Baby's First Real Estate Deal

I broke into the Austin housing market in 2013.
Here's how, in feelings, then numbers.

Feelings

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. 

My realtor, Henry, and I on closing day.

My realtor, Henry, and I on closing day.

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.

My favorite neeeeiighbor and I. In this lot, now stands new construction (see "HOT ZIP 78721").

My favorite neeeeiighbor and I. In this lot, now stands new construction (see "HOT ZIP 78721").

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. 

Mansell Steps Small.JPG

Numbers

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

Current position
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.

Stephanie DouglassComment