Well, they say it only takes one buyer to want your house, and one buyer did we get!
WE SOLD OUR HOUSE, GUYS!
I CAN’T BELIEVE IT!!
Over a month on the market, over another month for the closing, and then BOOM: docs signed and the biggest financial mistake of our lives officially came to a close! 9 years from not knowing jack about money all the way to where we are now having a MUCH better understanding of the way the world works. And, most importantly, the way *I* work. After all, they call it “personal” finance for a reason, eh?
And one word sums up the biggest change in my mentality since: “Congrats”. A line that was repeated 18 times to the buyer of our house, and one which I almost gagged at hearing the first 17 times.
“Congrats on now being in $300,000 debt??” I almost blurted out loud.
“Congrats on being tied to maintenance and extra bills and a job for years and years to come?” I followed it up with inside…
Quite a difference from the decade prior when WE were the ones on the receiving end of such “thanks,” and feeling on top of the world, haha… Little did we know we were chasing the wrong thing at the time and it would become one of our biggest financial mistakes. And coincidentally enough, we sat in the exact same chairs in the exact same conference room, and in the exact same office as we had just 9 years earlier signing away the paperwork! Pretty wild stuff…
Of course, for
some many home ownership is The American Dream* and one worth fighting for, no doubt about it, but it took me a while to realize there are other paths one can choose too which are equally OK. And while others may snicker or tell you it’s stupid (after all, renting is just throwing money down the drain, right?), it’s still perfectly fine to chase them. Again, if you’re putting your own ideal lifestyle ahead of everything else – even (especially) conventional wisdom.
(The main reasons we no longer wanted to be homeowners, btw, outside of all the expenses that come along with it, is the freedom and stress-free living that renting gives you. And since you can invest the difference of the money you’re saving in doing so, you can still easily “invest in your future” as you would a home. If you believe your home is even a true investment.)
But even knowing we didn’t want to be homeowners anymore, and especially landlords which we ended up becoming by default, it was still hard to break free and continue on our merry way. Our house was barely above water and we didn’t think we could sell it and come out alive anytime soon, so we continued renting it out until one magical day when we didn’t have to.
We just didn’t know that day had come :)
The Pros and Cons to Selling Our House
Two and a half years into renting out our house, our renter notified us that they were moving out early in September (military orders) so we joked about how awesome it would be if we could somehow unload it now. “No way” we thought, but we started running the numbers anyways playing the “what if” game, and eventually threw it out to y’all to get your opinion on whether it was the right time to sell or not.
Over 150 of y’all chimed in and told us what you thought (thanks!), and while it was pretty divided down the list as to what we should do, we were of course heavily leaning towards getting rid of it once and for all. But it was certainly a tough call, and here’s why:
The pros to selling the house:
- No more worry/headache
- No more bleeding of $$ every month ($600’ish with no extra principal being paid, $900’ish with – and we had been paying off extra like clockwork since the very beginning)
- No more anxiety any time a call/email comes from the property manager
- No more feeling like you have an extension of yourself somewhere. And far away at that.
- No more having our largest $$ mistake on the books!
Cons to selling the house:
- Winter was coming! A bad time to sell!
- It would cost us a big chunk of cash out the door (we estimated closing costs to be around $20,000-$30,000)
- We’d be selling it at a loss (we bought the house for $360,000 and it was only worth between $280,000 and $320,000 – depending on who you asked/where you researched)
- We’d lose any chance of turning it into an extra income stream over the years
- It would take some bandwidth to get it prepared and cleaned up and ready to be shown properly
- It might not be the best time to sell as the market hasn’t fully recovered/improved?
- And, in a weird way, we’d lose our back up home if the $hit ever hit the fan
We went back and forth for weeks, and eventually the emotional side won out while wanting to preserve our cash flow at the same time. And who were we kidding – $900 (at least!) going out the door each month compared to renting is a massive line item in the budget!
So we pulled the trigger and held our breaths.
The Final Result?
Well, this is what I guestimated would happen before even sitting down with our realtor:
(I know I know, shame on us for using a realtor! The nerve of not doing it ourselves and saving thousands in commission! :) If I thought I was smart/diligent enough to pull it off without blowing something up I would have, but I’m not so I didn’t even risk it. We did get 1% shaved off the usual 6% though since we stuck with our same (awesome) realtor so that was a nice win.)
Anyways, the prognotion:
Best case we walk away with $10,000’ish if we sell and no longer bleed $600/mo, and worst case we need to come up with $40,000+ to seal the deal, but we still get to stop the bleeding every month. And more than likely it’ll be somewhere in the middle.
