My Experience: Buy First Home Or Rent

This is a TRUE story.

Before 1997, I was renting a 2-bedroom apartment and paying $1,100 a month for about 5 years. With the rising apartment rentals, I decided to look for a 3-bedroom single home. The average cost for the single home was $200,000 with a monthly amortization of $1,250.

After studying all my financial resources, options, and real estate situation in 1997, I decided to buy my first brand new 3-bedroom, 2-bathroom attached one-story condominium unit located on the east side of the city. It has a fireplace and a patio. The price was $57,000, I put $3,000 down payment, and my monthly amortization was $525. The association dues was $95 a month.

In 2000 (3 years after), I purchased a second brand new 2-bedroom, 2-bathroom condominium on the second floor of a 2-story building located on the west side of the same city. It has also a fireplace and a patio. The price was $71,000, I put $5,000 down payment, and my amortization was $702. The association dues was $100 a month.

For the 2 condominium units, I was paying $1,227 a month for the mortgage loan principal, interest, and real estate taxes. I was also paying $195 a month for the association dues (to pay for garbage disposal, water, electrical lighting outside my condominium unit, lawn maintenance, painting of building, roof repair, security system, swimming pool maintenance, property management fees, and many others).

So, I was paying $1,422 a month for the 2 condominium units and association dues. My apartment rental was $1,100 a month before 1997.

In 2000, I rented my second condominium unit to a couple with no children and no pets for $1,000 a month. The average rental of apartments surrounding my condominium units was about $1,200 - $1,500 a month.

I was receiving a condominium rental income of $1,000 from my tenant and I was paying my mortgage lender the amount of $802 a month. I net $198 a month. In short, my tenant was paying for my mortgage loan. The excess $198 covered the $5,000 that I paid as down payment. In about 25 months, I was able to fully recover my down payment of $5,000. After that, every $198 was 100% profit.

However, the real estate situation became bad in 2007. Home property values went down. Many employees were laid off. Unemployment was increasing. People who bought homes for personal use or investment, hoping to sell their homes for profit, filed for bankruptcy. Some homes were foreclosed by the mortgage lenders. Some people short-sold their properties.

In 2008, I decided to sell my second condominium unit through a broker. It took 6 months to find a buyer. I was lucky that a buyer bought my condominium unit for $98,000. I received a net profit or capital gains from the sale in the amount of $25,000.

I still live in my first 3-bedroom, 2-bathroom condominium unit and I am maintaining it.

The reason for blogging this story is to share with you that you must be practical in your decision-making to buy a home. Do not become EMOTIONAL, meaning, “I love this BIG beautiful house” when you cannot afford to pay all the cost of home ownership.

Moral lesson: Spend within your income.

Come back soon for more interesting articles. Thank you for visiting my blog and God bless you.

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