Story of a Trying Newbie -- My 1st Purchase
Hello, everyone. I'm a new real estate investor. I would like to share the story of my first home. It's not a success story, rather a learning experience. Since I'm not good at writing, I organized the story in the easiest form for me. If the pictures don't come out in the post. I'll post them later.
Time
Fall 2008
Situation
- Graduated from state college w/ no student loan
- Internship job paid for college expenses
- Parents gave me some money intended for college tuition. Majority of it’s saved.
- Living with parents in SoCal
Goal
- Move out of parents’ house
- Buy a property close to work (30min in traffic to Downtown LA)
- Target area: Pasadena, San Gabriel Valley (A neighborhood for safety reasons)
- Price range $300K~ $400K for 2bd condo
Action
- Budget expenses to save more money for 20% down payment
- Created a spreadsheet and figured I could save $1000 per paycheck, $2000 per month
- Created a spreadsheet to project my savings
Time
Spring 2010
Situation
Own more than $80K in the savings
Goal
Purchase target condo in Pasadena (short sale, some repairs needed)
Action
- Made spreadsheet to find out if I can afford the condo and the repairs needed
- Proceeded to offer and eventually got the condo with 20% down
- Received 1st time home buyer credit, $8000 from fed, $1000/3 years from state
| House | |
| Down payment | $71,800 |
| House Price | $359,000 |
| Loan | $287,200 |
| % Down Payment | 20.0 |
| Loan Term (Year) | 30 |
| Loan Interest Rate | 5.25 |
| Monthly Payment | $1,586 |
Time
May 2010 – Jan 2014
Situation
- The majority of my paycheck is tied up in the house
- Frequent plumbing problems including leaky toilet from upstairs unit
- HOA reserve is underfunded
- Condo hacked by renting out spare bedroom at $900/mo
Goal
Upgrade to a more effective investment property
Action
- Fixed up condo with credits received
- Put in new flooring
- Sold condo at $428K, cashed out with a total of $200K
- Purchased SFR in the suburbs (Pomona) and leased it out for $500/mo Free Cash Flow
- Left with $80K in the savings and growing at $3400/mon.
- Now looking for another investment property
Lessons Learned
- My parent's education fund for me gave me a kick start. Not having student loan is great. I went to a state university. I felt I got quality education at an affordable price.
- Budget is my best friend. I keep track of every dollar I spend using an app.
- Not all short sales are created equal. Bank-approved short sales can be easier than what your agent says.
- Interview many contractors. I interviewed at least 8 contractors and tried to schedule them back to back with each other. I typed the scope of work and handed a copy to every contractor.
- Don’t overdo it. I probably spent more than I should on the flooring. The buyer purchased the property as a rental unit. So I don’t think a cheaper grade would’ve made any difference on the sale price.
- Staging is important. My cash buyer ended up paying for my furniture, which saved me the hassle of moving them out of the second-story condo.
- Some cities, like Pasadena, may require an inspection before you can sell your house. I didn’t know this. It was hard to schedule an appointment with the city inspector, and he withheld the permit because of a non-working electric outlet. That could’ve cost me the deal.
- HOA's cannot be trusted. They are quick to make rules, but slow when you need anything from them.
- Save your annual HOA reports. The buyer may ask for it. In that case, you won't have to beg the HOA for another copy.
- Now I can save $3400/mo after selling the condo. It’s a big relief that I don’t own a property that eats all of my paycheck every month.