Real Estate Investing – I Just Bought A House!

I have some HUGE news. On May 13, 2021, I placed an offer on a house and it was accepted! I am beyond excited. This is a CRAZY HOT real estate market we are in. Although I knew that my offer was strong, I still didn’t think I would be so lucky to get a house so quickly. Wow! I can barely contain the excitement. This post will be a lengthy one. So, I hope you had your coffee. We have a lot to cover. I’ll be talking about my thought processes, what happened, some of the numbers, etc. So, without further adieu, let’s dive in to see how I was able to buy this particular piece of real estate.

Background

In case this is your first time on this blog, or you are otherwise unaware of my situation, I’ve been trying to buy a beach condo for the longest while. In fact, I was under a contract back in 2019 to purchase a beach condo that was still being built. I wrote about my excitement in my post entitled, I Bought A Beach Condo.

However, even though the contract was signed in 2019, and the building was supposed to be finished in February 2020, there were construction delays. Then the coronavirus hit and there were even more delays. In fact, we got all the way to 2021 and I still had not closed on the condo.

More importantly, a number of banks pulled out of the market and so securing financing for the property became far more expensive than I had originally budgeted for. Even after liquidating my dividend portfolio (which is the reason why I now have to rebuild my dividend portfolio), I still needed to dip into my retirement accounts just to afford the down payment. By that point, I was over it and wanted to get out, but I was stuck because I was obligated to purchase according to my contract.

Then, as luck would have it, there were substantial changes to the condo documents and that required a new contract. That meant that owners had an additional 15 days to decide if they wanted to accept the new contract or cancel the contract and get a full refund. As you can imagine, I chose to cancel the contract. I wrote all about it in my post entitled, I Lost The Beach Condo.

So Now What?

Well, I was unwilling to dip into my retirement account to purchase a beach condo. I only was considering it initially because I found myself in a situation where had I not dipped into my retirement account, I would stand to lose a lot of money according to the contract. But, in the ordinary case, if I couldn’t afford to buy the house without dipping into my retirement account, then I wouldn’t buy the house.

I chose to re-evaluate my situation and put buying a beach condo on hold for a few years. Instead, I chose to look for a primary residence as an owner occupant. As soon as I got my money back into my account, which I did, I then interviewed several realtors, and chose who I thought was the best one.

We started looking for houses on May 2, 2021! That’s how recent all of this is.

The Real Estate Market

In my local area, the real estate market right now is CRAZY HOT!!! I don’t know how else to explain it.

The second house I saw, I fell in love with. It was gorgeous and in an historic district. I could not believe it was still on the market. When we went to check the house out, we were concerned that it would be too much of a money suck. So it needed anywhere from 50k to 150k to fix up. I wanted an idea of how much, what the after repair value would be, what the potential restrictions would be from the historical committee in terms of what I could do to the property, etc. Well, my realtor indicated she would do some research. The next day, the property was under contract by someone else!!!

I liked the house so much that I asked my realtor to inquire if they would take back-up offers, but we never heard back.

The point being is that in this market, I didn’t really have the luxury of time. If I wanted a house, I would have to make a quick decision. It was kind of depressing. Although I saw several houses after that, nothing could compare to that house.

To give you an idea of just how hot this market is, there was a duplex that was gone about 15 minutes after being on the MLS. The buyer bought it sight unseen. In some areas, I would look at properties and there is a line of folks with their realtors waiting to get in. Crazy hot indeed.

Mindset

As referenced earlier, I was a bit distressed by the process. It clearly is a seller’s market, which in general, means it’s a great time to sell a house and not a very good time to buy. I was seriously contemplating putting off buying a house until a few months. This was after a week of earnestly trying to find a house.

I just didn’t like the idea of making a quick decision like that. Not only that, but chances were that I would have to compete with multiple buyers for any house that I was interested in. So, despite wanting to buy another real estate property (from as early as 2019 to the present), I wasn’t really feeling the houses I was looking at.

The houses were either not in a good area, too expensive, or I just didn’t like how they looked. I knew I wasn’t trying to buy my dream home, but I wanted to at least like what I’m buying. After all, I plan on living there for the next couple of years.

