In 2010 at the height of the Great Recession, I bought my first real estate property and became an accidental home owner. Up until then, my parents and I lived in an apartment rented at below market rate. Because I have started working, we no longer qualify for the government housing program. Although we never owned any real estate before, we always knew owning a home is a basic step to financial security. So instead of looking for another apartment to rent and have others dictate our come and go, I decided to take the plunge and purchase a primary residence.
I’ve always been frugal due to my upbringing. In my first couple jobs, I saved 80% (probably more) of my income. Combined that with the little savings my parents had, I was able to afford the downpayment on a house in an “up and coming but far from there” neighborhood. It was unsettling. I’ve never spent so much money in my life before, housing prices were still dropping left and right, and headline after headline in the news said the economy was coming to an end. We poured in all the money we could scrape for the downpayment and held on to the belief that it is better to be an owner than a renter in the long term, especially in the Bay Area.
Since then, we’ve seen tremendous growth of housing prices as well as rent. I remember back then, a $1500/month rent for a 2-bedroom unit is considered expensive. Now you can’t even find one for less than $3500. At the same time, my monthly mortgage payment has gone down (it was refinanced a few times). Had I not purchased the house, we would have been priced out of living in the Bay Area altogether. I’ve since moved out of the house, but my parents still live there. As with any real estate properties purchased back then, the value of the house has doubled. The mortgage payment on the home is at least 50% lower than market rent for a similar unit in the same neighborhood. Best of all, I’m building equity off of those payments instead of to someone else’s pocket.
Whether that first property was pure luck or not, I continued to buy more real estate properties in the next few years even though prices were rising. And all of them have benefitted from appreciation of both price and rent, as well as mortgage paydown at a very low interest rate. Lesson here is, give it a serious thought when it comes to owning a home. This is especially true in places that have seen historical price appreciation. There are many ways to make this happen, and I’ll write more in a later post on how I did it.