Wanna Get Paid $15K to Buy Your First House?

I am the managing partner of Help Keep My Money LLC, a management company based on southern CA. I was an active real estate investor form 1997 - 2005 and I was paid $15K to purchase my first house in 1997.

My first wife and I were 2-3 years out of college, making good money but not saving (a conscious decision) when she became pregnant.  Our focus then shifted to getting a house.  1997 was the bottom of the 1989 housing market crash in California and no area was harder hit than the Antelope Valley (Palmdale and Lancaster).  Palmdale had been the fastest growing city in the USA in the late 1980's and was hit hard when the aerospace industry left California.  So houses that sold for $250K in 1989 where going for half price in 1997.  I saw an ad in the local newspaper for a 3 bed, 2 bath 1524 sf. house for $110K, so I called the number in the ad.  I spoke with the seller who explained his situation.

He was a bachelor who had lived in the area because of his mother, who decided to move, so he was selling his house.  Since he was upside down (loan balance was $130K) he was going to make a final lump sum payment of $20K to the mortgage company to bring the balance down to $110K and have someone assume his FHA mortgage who could then refinance.  This is where the opportunity presented itself.

My first wife and I made great money ($100K in 1997) but we hadn't saved a penny towards a down payment.  I could easily make the monthly payment.  So I told the seller the following:  Give us $15K and we'll assume the loan as is.  He saved $5K and we $15K in cash that we used to pay down bills (and student loans).  It was clearly a win-win situation.  We setup concurrent escrows for the assumption and the $15K cash transfer (FHA couldn't know about the $15K transfer).  I told my wife that we would have to stay in the house for five years to get from being under water.  We stayed in the house for exactly 5 years (5/29/97 - 6/7/02) before we sold it and used the $10K profit to buy our next house.

The main thing to take away from this experience is that there is always a deal in any real estate transaction.  It may not be obvious or take the traditional form that we are used to seeing, but we must be open to thinking out of the box and taking advantage of opportunities when they present themselves.  So stay ready, because if you stay ready, you don't have to get ready.  Next time I'll tell you how I took the $10K from this first house and turned it into over $350K in equity in 27 months. Until next time...

God Bless You!