I am officially a home owner!
I recently bought a condo that I won’t live in and isn’t even in the state where I currently reside. It’s an investment property and hopefully the beginning of a long term relationship with the world of real estate.
I have been saving since leaving residency with the hopes of buying my first home within 5 years of being out of training. Except one huge road block was that I picked two of the most expensive cities to start my post-residency career in, New York and Los Angeles. The housing market in both places command over $1,000,000 for a 2bdr condo in the city setting which I have grown used to. As a single woman, a 3-4 bdr house in the suburbs would make me feel lonely and be way more house than I care to maintain therefore a condo is my best bet. So after 3 years of saving for this home and retirement (with a few personal spending treats of course), I was barely close enough to have a significant down payment for the condo I would want. I initially thought that I would wait for a few more years, save a bit more and “hopefully” by then I would be in a relationship and maybe buy a place with my guy, likely cheaper and bigger in the ‘burbs. Luckily I didn’t hope for too long. I realized my dream of being a home owner and my dream of investing could marry and I could buy a condo in a more affordable area as an investment property. This way, I would get my foot in the proverbial real estate investment “door” as well as understand the ins and outs of home ownership.
So with the help of my parents who live in Florida and have a wealth of knowledge in real estate, I jumped at a great opportunity to buy a place in West Palm Beach, FL. West Palm is a vibrant Florida city that took a hard hit, as many cities did, during the 2008-2009 recession. Now with the rising housing markets, prices are beginning to pick up, although still not nearly where they were pre-recession. I immediately jumped at the option to get into the market as it was on the way up, in hopes of not only earning some passive rental income but also building significant equity as the market continues to rise.
Partly due to my current independent contractor status, which requires 1-2 years of income to get a mortgage loan, I decided to take the money I was saving for my own home and instead pay cash for the condo in Florida. Not only would I avoid the paperwork hassle of financing as well as the interest on a mortgage loan, but the profit would be all mine (except of course for taxes which you can never avoid) and some HOA fees that were reasonable. Plus, if the market does what we would all like it to do, that money I had been saving is now earning equity which is way better than any interest I could get from a savings account. Win-win!
So here are a few things that I learned that will hopefully help some fellow mavens ready to make their next big life move.
1. Save early to be prepared for opportunities when they present themselves.
2. You have to spend money to make money…. Seeing all of my savings gone in an instant hurt my heart terribly but the possibilities for earning are even greater now. Don’t let fear or comfort stop you.
3. Good advisors are key. My parents were wonderful but if I didn’t have them, I would certainly seek the advice of others. When you want something, don’t be afraid to ask for help along the way.
4. Closing costs can be a significant and often times an unaccounted for cost of home purchases. Closing costs are almost 80% less when you pay cash and decrease significantly based on how much more down payment you make on a mortgage. Put as much down as possible so that less of your money goes to interest or nonsense fees.
5. I learned after the fact that there are “recoup” loans that allow you to apply a mortgage to a purchase after buying it with cash so that you can get a portion of the cash purchase back. This is really useful if you want to use that cash for other things. But of course you will now have a mortgage, i.e. a monthly payment and interest to pay.
6. Doctors loans are available that allow you to pay 10% down on a home without paying PMI (private mortgage insurance – paid when you don’t put 20% down or more). So ask your loan officer about these if you are a physician. Special loan incentives are also available to non-physician health care workers who live in the vicinity of their hospital.
7. It feels good to make these kind of moves on your own, not waiting for someone to give you the go ahead or to do it with you. So just do it!