still being frugal)
Down Payment: 20% = $36,000
Closing Costs: $6,000
Principal, interest, taxes, insurance: $1150/month
Roommate paid: $550/month plus bills (s/o to my bestie, Nancy!)
I paid: $600/month plus bills
I still owe $130,000
The house could sell for around $280,000
I have $150,000 in equity [current value] - [what I owe] = [equity]
Right now, my full monthly payment is $1184 [principal & interest] + [taxes] + [insurance] = [monthly payment]
My tenants pay me $1590/month
Essentially, someone else is paying down my mortgage, plus a little extra --- it's amazing
A livable house listed for $165,000 in the "hot 78721" doesn't exist right now, but I entered the market at a time when houses were already being flipped and when Austin was not a secret. The person who sold me my house walked away with a sizable profit. But I am so happy I invested when I did. The best time to buy real estate is right now.