Nevertheless, I kept checking the MLS listings every day to see if there was any house that caught my attention.

The Showing

Then it happened. On Thursday, May 13, 2021, a house came on the market. It looked beautiful from the pictures, and it was an immediate contender.

I saw a house immediately before checking out the house that was the immediate contender. The prior house I saw was nice, but needed work to fix up a little bit. The selling point to that house was there was a nice pool in the back yard that was set up for entertaining guests. But, I didn’t like the increased liability associated with having a pool. That’s because when I buy the house and leave, I’ll be keeping it as a rental.

After we left the pool house, we went to the house that was the immediate contender. The front of the house was beautiful. The rooms were spacious, the ceiling high, and the outside was large with a gazebo in the middle. For privacy reasons, I won’t show pictures (sorry), but take my word for it. The house is gorgeous. It had a semi-open floor plan and it just felt like home!

Although there were people there when we got to the location, we weren’t expecting another potential buyers for a couple of hours. So, I was able to get a good showing and feeling of that house during that time. It was in a good location, good school district, 20-minutes from work, and I wouldn’t have to do a thing to it. It was move-in ready. So, I decided to put an offer in. This was the first house I decided to put an actual offer in.

The Offer

In an effort to get the deal, we wanted to let the sellers know that we were serious. I already had a pre-approval from my lender. I won’t go into all the specifics, but I offered $5,500 over the asking price. My realtor also indicated that she would lower her fees. There were some other things we did to make it a strong offer.

When we went and looked at the house, there were already 4 other offers that were made the same day it came on the market. In fact, by the end of the day that the house came on the market, there were 10 offers to buy that house, mine included.

Although it was close, and another offer technically came in more than mine, the seller accepted my offer because the closing process was going to be smoother!

Now, I’m expecting to close on this real estate in about 45 days! So, unless there is something that’s significant that comes up in the inspection, I should be closing soon. The house was built in 1995 and has a new roof that’s about 2 years old. A number of other things in the house are new as well. I’m not worried but we shall see.

The Numbers

Emotions aside, it’s still all about the numbers. No matter how much I like a house, there’s no point in buying it if the numbers don’t make sense.

At the outset, I’m not a professional real estate investor. So, for practical purposes, this was a property bought at retail value. Honestly, the first house I bought was also at retail value, but that still turned out well for me. For that first house, I lived in it, and then when I moved, I rented it out. It is still generating rental income for me today.

I plan on doing the same with this house that I just bought.

The purchase price is between 250k and 300k. For various reasons, at this time, I’ve decided not to provide any further details about the loan. That being said, the mortgage payment, (which is influenced by how much money I put down), taxes and insurance will likely be no more than $1200 per month. After I leave the house and rent it out, I can reasonably expect to receive approximately $2000 per month in rental income.

While there are different ways to evaluate whether a particular real estate investment is a good deal, I think this one is. Regardless, I’m very happy with the purchase and time will tell if I made the right decision.

What’s Next?

After I close on this property, I will look to purchase another house. That one will be a non-owner occupied investment property. It will require at least 20% down, and perhaps 25% down. So, I’m evaluating my budget to see if I can afford it. I’m also working with my current lender on that issue as well.

I’ve never bought two houses in one year. But qualifying for an investment property will likely be based solely on my income and not on any income the investment property generates – specifically for another single family residence. We shall see. So, stay tuned for any updates on this.

In all likelihood, I’ll want to move into my new house, and relax for a couple of months before trying to buy another house. But, hopefully, I’ll have the cash to make a real estate purchase if I see what I think is a good deal.

Finally, I plan on having roommates. The house is a 4 bedroom and 2 and 1/2 bath house. I plan on renting out two of the rooms, which are large, and using the fourth bedroom as an office area for my future YouTube videos!!! Wish me luck.

Conclusion

I am beyond excited. I bought my second house. It was a roller coaster of emotions. Although I invest in dividends, I don’t do so to the exclusion of other investment opportunities. Real estate investing is part of my overall plan to reach financial independence.

Do you invest in real estate? Are you trying to buy a house right now? what did you think of this post? Let me know your thoughts by commenting below.