Sunday, January 20, 2013
A little background...(Part 1)
I never intended to become a real estate investor. But I got caught up in the real estate investing mania sweeping the world following the Dot Com bust of 2001. You could say I was late to the game. My real estate experience up to 2003 was limited--to say the least.
Around 1997 we had purchased our first home--a single-wide mobile home in California, which resided in a mobile home park. It cost us somewhere in the neighborhood of $18k and we had to put 25% down to purchase. I remember sitting in the banker's office where he stated that it was worth a good deal more. I was pleased to have some equity in something resembling real estate even if it was a generally depreciating asset. Mobile homes aren't like houses, especially if they are parked in a mobile home park where someone else owns the land they sit upon. But it was ours! We paid it off in a few short years.
Little did we realize that even in the case of mobile homes, in an escalating real estate market, ALL boats rise with the tide. We had subsequently moved to Oklahoma and decided to sell it a couple of years later. At best, we expected to sell for somewhere around $27,000. This was closer to the real value of our 60' long x 14' single-wide mobile home on rented land. We were pleasantly surprised--no...shocked--when the realtor told us that the market value justified an asking price of $55,000. Within a relatively few weeks we found a buyer and settled for $52,500. Wow! That was unexpected. We ultimately added that to our savings and both cashed out our IRA's for the lifetime $10,000 penalty free withdrawal (Total $20,000.00) and subsequently bought a 3 bedroom 2 bath brick house with a nice family room including a fireplace in SW Oklahoma for 77k cash. I can tell you that it was an awesome feeling to own our house outright.
A few years later (2006), we decided to move to Costa Rica. While living in Costa Rica we sold that house for $105k just before the housing market crashed in 2007. However, I'm getting ahead myself...
With our personal residence fully owned, we easily qualified for an ING HELOC of $51,500.00 This turned out to be a useful tool for our first real estate investing venture in 2003--a "fix and flip" project.
I had done a lot of reading and though a little late to the real estate party, I decided that a "flip" house could be both fun and interesting, (if not a little scary). Having owned several small, successful janitorial businesses since high school, I had some financial acumen, but was modestly aware of my limitations. Therefore, this first investment had a very simple stated goal, "I'll be happy to just break even". I'm not a construction guy, per se, but I can do minor repairs of the handyman type fairly well. I can construct spreadsheets, and I was debt-free. These were all advantages to venturing off into the real estate investing universe.
Soooo....I bought real estate books and I read, and read and read some more. I read online, I talked with other RE investors and I looked for my first test property. Found...one vacant property.
To be continued....