What are common mistakes made by first time house buyers?
Answered by: Dave Merk,Retired Navy, Realestate investing 2004 - present, Lego nerd
Here are all the mistakes I made on my first go;
It was 1999 and my partner pointed out an ad in the paper displaying beautiful, brand new 4 bedroom houses for $169,900. But I knew I couldn’t afford it, because my parents told me it was impossible. This was San Diego. Anybody else go house shopping in SD lately? They are not 169k anymore!
The year is now 2000 and the San Diego market was crazy hot. Now I am serious. But still dumb. I look and find a decent place and submit an offer BEFORE getting pre-approved for a loan. Needless to say, I didn’t win that bid. Some of that was the realtor’s fault. He should have known better. Make sure your agent knows what they are doing!
I eventually settle for a 2 bedroom condo situated right above someone else’s garage and directly below a neighbor with a noisy kid and all with a beautiful view of a freeway! Needless to say, I never felt lonely.
Only after we moved in did I discover how filthy the carpet was. It would have been so easy to get it professionally cleaned BEFORE WE MOVED IN!
A nice tree blocked the view of the freeway and provided some shade and noise relief, that was until the HOA cut it down! When I complained to them about removing the tree, they cited maintenence and reminded me that they had asked the homeowners about it, and made it clear that I should be attending their meetings! Yes, if you get into an HOA, go to the meetings, take the time to understand the issues, and vote.
A couple years later the Navy (I was enlisted) transferred me to Pearl Harbor. My agent in Hawaii advised me to keep the San Diego condo, do a cash-out refi, keep it as a rental and use the cash-out funds to buy a small house which could be converted to another rental one day. The whole thing worked to where I would have gotten an extra $100 or so each month and would have been able to get into a small house for $280k which would have been a big improvement over what we had been living in. Nope, I was at the top of Mt Stupid. I wanted a big, nice house, so I sold the condo and bought a 400k house. Today that condo is worth more than double what I sold it for and it would have been a great rental. The house went up in value too, which made my former partner very happy when she took it to the bank.
The biggest mistake I ever made was not buying when I had an opportunity in 1996. A small condo I looked at then would have set me back $89,000. Today that condo is worth $280,000. But I had to have a new car instead..
There you have it, feel free to downvote me now.
Oh wait, here are a few things I did right;
I started looking, and learning one lesson at a time, figuring out the buying process until I was ready to buy.
It took several attempts to get approved for a mortgage and get an offer accepted, so when I did get the first place, it was a hell of an achievement, even if it was just a crap hole.
Despite the lousy setting, my measly $5800 of life savings invested in that condo returned $90,000 when I sold It only 2 years later. Even the crappy places can make you rich if you time them right.
Actually, the dirty carpet was a pretty easy fix. Once we got settled and were really tired of seeing the soles of our feet turn black simply from walking bedroom to kitchen, I hired a professional carpet cleaner and for $200 they cleaned the entire floor (around the furniture we couldn’t easily move) and it was just like new, no more black feet!
I learned over the years through bad HOA experiences to just stay out of them. Some of the best investments I made were non-HOAs. There is always a risk of your neighbor doing something silly like painting their house purple, but who cares, for the freedom I get from those sons of HOA bitches, my neighbors can paint their house any color they want and dock a purple boat on their roof for all I care. It’s so great to be free from the BS and monthly fees!
A year after I made the mistake of selling, I learned the rental lesson. My savvy agent advised me to do the cash out refi on the house. Which I did and bought 3 small rentals. When my partner took the house, I took the rentals (she still got the better end of that) but it’s all what you make of it. I took those 3 rentals and turned them into 7 much better rentals, applying all the hard lessons I already learned.
I know the 1996 car argument will never win. I obviously needed transportation. It’s true I could have just stayed in a bicycle and saved a ton of cash even if I didn’t buy the first investment. But that lesson today gives me the motivation to make better spending choices. In 2007 during the housing bust, I was near bankruptcy, so I went back to riding a bike. Assuming that ditching the car and going back to bicycling saved me an average of $500 per month, it adds up to about $72.000 saved over the past 12 years, and thanks to that bike I've never been I better shape, and considering Hawaii's traffic it’s still probably the fastest ride in town.
It’s easy to argue in favor of a car until you realize what other wonderful things you can have if you find a way to live without one. So what did I do without a car?
Well, I bought a house of course!
And then I did some travel, on a bicycle of course!
And I bought another house;
And ate whatever I wanted and stayed thin, because bicycling does that;
Bought another house;
And traveled some more;
Left the bicycle home this time!
And bought another house, but I lost that picture, so here is some more food porn.
Should I stop now?
Here it is: THE BIGGEST MISTAKE I SEE PEOPLE MAKING IS NOT INVESTING BECAUSE THEY ARE SO INVOLVED WITH THAT STUPID CAR!
okay, up/downvote me now, cheers!