In 2003 I bought my first property, a two-family house in the Centerville area of Lowell, for $213,000. Within six months I put about $75,000 into the property and another $50,000 over the next few years (not to mention endless amounts of my own sweat and time).
This week I accepted an offer to sell the property for $180,000. It just doesn't seem right, but I know it's the best thing to do. All three of my rental properties are listed on the market right now for much less than I owe and yet this is the first offer I have received in over 8 months. There are more than 300 houses for sale in Lowell right now. There are houses on the market for $175,000 that only two years ago would have sold for over $300,000! Just one year after purchasing my own first property, it was reappraised for double what I paid for it.
It will be quite some time before I know whether or not the bank will approve the short sale and even if they do approve it, they will almost definitely leave me with the balance: $170,000. My other two properties are in the same situation and I'm not alone.
I have read dozens and dozens of articles in the newspaper about other homeowners who took adjustable rate mortgages so they could have lower monthly payments. They never intended on keeping the mortgage past the two year fixed term but instead planned to refinance the property after its value increased. When the values made a dramatic run in the other direction, owners were stuck with owing more than the value of the house. This meant they couldn't sell and they couldn't refinance.
I wish I had the cash to buy properties right now because within 5 years all these houses will probably be selling for upwards of $400,000. Real estate value always increases over time. Thats the thing about real estate: it's real. But with all investment comes real risk. Regardless of what happens to me financially over the next year, you can be sure I will be taking the lessons I've learned and applying them in the future.
Ever think about buying property out of state for less and renting it out, plus knowing someone that is trustworthy in that town helps.
I have thought about doing that, but in my past experience with managing my own properties, I feel very reluctant to place that kind of responsibility with anyone. If I found the right property and the right person, I might consider doing it.
Property management/maintenance can quickly become a full-time job and unless the person is doing it full-time it can be difficult for them to do it well.
Oh just say it………..
You think I might “blow up the house”. LOL
LOL, that’s not what I said! 😀
Raam, Read your blog on your foundation project, and the above about it’s sale. After all you put into it, that’s very sad to hear. I’m digging out my 5.5′ cellar now to add a bedroom (15X12) and a Bathroom/stairs area. Your blog has given me a lot of insight and I really appreciate the 3 page section from the engineer you hired. If I blog it or put it on a website I’ll post it on your blog. Even now in 09 yours is still the most complete info I’ve found. Thx.
Thanks, Digger. It was definitely hard letting all that hard work go to a short sale, but it was an immensely fun project while I worked on it. It’s great to hear from people who have found my post helpful and I wish you the best of luck! 🙂
I’m considering doing this with my 100 year old house though mostly just to replace the thin crust of a floor with a proper 4″ thick concrete floor. My arms hurt just thinking about it.
Last year I trenched around the exterior of the foundation by hand and insulated with foam sheets. That was a back breaker. Can’t wait to ruin the rest of my body working on the inside!
I remember noticing the size of my arms had almost doubled in size by the end of that summer after digging out the basement. Definitely a good workout! 🙂
Wondering how things are 5 years later? I also suffered a loss back in 2009 and sold my home (breaking even with the bank but losing my invested money). Now we are thinking of buying again…very scared though.Thoughts?
Hi Maddie,
I’m actually really glad I got out when I did. I ended up filing for bankruptcy in 2009 and essentially starting over from scratch. But it was a blessing in disguise as that’s exactly what I needed in my life. I sold all my stuff and started traveling the world with only was on my back.
But last year I had a baby girl and now my wife and I have considered buying a place near family (we’ll be traveling 6 months every year and staying near family the other 6 months and we don’t like the idea of paying rent to help a landlord pay for his investment). But it’s scary. In many ways, we love the freedom that comes with paying rent, not to mention the lack of risk. I don’t feel burned in any way, but I do feel a lot more cautious. The only reason we’re even considering buying is because we know we’ll be near family for 6 months each year, for at least the next 10-15 years while our daughter grows up.
We still haven’t decided and as of right now the plan is to continue renting, at least until we can save up enough money to put down at least half the purchase price, so that we have lots of equity in the property right from the start (when I was investing in property 10 years ago, I was mortgaging 90% of the equity… crazy now that I think about it).
I hope these thoughts help and good luck!
(Sorry for the delayed reply; I’m just catching up to comments now!)
Raam, excellent piece on your basement project, I’ve tackled the same type of project a few years back for my sister and brother in law. Wish I had had the foresight to take photo’s as I worked. Morale of the story Do’ers get it done, dreamers don’t. Keep Doing dude!
Thanks, James! When you’re willing to give it a shot even when you haven’t got an instruction manual, you can do pretty much anything. 🙂
Loved the basement project! I’m planning on doing my own only half the basement that will be @ 400 sq ft! And putting in a bathroom and kitchen almost the same plan you had! Your project details have given me so much encouragement and I think I will talk to an engineer first!
I wondered if you had considered building a tiny house “no rent” lots of stories on the tiny house news letter if you google it!
I wish you all the best! And thank you!
Hi Christine, thanks for the comment. When I was working on the basement project, 10+ years ago, Tiny Houses weren’t even a thing! I have since heard a lot about them and I’d love to build one someday.
I hope that time has treated you well as you deserve it. As someone who took on this same project in Chicago’s hard clay soil I know what a back breaker it can be. I was 40 at the time and my body has never been the same. It broke my heart to read that you lost the property after all that. You are a stud. I wish that I had taken pictures along the way. Had over 4 trucks of dirt in my backyard before I was finished.
Hey Rich,
Apologies for the really late reply here. Time has treated me well and I look back occasionally on the projects I undertook for my first few properties and I’m grateful for the experience (and cringe at the amateur mistakes I made—but that’s part of life). I hope you’re well.
I somehow stumbled on your site- loved reading about your basement. I am a daughter of a builder that lost his business during the Great Recession. My dad moved in with us and started chiseling the dirt below our 100 year old house and carrying buckets of dirt out like you. Years and other projects later, we came back to the basement last year. It’s almost done and will be really cool.
Glad that in the end things worked out well for you. Sometimes it doesn’t seem like it will, but the sun eventually comes back out.
Hi Julie,
You’re so right about the sun coming back out. When I received your comment, I was, coincidentally, in the middle of working on renovating the basement of the house I bought a few years ago and I’m benefiting from so much of what I learned renovating the basement of my first home. I’ve also taken so many of the financial lessons that I learned in 2003-2009 and doing better now.
We’ve got to keep evolving, keep learning, and keep moving forward. No matter how dark the moment might feel, the sun will, as you said, eventually come back out.
Thanks for stopping by and commenting!