A big gap between earning $10,000 or losing $40,000+ to offload it, haha, but correct I was in stating it would be somewhere in the middle :)
The final sales price was $300,000 (we started at $310,000 and dropped it after a few weeks) and we ended up bringing $14,000 and change to the table to wrap it all up. So not the best, but certainly not the worst case either. We also spent $3,000 fixing it up (carpet, paint, odds and ends), and then lost about a month and a half of rental income on top (an extra $2,400)
But – and this is a great but! – we lucked out in that not only did we find the perfect buyer for our house in terms of our unique layout, AND in the middle of winter, but he also wanted to move in ASAP! It was Christmastime and the poor guy was living out of a motel, so he literally paid us (above market) rent for 3 weeks straight while going through the paperwork and home inspections, yada yada yada, which helped offset it a bit. So that gave us a bump of $1,500 in cash and a little in utility savings as well.
So, in a nutshell, we paid interest for 9 years straight (totaling $160,000+), mortgage principal for 9 years straight ($70,000+), over $30,000 in repairs/maintenance/upgrades, and then in order to unload the house once and for all we had to pony up an additional $12,500.
A grand total of over $272,000 to “own” our house – what a bargain! ;) And that’s all *after-tax* money too, btw, so we had to earn about $400,000 just to pay for it all.
Of course, there were tax write-offs in there too and rent checks that softened the blow, and if we were renting something similar during that time we still would have had to dish out a ton of money (though closer to the $150,000-$180,000 range, leaving $100,000’ish to be saved/invested somewhere!) but however you look at it we were spending gobs of money for something we no longer cared about anymore. And that sucks no matter how you look at it.
But now??? We’re home-free, baby!! Literally!
We got our freedom back, our money back, and most importantly – our mental energy back. And I couldn’t be happier. My wife on the other hand is going through some sort of sadness phase right now (thinking about all the great memories we once had there like our newlywed days and the birth of Baby Penny), but she too knows deep down it was the right decision and was time to move on.
What the future now holds only time will tell, but what I do know is that there is no way in hell am I dropping a third of a million dollars again ON A WHIM for something just because everyone else is doing it. And certainly not with $0 money down and 100% financed!! *shakes head*
Every action going forward will be made both consciously, and towards what we ultimately want in life… And not what someone says is what we should want in life. I’m all grown up now y’all, look at me! :)
Oh, and there’s another cool win in this too, albeit a nerdy one:
We now have SIX less bills to track and pay each month! Hooray for minimalism! One (not so simple) transaction that further eradicates a handful of bills going forward. Particularly:
- 1st mortgage ($1,875, which we rounded up to $2,000 each month for extra principal payment)
- 2nd mortgage ($60, which we rounded up to $200 each month)
- Home owners association #1 ($95’ish)
- Home owners #2 ($45’ish – why we had two I couldn’t tell you)
- Property manager fee ($150’ish)
- Rental property insurance ($186.10/year)
6 less things to worry about totaling a whopping $2,500’ish/mo after you throw in maintenance, upgrades, and of course all that extra principal payment so you don’t have to be in debt for the rest of your lives… Not gonna miss that!
So all this to say we’re extremely glad we took the risk three months ago and went for the gold here. Would it have been that bad to keep renting it out over the years and eventually come up cash flow positive with a nice rental on our hands down the line? No. I’m sure it would have worked out. But man would it had drained us over time… And that was not something I was looking forward to.
You all know by now I harness my emotions in everything I do with our money, and I’m not afraid to continue doing so despite what the gurus may say. It’s one of the best ways I know how to stay excited and motivated with my money! I’d have given up long ago if all this stuff bored me!
Anyways, our house is now sold and we continue forward working on the next thing… Our net worth is about to be pummeled losing that gap in home equity and the extra $13,000 we just dropped on it, but short term pain for long term gain!
Upwards and onwards!
PS: I should note, I don’t regret buying the house for a minute. Going through this 9-year process and learning about myself – and money in general – was one of the best things that could have ever happened. Not only did it shock me back to reality, but it’s BECAUSE of this house that I went online and eventually started this random blog! Which changed my life and career and opportunities – and especially my friends! YOU! So the biggest financial mistake on the books, but the best move ever for a completely changed life… Crazy how things turn out :)
* I know I’ll receive some hate on this post because it seems like I’m bashing home ownership here, but please know that I am not. I’m just bashing it FOR US and what we want in our lives at this given point in time (maybe it’ll change later?). If your home is awesome and giving you mad love, financially and/or emotionally, I am envious of you! And congratulate the hell out of you for figuring it out and not being such a dumb ass like us! Keep killing it over there and listening to that inner voice of yours… it’s obviously working :)
[Photo by MsSaraKelly / tweaked by J$]
Jay loves talking about money, collecting coins, blasting hip-hop, and hanging out with his three beautiful boys. You can check out all of his online projects at jmoney.biz. Thanks for reading the blog!