Adventures in Real Estate

I have gotten a few requests to discuss my real estate investing.  It is a very robust topic and not one that I can capture in a single blog post but today I will talk about my first real estate purchase.  If this is well received, I can discuss other purchases or stories from my experiences with this subject in the future.

I have always had a fascination with Real Estate.  It probably took hold with my first home purchase.  I was living in New York and the real estate market was going through one of the occasional irrational periods.  My fiancé and I started searching for our newlywed home.  I was working in New York City and living on Long Island.  For those not from the area, this meant a LONG day.  I would leave my house around 5am, commute for two hours to work, work a full day, then commute back home.  I would arrive home by around 8pm, eat a quick dinner and then basically go to bed and be ready to do it all again.  With this schedule, it was not easy to fit a house search into my weekdays.  

My fiancé had a more traditional schedule at the time.  She was working and going to school, but both were located in close proximity to where she lived so her days fit closer into the normal schedule.  So, the system we devised was that she would go see many houses and determine those that were worth seeing.  We would then schedule showings on the weekends and her and I would go to those together.  We would usually end our day at a diner or restaurant and discuss the various properties that we saw.  I call this a system because it was something that lasted almost a full year.  We probably looked at over 100 houses.  The typical house sale at that time consisted on a one-day listing followed by multiple offers, all above the asking price.  Sellers got lazy and would not even prep their houses for sale, they would just put a sign out and see what happened.  There was one day that we pulled up in front of our 8th or 10th house in a single day, took one look and both said at the same time “move on.”  We were getting discouraged and considered giving up.  We talked about all our options including living with one of our parents, renting an apartment, etc.

My soon to be father-in-law was a police detective and this caused him to be out and about quite a bit.  He came across a house that was for sale by owner.  He brought my fiancé to see it and later that night, the two of them told me about it.  There was plenty wrong with this house.  Mostly it was that it had a very awkward layout and the current owners had a very eclectic (read STRANGE) style and made some interesting décor decisions.  My partner did not think it was a good option and did not want to even bring me to see it.  Since we had been looking for so long and had looked at so many houses, I said “what the heck?  What is one more house to look at?”  

We went to see the house and while she saw all the flaws, somehow all I could see were the possibilities.  I walked the awkward floor plan with my soon to be father in law and started saying things like “we could knock down this wall and open things up” or “we can take these trees down for more curb appeal.”  Anyone who knows me might laugh at this since I am NOT usually a glass is half full type.  Also, casually throwing out somewhat major construction ideas is also comical since I could not pick a hammer out of a lineup.  But once the three of us put our heads together about what the house COULD be, we decided to move forward.  

Being for sale by the owner was considered a positive but I found this not to be the case.  As I alluded to above, the sellers sort of marched to the beat of their own drummer so having an advisor on their side might have made for a quicker and smoother transaction but I had a realtor to work with that was a seasoned veteran and a family friend, so we were coached through the process very well.  It came down to price at that point.  Having made many offers over the past year, only to lose out to higher ones, you would think that I would throw caution to the wind and make sure I got this house at all costs.  This is not the case.  Although I had no experience negotiating on houses (or anything else at that time), I had a number in my mind that I was not going to cross.  Once we laid all cards on the table, us and the sellers were $3,000 apart and neither of us would budge.  After some time of playing chicken with one another, I had a personal conversation with the seller, and he asked me the most important question in this transaction.  He asked, “if this is the house you really want, are you willing to lose it over $3,000?”  I quickly realized that I was simply trying to “win” the negotiation and that $3,000 over a 30-year mortgage was really not going to make much of a difference at all.  I agreed to the price and we became homeowners.

We put in quite a bit of work that make that house our home.  This included some of those fairly significant construction projects I mentioned.  We depleted just about all our savings and called in every favor in the book but at the end of it all, we had replaced the roof, all windows, paved the driveway, updated landscaping and updated the electric.  The house was perfect for us.  We lived there for almost three years before my job took us out of that area and we had to sell the house.  The housing boom had continued through those three years and we wound up selling that house for a 63% premium over the purchase price.  

The profit was great, but I think the part that solidified my love of real estate was the fact that we were able to take an ugly duckling of a house and turn it into a beautiful home that a newly married couple was able to enjoy.   At that point I was hooked and knew that not only would my next home search going to incorporate the lessons I learned during this process but that I would also use these experiences to learn as much as I could about real estate as an investment vehicle.

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