Getting on the Real Estate Merry-go-Round

This March I will celebrate three years of homeownership and I'm thrilled. As a first time home owner, the path to my first real estate investment was long in the making. I planned, saved and searched and when a good opportunity presented itself I was ready. What I learned in the process has as much value as the financial rewards.

My journey began shortly after finishing my undergraduate studies. I had built up a small home improvement business, a modest down payment and got pre-qualified for a loan. All three of these factors would show sellers that despite being a first time home buyer, I was a serious buyer and not just out "kicking tires."

I also got my real estate license. Of course it is not necessary to take this step to purchase real estate but the rewards can make it very worthwhile. First, obtaining the license is an education in the legalities of real estate. You learn the language, terms and the processes. It also gives you access to the market and it lets you represent yourself. As you start purchasing real estate, your license makes you eligible for a commission (depending on the terms of the transaction). A typical commission is the same percentage as average closing costs which means no out of pocket expenses other than your down payment.

I felt armed and ready as I set priorities and goals. My initial idea was to purchase a two-family and let the rental income pay the mortgage. I wasn't opposed to a property that needed cosmetic updates but I didn't want to get involved in structural or mechanical renovations. In real estate terms, I wanted something with "good bones." I made location an important investment aspect but was personally flexible even though I intended to live in the property.

I pinned a central location and searched every neighborhood within a 30 mile radius. I considered all options: rural, urban, suburban, every size, shape and color. I even considered partnering with others looking to invest. I spent two years scouring the market. I saw more kitchens, furnaces and bathrooms in those two years than anybody should. As the time went by, I started growing discouraged. Despite all my planning and preparation I found myself looking to buy in an over-inflated real estate market. Properties were overpriced and there were not much available in my price range.

Most of the two-families I saw were so run-down they could've been condemned. Structures that needed almost complete renovation were selling at sky high prices. One property I looked at was leaking oil so badly in the cellar that the smell hit you before you got out of your car. Yet the owner was asking near half a million for the dilapidated two-family that had obviously not been well-maintained if at all.

Time after time, I got my hopes up on a new listing only to be disappointed. Then, one day while searching the MLS (Multiple Listing Service) for two-families, a little condominium popped up in my peripheral vision. It was located in a town with steady economic growth and a strong community. The condo was an end unit, had a garage and was in good shape. Although not at all what I was looking for, I thought it couldn't hurt to take a look.

I had originally told myself that my skills meant I was able to take on a sizable project. When I parked in front of my future home for the first time I realized I should forget my initial ambition and go for the affordable, comfortable, low maintenance opportunity that presented itself.

My gut actually claimed the condominium before I even crossed the threshold. This was admittedly a purely emotional reaction but turned out to be a sound instinct. I checked out the unit inside and my initial reaction turned into one of pure delight. It was perfect. Perfectly opposite of my original goal, but nicer than anything I'd seen on the real estate market in two years and it was within my price range.

Even though it "had me at hello," I had to back up my emotions with some rational input. I asked a builder friend I trusted to accompany me back for a second look. An engineer by training, he inspected the condo inside and out, poked at the mechanicals and told me to make an offer on this "no-brainer" before somebody else did. I closed on the property one month later.

It seems like yesterday but it will be three years in March. It took a lot of diligence but is now an accomplished dream. Here's why it worked:

Planning

Real Estate is seductive for many reasons. It offers financial incentives as well as emotional comfort. It can be a very good investment as well as fulfill personal dreams like creating a sanctuary for health, family or hobbies. It is a decision that needs advance planning. Mortgage qualification requires some financial stability including good credit and proof of steady income. It is also very helpful to have money saved not only for the down payment but also for mortgage payments, repairs and maintenance. Allowing yourself time to plan also clarifies your goals and helps you focus on making a good investment decision.

Preparation

When you are ready to invest in real estate get your "ducks in a row." Get your credit reports, clean up bad debt and get any credit in check. A lender doesn't know you personally and can only judge you on paper. Talk to your bank and mortgage companies to find out who will pre-qualify you and give you the best rate on a mortgage. Talk to friends and family about your real estate goals. Be open to listening to other's experience and advice, but use your own best judgment.

Patience

I was ready to buy in 2001 but it wasn't until three years later that I put my money into a real estate investment. There were many times during those three years where I almost sold myself short because I was discouraged and ready to settle or because I was feeling impatient. What kept me from making a bad investment was patience. Real Estate is a long-term investment. There are plenty of "quick flip" stories that indicate otherwise but overall a long-term outlook is wisest. It is relevant to both searching and owning real estate. Take your time.

Persistence

It never fails. You have a goal: own real estate. There are reasons why you made the decision to start looking into a real estate investment. The market will fluctuate. Prices will go up and down as will interest rates. Things will and constantly do change. The one thing you can control is your persistence. If you stick to your goals the right situation will present itself.

Recognize Opportunity

I had planned to buy a two-family which was a good idea. However, had I not listened to instinct I would have missed an opportunity. The property I own offers security and flexibility. It is a relatively low-risk real estate investment and is low-maintenance. It was an opportunity and I would've been a fool to let it pass by because it didn't fit precisely with my original plan. It's true that "life is what happens when you're making other plans." Sticking to a plan is a good thing but don't be stubborn about it if a better opportunity comes along.