Getting Back to Level

Buying a house to make into your primary home is fun, especially if you get to see the phases of the build. 

It's not fun to move in and watch the market drop along with the value of your home.

Prior to buying our (spouse at the time) first home the family members who we had observed doing well in their real estate moves had given us advice to stretch our budget to get a house. What we did not filter through is the part of getting a deal under market value. So, we bought a new home at retail.

Two years after purchasing, a career decision took my spouse and I to another state and left the option of losing money selling the home or renting it. We decided to rent. 

We repeated the mistake of purchasing our second home at retail, again stretching our budget. When we separated, we each had a home to rent out, both homes had a payoff higher than market value by about $20,000.

The first home, hers, has been fruitful as the rent is higher than the mortgage. The second home rents for just under the mortgage payment. As I haven't been in a position to short sale or wholesale, I have held the property as a rental and let the rent make most of the payment while still building a small amount of equity. Having done this for the past five years, I can now refinance from 5.5 down to 3% and knock my mortgage down below the rent thereby making it a small cash flow coming in instead of going out.

I don't regret stretching my house budget, but I see now that for the same price as I spent on retail houses, I could have gotten much more house if I had a wider perspective.