…And no, the answer isn’t by selling drugs. C’mon, man.
Y’all might remember back in the day when the wife and I were thinking of buying a house. This didn’t go so well for a few different reasons, the main one being that we had a price range of between $200,000 and $250,000, and we couldn’t find anything in the price range that wasn’t falling over. So rather than stretching to buy something a little nicer, we decided to rent.
I even went as far as saying that renting will make me a millionaire. Basically, the logic goes like this. By investing money I would normally have stuck inside of home equity, I can count on my wealth increasing by a faster rate than home equity, which traditionally has only kept up with inflation (at least in rational parts of the Canadian real estate market).
Essentially, home equity is a really crummy asset. But you already knew that, because I told you so. And you all listen to me, except for the haters. THEY’RE ALWAYS GOING TO HATE, AREN’T THEY TAYLOR?
Is she wearing a bandaid?
Anyhoo, basically my attitude about home ownership could be summed up like this. I liked the idea of owning a house, but unless I could find a house at a reasonable price that checked off all my boxes, I was content renting.
You can probably guess what happened next. Behold, my new house.
The picture is already at the top, dummy.
Do you think it would be too much to ask the nice people to scroll up and have a look?
They’re already doing you a favor by reading this crap. Do you really want to subject them to more work?
When we looked at houses a little over a year ago, I told the Realtor what we were looking for. It was for a very specific type of house in a very specific neighborhood. Because hey, if you’re going to be patient, you might as well wait for what you want. Naturally, when such a house came on the market, the Realtor gave us a call.
Ha ha just kidding. You know, for their job being all about sales, collectively Realtors are really bad at calling clients.
We heard about it from a neighbor who’s a friend of mine. From his vantage point of across the street, he watched for months as this place was rebuilt from almost the ground up. It turns out the previous owner was a hoarder (YES!) who had a lot of cats in there (DOUBLE YES!). The cat piss damaged the walls and floor, which were replaced along with most everything else.
The only thing this story is missing is knocking out a wall so the fat guy who doesn’t fit through the door can go to the hospital.
Once the sign went up, he gave me a call and told me the story.
The sale was being handled by a family member of the aforementioned hoarder who wanted the property gone quickly. So it was listed at under $200,000, which is a steal for that neighborhood. Crummy houses with no work done whatsoever to them regularly sell for more than $200,000 in that part of town.
The other thing we had going for us is there were no inside pictures of the place. It looks good from the outside, but nothing compared to the interior, which is brand new. This probably helped limit the amount of interest in the place.
And, to the honest, I’d bet the realtor who had it listed was trying to keep it on the down low to try and double end the listing.
We phoned our Realtor and got in to see it that night, spending a good hour there inspecting the place from top to bottom. I couldn’t believe how good of condition it was in. Not only had they done a nice job with the renos, but stuff like the foundation was also in great shape. It’s a 50 year old house and I could only see a couple of very minor cracks in the foundation. It was amazing.
After inspecting this house, we figured out pretty quickly it would be a hot commodity. The next morning we put an offer in and a few hours later it was ours. I won’t say much about the offer because I’m going to write about it more extensively in the future, but I will say we were in a multiple offer situation.
Yeah. Not only did I buy a house, but I had to compete with someone to do so. I pretty much broke all my rules. FINALLY, FINANCIAL UPROAR BREAKS THE RULES AND EMBRACES A DEVIL MAY CARE ATTITUDE.
How I made $30,000
This one is simple. Basically we bought a place worth $225,000 for $195,000.
That’s not just our wishful thinking either. Not only did two other Realtors confirm the value, but so did all of the comparable sales in the area. There was a reason why we jumped on the place within a day of the for sale sign going up on the lawn.
We did contemplate continuing to rent while trying to resell the place in a year or two (after putting in a renter and collecting that cash flow), but we decided not to.
Ideally, my strategy will be as simple as possible. Since mortgage money is so cheap, the mortgage will be the last debt I pay off.
I say ideally because as it stands today, I’m finding it harder and harder to find attractive stocks. Valuations are just too high. I find myself more inclined to sell some of my winners rather than looking at buying stuff. So I may take some capital I have in a taxable brokerage account and put it on the mortgage.
I chose a monthly mortgage payment of $700 per month, which extends us just past the 25-year amortization mark. This is easy to do if you have a decent sized down payment.
Our total monthly costs go as follows:
Utilities (internet, water, power, heat): $450
I’m including nothing for maintenance for the time being since just about everything inside the house is new. The roof and exterior walls are new as well. I know I’ll pay for maintenance eventually. I just think I can avoid it for the time being.
The total costs work out to $1,380 per month, a savings of $170 per month compared to renting. But, again, most of that savings will eventually get eaten up by replacing appliances or a furnace or building sex dungeons or whatever it is you owners have to worry about.
Am I worried about Canada’s housing bubble?
Look, if I was buying in Toronto, or Vancouver, or even Calgary, I’d probably be worried about values. At least two of those three markets are nuts, with the other still pretty overvalued. Plus I’d be shelling out at least half a million for a nice place that isn’t a condo. At least my house has land.
But I live in a small town where it’s possible to buy a nice place for under $200,000. This is approximately 3x the average family income in town. It’s a pretty reasonable valuation in a world where interest rates are below 3%.
Stop rambling already
So yeah. We put $30,000 in our pocket as well as creating a little extra cash flow in the meantime. I’m quite okay with our decision to buy even if such a thing isn’t en vogue today. Go ahead and yell at me in the commenters, renters for lyfe.