The Fine Print, Part 1

Chalk it up to lessons learned. One very, big lesson to be exact: home ownership and what it really is and isn’t. Now, to be fair, this isn’t a news flash lesson but it is definitely a course correction and eye opening learning curve. Think of it as an expanded view. I literally feel like I just climbed on top of the barn and got a whole new perspective. This is good, this is a sign of growth and if I can keep it in my memory a sign of potential wisdom.

screen-shot-2010-12-15-at-105401-amTo understand where I’m coming from I must back up the train about 18 1/2 years ago, for this is where the seeds for independent living and home ownership began. The time is spring of 1992 and I’m engaged. Blake and I are talking about our new life we’ll be starting together in May, we’re making plans, dreaming, plotting our future course and such. One of the topics on the burner is where we’ll live. While apartments are the most common and expected avenue, we start thinking that if we could get into a little duplex we’d have something to show for the 4 or so years of expected rent. Problem: we have no money for a downpayment and we’re going to be living in a new and unfamiliar place. Extension of the problem, we can’t convince Blake’s dad, our only source for a solution to the problem and super smart accountant, that this is a wise investment. He counters that we don’t know where we’re going to be after graduation which is only a few years out and thus staying flexible with renting makes more sense. Hindsight shows this would have been very wise indeed, however all is not lost as through this exercise Blake’s younger brother received the fruits of planting these seeds a few years later. You’re welcome, Ryan. ~wink~ But I digress. The point of this share is that even before I was married I had a belief in the value of owning a residence; an accepted social truth that it would be an investment instead of flushing money down a toilet never to be seen again.

screen-shot-2010-12-15-at-105453-amBlake and I spent the next 5 years spending every possible downpayment dollar on taxes. We were DINKS (dual income no kids) and we had no deductibles. It was most disheartening and we grew accustomed to the reality that we were locked into renting. In our 5th year of marriage we moved back to Idaho where Blake had taking a job for a start up company. This was a turning point as after 6 months, Blake’s dad asked us why we weren’t settling down with a home, which would be a wise move. We explained the lack of downpayment and this time he offered to help which made it possible for us to purchase our first home. ~Thanks Dad!~ It wasn’t anything fancy, only 1,000 sq. feet and $65k, but it was ours and it felt wonderful. We spent the next six years making it ours, creating a yard and increasing it’s value. When we moved in 2002, we felt it payed off as we were able to sell it for about $87k. The point of sharing this is the reality that our fist expectation of ‘making money’ or receiving a return on our investment was achieved.

screen-shot-2010-12-15-at-105637-am2002 was an ugly year for us. Our business had gone under, I’d suffered a medical disaster that stretched over 3 long months building a mountain of medical bills and there was no work for Blake in the small Idaho town. Suffice it to say it was a miracle we were able to purchase anything when we moved back to Arizona. We found an affordable townhome for about $120k. It took us 5 years to dig out of the hole we’d dug with our financial disasters, but toward the end of year 4 our home provided us some additional help with a home equity loan that helped us clear our consumer debt. In 2006 we were blessed with a nice salary increase for Blake. This coupled with our cleared consumer debt gave us a new lease on life. We decided it was time to really “settle” and bought our first dream home. I describe it this way because the first two homes we bought were choices made by lack of options more than anything. This time we went looking for something we wanted and we found it. A great home, nice sized yard, pool in the backyard, everything we thought we wanted to live the good life and be super happy for the rest of our lives. We had added confidence as the townhome we’d bought 5 years before had nearly doubled which fueled our ability to purchase our dream home for $374k. The point of this share is multi-faceted; 1) we gained experience with the process of buying and selling, 2) we were able to use home equity to help us make progress on financial goals, 3) we capitalized on selling high returning more profits, 4) we followed the typical ‘American Dream’ pattern of upgrading.

So far so good right? I thought so too. However, my lesson was just beginning.

screen-shot-2010-12-15-at-110339-amIn fairness, things were really good for about the next three years. When the dust settled, our monthly house payment was about $500 more a month than promised when we purchased the home but it didn’t kill us. However, when Blake took a job he really wanted that let him work from home we sacrificed some monthly income and in the 4th year we’d have some bigger home maintenance and growing kid financial needs. We didn’t actually see the results for about a year, when we started noticing the consumer debt had crept back up to compensate. Naturally, this would be about the time the nation would experience financial distress and our area was hit with the demise of bank mortgage disaster. The long and short is that the value of our home fell to half what we paid for it. For the first while this was disappointing to be sure but it wasn’t a show stopper. We had no intention of moving so we figured we’d weather the storm and eventually the value would come back up to what we’d paid for it – by all practical and realistic projections about 7-12 years. I was blessed with a work opportunity about this time that would allow us to tackle the consumer debt and with some diligence we’d be back on top of things soon. If you’ve read many stories, you know this is the point where the curve ball comes. And sure enough it did, Blake got recruited for an amazing job opportunity in a different state. The point of this share is unforeseeable consequences can come from circumstances and factors beyond your control and vision.

So let’s recap the history:

  • I believe in the theory that home ownership is a wise investment and will provide a return for monthly money spent on housing.
  • I experience this ‘return on investment’.
  • I gain experience with the process of buying and selling, am able to see the value of home equity, made a high return on our home sale and followed the upgrading pattern.
  • Unforeseeable and uncontrollable events generate substantial consequences on the home buying decision.

I’d keep writing, but I’m exhausted so I’ll break this post out into two parts. I’ll tackle the wealth of knowledge gained and my personal thoughts as a result in Part 2.

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2 comments on “The Fine Print, Part 1

  1. Your story sounds a little like our story. Except we’re still in our first home. It’s a nice home, but the mortgage is killing us and we can’t refinance at today’s super low rates (out little one has a lot of medical bills). It took us a long time to buy our first home too, but we’ve finally did it about 13 years ago. With the way things are going, it will probably be the only home we will ever own.

    I could do with the knowledge but the learning curves are sure not fun!

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