The story of my first (accidental) real estate deal

Add one more to the ever-growing list of accidental real estate investors! It begins with the story of one of the most bizarre chapters of my life...

Back in February of 2011 (3.5 years after getting married and renting in various locations), my wife and I took the big step into adulthood and purchased our first home. It was a 1960s home in the same neighborhood Heather grew up in (half mile away from her parents), full of charm and wonderful wood paneling (sarcasm). A 1400+ square foot 4-bedroom ranch with 2 bathrooms, a full unfinished basement (someday to be converted into the sweetest mancave of all time), and a nice sized backyard for us to get a dog and a couple of kids down the road. Perfect little place to start our family!

Life had something else in mind.

After several months of hard work to sand/prime/paint the whole place, re-finishing the kitchen cabinets, new appliances, furnace and hot water heater...even tearing out some nasty evergreens and planting a beautiful new garden, we had it just about where we wanted it!

At about exactly the same time, Heather's dad was diagnosed with cancer. :-(

Talk about a life altering event. Once the realization set in that he wouldn't be able to go up any stairs anymore, our lovely new home now became a shower house for Heather's quickly deteriorating father.

He passed away in August of 2012, and we were faced with a life situation we didn't think about in this whole process. Heather's mom was now all alone in a mortgage-free 2-story, 5-bedroom home with a full basement, and $9K annual property taxes. Needless to say, this was too much home for a soon-to-be-retired lunch lady without her formerly bread-winning husband.

Just for an additional splash of God showing us His sense of humor, Heather became pregnant the month after her dad passed away...after trying unsuccessfully for 3 years.

Needless to say...this was the most interesting year of our lives.

Faced with a few possible decisions (either Heather's mom move in with us or we sell her house and get her a condo), we decided to move back into Heather's childhood home with her mom. There was more than enough room, no mortgage, and we were excited about the idea of having her around as a full-time live-in MorMor (mother's mother [grandma] in Swedish).

ENTER THE REAL ESTATE STORY!

The market wasn't exactly where we wanted it in order to get out of our mortgage on the upside, so we decided to enlist our realtor to find us a qualified renter. We learned that we could JUST ABOUT break even with the rent the home commanded (even with flood insurance and ridiculous property taxes), so we figured we'd give it a go. Thankfully, we found some amazing tenants and as of December 2012, we went from first-time home owners to first-time real estate investors with our first rental property! So, after a few interviews with potentials renters, we signed a 12-month lease.

Who knew it was so easy...........to accidentally get into real estate investing.

Fast forward 7+ successful months of renting, and I get a message from my tenant asking me if I would mind sub-leasing for the remainder of their term if they ended up finding a house that they wanted to buy. I messaged back and said I obviously only cared if the rent was being paid, but to let me speak to my realtor and get back to him in a couple days with a decision. 2 days later (before I had a chance to discuss it with my realtor), I get another email informing me that they had been looking at homes and found one that they really loved and had made an offer.

Now, I was new to the rental game, but I knew at the very least that living out 7 of 12 months of a lease and then bailing wasn't a cool thing to do! The husband said not to worry, that he would coordinate the sublease and I wouldn't have to do a thing. Feeling like I had no choice, I cordially went along with it and scurried to get a hold of my realtor and ask him WTF I was supposed to do.

On the same phone conversation to my realtor, he started looking up comps on my house. Turned out that the market had made a pretty dramatic upward swing, and I could serve to make a hefty little profit if we sold! With the alternative being to find a sub-leaser for 5 more months, this sounded attractive as I could just wipe my hands clean of it if sold and move on with my life. Not to mention, my personal net worth would appreciate it...going from a $182K mortgage balance to co-owning a $350K home with no mortgage...that's a nice little $532K positive swing to my net worth!

His strategy was to price it below market value in order to encourage multiple bidders. Comps for our home were around $235K, so he listed it at $230K. Day 1 rolled around, and we got an offer! I was amazed it happened so quick. $220K...not bad, but not great. We countered at $225K, and crossed our fingers as hard as we could that before they came back with an answer, we'd have other offers on the table.

Our gamble worked! Before we had heard back, we received 3 more offers (one cash offer!) and informed the original bidder that we were now in a multiple bid situation.

TALK ABOUT EXCITING! After this whole crazy road we had been down, we netted out with our house on the market, 4 bids in the first 48 hours, and one of them was over asking price at $236K. I could hardly believe it, and realized at that moment that I absolutely loved the thrill of the deal!

After a few more kinks and turns, we ended up selling at the asking price of $230K (the buyer had to switch from conventional to FHA loan mid-stream, and then that appraisal came in at $230K so we had to lower the price...but eliminated the closing costs). Needless to say, we paid off our $182K balance, all the costs, and walked away with a sizeable profit on the sale!

As with everything in life, I've thought back to how I would have done things differently if this were to happen again, and I'm going to write a separate blog post of the pros/cons of this deal, and what I learned about that I will keep in mind when approaching my next deal!