Foregeative Experiences: Property, Oh Brothers!

As I’ve mentioned in previous posts, I didn’t get a lot of good or bad money advice growing up, other than generally to be frugal. As I’ve also mentioned, I learned that lesson pretty well. Too well in some cases.

I got my degree in Financialmoneynomics from the School of Hard Knocks, or “the SHaK,” as those in the know call it. I was a remedial student.

One class that I took at the SHaK was Real Estate 101. After graduating law school in my mid-20s, I was (or at least I thought I was) worth way more dead than alive in no financial position to buy property. In fact, the thought of buying a place to live seemed fanciful to me. I was perfectly happy renting a relatively cheap apartment in a neighborhood I generally liked.

By the buy

But then The Missus and I got together, our friends started buying condos and houses, and we started entertaining the thought of buying. Real estate prices always go up and owning property is a sound investment, we’d read and heard from people. Mainstream Additional sources that I referenced seemed to back that up. Others told us that you have to spend money to make money. So we looked at places more expensive than we should have, tho we did have the good sense not to go overboard.

So yeah, maybe we’d have to scrimp and save to amass a huge amount for a down payment. And maybe we’d have to then start saving all over again to build an emergency fund after we made said down payment. And maybe we’d have to spend a huge amount of our income on closing costs, mortgage payments, real estate taxes, home maintenance, and home improvements. But, hey, it’d all be worth it when we sold and realized a tidy profit. And the government, banks, and people we knew and respected all implored us to make the obviously smart move and buy. Surely they wouldn’t — couldn’t! — steer us wrong.

So in 2000 we bought Condo #1, which, admittedly, we loved. In 2007, we decided to move. Astute readers will note that the real estate market — which had for years been on fire — had begun to teeter by then. We didn’t know that at the time.

We took our condo off the market, after the place had been listed for sale for a few months, with no interested parties in sight. Surely our real estate agent was bad at her job, we concluded. Because real estate always sells, and the price always goes up! Right? In 2008, we relisted the place, with a new agent. Again, no sale. Notwithstanding that in retrospect I believe that both of our agents were, in fact, not particularly good at their job, I recognize that we were in a loser (for sellers) market.

Chastened and not too hopeful, we listed yet again in 2009. Well, the third was the charm. We sold for a price a bit above what we’d paid for the place in 2000. Counting all the money we spent to buy, maintain, and sell the place, we realized no tidy windfall. In fact, it was the opposite. And while our agent did sell Condo #1, he was a terrible negotiator on the buy side. So we paid tens of thousands of dollars more than we should have for Condo #2.

Nine years later, we decided to move states. By this point, I’d soured on owning property, much less as an investment. We listed our place with trepidation borne from past experiences. We sold the place after a few months, but for a price less than 10% higher than we’d bought for. Counting all the money we spent to buy, maintain, and sell the place, and adding the price we overpaid to buy, we did even worse financially than we did with Condo #1.

Room to let

By this point, I’d read some pieces that had completely changed my opinion of buying always being the obvious superior alternative to renting. Here’s one. And another. Also, this. And I’d since adopted a question-everything attitude.

These lessons and reading materials for Real Estate 101 led me to to adopt a mindset in which buying freaks me out isn’t the default choice for us as it once had been. Instead, I now would consider buying only in rare and fairly specific — if pretty unlikely — instances. Working the numbers, I realized that had we rented all along, we’d have spent less money and been able to do any number of productive things with the down payment money and extra money spent on ownership. D’oh!

But we can’t change the past, can we? No, seriously. I’m really asking. Can we? Cuz I’d really like to. No, we can’t you say? Nuts! Oh well.

I guess Real Estate 101 has been a worthwhile class, if for no other reason than that we learned a lot. And while we may yet make other property-related mistakes, we won’t be repeating those we’ve already made, which tho only moderately painful for us in the grand scheme of things have the potential to be much more painful under not wholly unlikely circumstances.

I prob’ly should say here that our decision is personal, and very possibly at least a bit irrational. And I appreciate the advice I’ve since learned that one should not buy a home as an investment, much less a get-rich-quick scheme. Also, others might find any number of perfectly good reasons to buy a home to live in instead of renting. All good. You do you! We got burned schooled, so we’re choosing a different path for the time being.

But whatever you do, as the good folks of Millennial Revolution caution, beware of being house horny. You just might find yourself way overpaying foe a place.