Location, Location, Location!!! Isn’t that what you always hear when you are in the market to buy a house? Well, that’s what I heard when I was 24. I heard it from my parents, brothers, real estate agent and even my home mortgage broker, but did I listen, oooooh no!
I want to share my story so that hopefully you can learn something from it and be able to make informed decisions when it comes to buying your first property, home loans, mortgages, credit cards and especially remodeling. Remodeling is where I went wrong. I went wrong in many ways such as over spending, not having a clear budget, and not taking into consideration ALL of the material costs (and yes, i especially forgot to budget for nails). Where did I get the money to pay for this over spending? Definitely not from my savings account, I had put pretty much all I had into making the purchase of my condo. Like the other 78% of American households that own credit cards, that extra cash came from credit cards that I had readily accessible. But before I get into the details of the journey, let me first begin by my thought process in buying a place of my own.
Like I said, I was 24, in graduate school, and planning to be in Southern California for about 3 years. I thought to myself why pay rent and have that money go to someone else, while I can find a creative way to finance a condo myself and rent out a couple of rooms to others. Sounds logical doesn’t it, well it was a good idea at the time. That’s not where I went wrong. I went wrong with the location. Since I couldn’t afford anything in the best part of town and I wanted to stay out of downtown since that was really bad (especially parking), I chose a condo that was near downtown. It was a 2 bed 2 bath, but was actually a 3 bedroom because the loft it had I used as a third bedroom. Not only was I able to collect rent from one tenant renting a room, I was collecting from a second tenant making my mortgage payments pretty close to what I would have been paying in rent (about $700).
Now I have this great condo in the not so great part of town. It comes with 2 one-car garages and washer dryer hook ups. In college, you know how important it is to have that washer/ dryer in the house because it’s a hassle to get change all the time. The first mistake I made, I bought top of the line appliances including a Maytag refrigerator and a stackable LG washer/dryer. I was suckered in Home Depot by their great limited time offer of no interest for 6 months guaranteed on purchase of $1000.00 or more. Well what they don’t tell you is that at the end of those 6 months if you don’t pay off the balance on your new card, you will get charged heavily (23%) on accumulated interest.
Did you ever hear that you should remodel your kitchen and bathrooms for the best returns? Well I did, and guess what, I went with what people told me this time. This was my second mistake. In part two, I will talk about my remodeling process and show you some before and after pictures. Stay tuned…
Rich Dad Says: “Credit cards are the worst kind of debt to have.”
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I think one major problem is that people overpay for houses with problems because they don’t know what defects to look for. This drives the prices up for everyone. Many first time home buyers also have no idea they can offer less than the asking price. I didn’t know that when I bought my first home.
Many of the houses I have looked at are priced well over the foreclosures on the market, yet the only difference between the homes is one has a fresh coat of paint and new carpet. There is still rotted siding under the paint, the roofs will soon need repair and they all have cabinet rot.