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Early in my career, I remember sitting down with my dad and asking him how I could ever afford to buy a house as nice as the one I grew up in.
My parents have lived in the same home for more than twenty years, and homes in the Denver suburb have skyrocketed in that time.
Even with my MBA and good job as a financial analyst, I still struggled with the concept of ever owning a half a million dollar house.
Little did I know that joining my finances with my future wife would make it a reality.
Building a Down Payment Fund
When I finished school with a finance degree, buying a home wasn’t at the top of my mind. However, after a year at home, a year and a half with a roommate, and about a year living on my own, I was ready to own my own home.
As someone big on planning ahead, I wanted a “starter home” that would be great for myself and work comfortably with a future wife and a kid or two.
I started looking at what that might cost, and I had no idea how I could ever afford it.
Even making a solid salary, between insurance, retirement savings, and other living expenses, I didn’t see a clear path to saving $100,000 in cash, a 20% down payment on a $500,000.
And once I got there, even with low interest rates, I was still staring at a $2,000 monthly payment. Compared to the $600 or so I was paying in rent, that was ludicrous!
But I didn’t let it discourage me. I started saving. It was just a little bit at a time to start, but it was something.
I was also nearing the end of my MBA program and decided to keep what was left of my college savings for a down payment. I did have a good path to get out of student loan debt, so I figured my best bet was starting to save for a house.
Buying my First Home
A little less than a year later, I started to think about what other options I might have.
Without breaking the bank on a $500,000 house, I might still be able to find something good, right?
I started doing some hunting on Zillow and even went to check out a condo (decided condos were not for me) and a few houses with a Realtor. But I was having trouble finding something that was in an area I liked, wasn’t a complete junker, and in my budget.
I eventually gave up after looking at a house on a weird street that I didn’t like at the edge of my desired neighborhood that had some foundation issues.
I thought it just wasn’t my time, and put the house hunt on hold.
A short while later, I decided it was worth looking again and checked out a few homes with a new Realtor, a friend of my mother, and was running into the same issues.
She suggested looking at homes with a more open mind on my needs and wants. A few weeks later, I saw a really cool condo pop up on Zillow right at my budget.
After going to check it out, I was a little discouraged by the non-traditional layout and galley kitchen, but it was a model condo that came fully furnished.
I pushed hard on the negotiation and was able to buy a two-bedroom condo for $137,500.
Splitting the mortgage payment with a roommate, I ended up saving money each month compared to my updated $715 per month rent. That was a huge win, and got me on track to bigger and better in the future.
Joining Forces to Buy a Better Home
While living in that condo, I met a really cool girl on a bike ride. Fast forward a few months and we’re dating. A little while later we decided it was time to live together.
Her expensive rental was coming up for renewal, and I decided it was the right time to kick out the roommate, sorry about that Andrew, and replace him with someone much more attractive for my tastes.
I put a little work into the condo while living there and sold it about two and a half years later. I sold it for $215,000, a $77,500 gain.
Pretty good for two a half years while paying less than I would have on rent, right?
That was a 56% gain on what I paid. I don’t know if I’ll ever pull a real estate move that awesome again, but I’m happy to have left that condo quite a bit richer than when I bought it.
My then girlfriend and I moved to Portland together and moved into a rental. In that time we got engaged, got married, and started talking about what’s next for the Rosenbergs.
I had about $120,000 in the bank to put into a new home purchase thanks to savings and the gain on my condo, and my wife had another $100,000 or so to contribute from a starter home fix and flip she had owned in California before we started dating.
We decided that the timing was right for us and the Portland market, and we started hunting for homes.
The real estate market in Portland is nuts. Seriously crazy stuff. Old, crappy homes are selling with multiple offers in less than 24 hours, so getting a house that we would really be happy in was going to be a challenge.
We looked at a couple of houses with a great real estate agent and even made an offer on a place, but we didn’t get it. So we kept our eyes on Zillow to see if something that would be a better fit was available. It took a little while before “The Blue House” caught our attention.
The house was new construction, but it had been sitting long enough with no sale that we thought it was worth pushing a little bit on the price.
We landed at $460,000, and with a 40% down payment, our monthly mortgage payment was about the same as our rent for the prior year. Not bad!
We lived there for only fourteen months before a change in circumstances had us ready to move. But while living in that beautiful home, we had our first child, some fun life milestones, and a house we totally loved.
It was while living in that house that I decided to quit my job to become a full-time freelancer, a big risk with a new baby at home. But we realized that if we sold our house and moved to California to be closer to family, we would have five years of living expenses in the bank.
If we didn’t need to use that money, it would be a great down payment for next time.
We listed the house for sale on March 18, 2016 for $550,000, a 20% increase over what we paid.
Thanks to the craziness that is Portland real estate, the house sold two days later with a full-price, all cash offer. That is a $90,000 gain over what we paid for the house!
Now my lifetime real estate gains totaled up to $167,500, more than two years of work at my Senior Financial Analyst salary I walked away from when I went full-time on my own business.
Planning for a Home Purchase in California
We moved to California about a month later after a two-week escrow and another two-week sale lease-back. We were packed up and on the way to California where a new real estate challenge was waiting.
We found a nice, two-bedroom rental a five-minute walk from the beach. That is our home today. In fact, that’s where I’m sitting writing this article!
But going from a beautiful four-bedroom house to a two-bedroom apartment wasn’t our forever plan. We are already starting to plan for our next home. And our rent is about 25% more than our old mortgage payment, which puts a damper on our finances.
Thanks to hustling, networking, and amazing clients, I only ever needed to pull $2,000 from our savings to support our more expensive life in California. But with a great down payment in the bank, we are starting to look to buy a new house this summer.
Hopefully that down payment is big enough to save us money compared to our current rent. Only time will tell.
But one thing is certain. If it had not been for working on our finances as a couple, we never would have bought The Blue House and made $90,000 on it. And we would be a lot farther from being able to afford a home on the California coastline.
Thanks to joining finances with my wife, I have a much better living situation than I would have without her. Also, thanks to her, I have a wonderful daughter and a life that I wouldn’t trade for anything.
This is a guest post by Eric Rosenberg, a full-time freelancer and blogger at Personal Profitability. Eric writes about personal finance and entrepreneurship at InvestmentZen, his own blog, and other sites around the web.
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