How I Bought My First House
This is where most potential moguls (or everyone) gets stuck. Confusion, lack of Capital, fear all play a role resulting in inaction for many. There are an infinite number of ways to get started in Real Estate. This post will be about how I did it. Was it the best route – no, but it worked well, sort of.
First thing is my first house was bought when I was 18 years old (32 years ago). I knew I wanted to buy a shit ton of properties and rent them out and thats about it. I also didn’t have a place to live in the city of Milwaukee which is were I had decided to move. I figured I would buy something to live in for about a year until I could move up to something better and at that time I would rent it out.
I had no money or credit or cosigner or even know how to get this done. I also didn’t have a legit job or income. I was becoming a entrepreneur which for me was code for “side jobs” of questionable character. (more on that later). Instead of renting when I moved to Milwaukee I began looking through the classified sections for Houses for Sale. In 1990 there was no internet as there is today, I looked at properties between side hustles. I had read some books on “nothing down” and “other peoples money” for buying properties.
I think it was the first place I looked at that ultimately became my first purchase, don’t follow that lead. I responded to the add because it said the house was 24,000 which even then was unheard of. What I didn’t realize, in my inexperience, was that it was on “crack alley”. I asked the guy if he would sell it on land contract with nothing down and after back and forth we agreed on me renting for 6 months and if I could come up with 5000 he would sell to me on land contract.
The house wasn’t too bad but the neighborhood was a shithole. This is where the part about making sacrifices comes in. I could have rented a nice apt with a swimming pool and locked lobby and paid out my entire budget monthly. I chose to spend half my budget on rent and try to save 5000 so I could buy something. I rightfully felt that if I had anything under contract I can always move on to something better. I worked harder than I ever had for the 6 months and saved the 5000 and the seller had his accountant draw up a simple contract and thats how it all started.
This plan had many problems along the way, the first was when my high school girlfriend didn’t want to move into this house. Her parents were completely against it. I had to chase drunk people down the road one night to save my dog from being jacked. I was in a physical altercation with a neighbor one night and ultimately ended up getting arrested (long story). So I didn’t ride off into the sunset with this purchase but it started me down the path.
After a year I was able to go into a bank and get a loan for a 54,000 home with 20 percent down. This was a 4 bedroom home with a fireplace, 2 car garage and a yard in a little better neighborhood. I really felt I had arrived and that it was a sign of better things to come. After renting out my original house for a profit I was already making money in Real Estate. Life was good for about a New York Minute until I had my first legal problem in Real Estate.
The seller had came by to collect his mortgage payment from me as he did every month. When someone else answered the door and said I didn’t live there anymore he was furious. He did not take kindly to me making a profit off the fact he had helped me out by doing the land contract. His lawyer sent me a letter stating they wanted payment in full for the house or they would foreclose on the basis that I had ………..shit I don’t even remember how they said it. Basically, they believed I had given up some material interest in the property by renting it out and that was against our contract.
Im not an attorney nor do I play one on TV but I think they were baked with that shit! My friend had a budget lawyer and for 100 I could go get budget advise so thats what I did. This is where Kenny Rogers came in, you know the country singer, “You got to know when to hold them, and you got to know when to fold them”. I folded on that battle because it just wasn’t worth it. In the end my new bank gave me a loan to pay it off and I ended up with a better financing deal than the owner financing. Now I was making even more money from the rental because my payment had gone down. Fancy trick called “Amortization“, more on that later.
There you have it, my first deal in a nutshell. I think the biggest take away from this is that I didn’t go out to buy my first house but instead I bought a future investment. I delayed living in a appropriate housing situation until I could get my investments started. Not sure that this is the best course of action but it was one possible journey out of an infinite number. Looking back there were many shortcuts I could have taken but you don’t know what you don’t know. I jumped in head first, shit, I had nothing to lose so why not. You have to assess your own situation and if you have nothing to lose than its a no brainer. Peace.