Raise your hand if this story sounds familiar to you.
You decide to buy a house or a condo or a duplex or whatever. Because someone told that real estate was a sound investment. Because you will always see a return on your investment. Because it’s seriously fool proof!
Then 2008 happened. And you are left holding the bag on a house you maybe only sorta can afford as you watch it sink further and further underwater while you desperately try to dog paddle yourself and your meager belongings to shore.
Here’s where I roll my eyes so hard they actually pop out of my head. Because this happened to us.
The recession screwed a lot of people.
It screwed me and my husband. Though, admittedly, we did not take as large a hit as many other folks. We were able to stay in our condo. And while we quickly grew out of that “fool proof investment,” it was just the two of us and a couple of dogs so we made it work for a long time.
When we were finally ready to move into something a little larger than 600 square feet, about 5 years post recession, we came to the realization that we were STILL underwater on our condo.
And not just kinda sorta underwater, but A LOT underwater. We were sunk like the Titanic.
If we had tried to bail ourselves out from under that loan we would have had no money for a down payment on a new, larger house.
So we weighed our options and we did some research. We learned a few things.
- Condos were not increasing in equity post-crash as fast as single-family homes.
- Because the housing market was so depressed, first-time homebuyers who would normally be interested in a condo of our size were able to get a lot more house for a lot less money and were leaning towards single-family homes
- The rental market was booming because enough people had been hit hard by the recession and couldn’t necessarily afford to purchase new homes
- Our income had risen steadily enough over the past 5 years that we could “afford” (check the quotes) to purchase another property while holding onto our current property
And that is how we became accidental landlords.
We did the math and crunched the numbers and found out that if we could rent out our condo for enough to cover the mortgage and HOA fee each month, we could definitely afford to purchase a larger property for ourselves. One with a yard for our dogs. And a garage for our cars.
We even ran the “emergency” numbers to determine that if we got a renter who turned out to be a flake and never paid us, could we float both mortgages if we had to. It turned out we could.
Luckily, and I stress that this was a very lucky stroke of fortune for us, a family member of ours was looking to downsize at the same time we were looking to upsize. They offered to rent our condo from us when we moved out.
Now… this is not a course of action I’d recommend for everyone. Essentially, you’re mixing business with family here. And that’s… not always wise.
Once again, very luckily for us, this turned out to be a perfect arrangement. We weren’t necessarily making any money on the condo. In fact, most months we barely broke even. But we didn’t have to dump tens of thousands of dollars into a mortgage that we’d never see any return on either.
It’s been about 4 years since we entered into this arrangement with our family member and it is still working out for us. Hopefully it will continue for as long as it’s beneficial to all parties.
But, and I want to stress this for all the people who are in the same boat as us. It’s been 9 years since the recession and we are STILL underwater on this condo. And that is just on the mortgage. That doesn’t even count the money we put into the place to make it ours – new windows, new appliances, etc…
I’m telling you this story because I want you to realize that financial setbacks can be overcome. What felt like an insurmountable hurdle- being underwater on the mortgage – has been something of a learning experience for me and my husband.
Might we be doing even better financially if we hadn’t been saddled with that property? Maybe. If we had waited even one more year to buy a property, we could be living very different lives.
But the life we’re living now is not one I’d trade for anything in the world.
We grew and learned from this experience and I think, ultimately, it made us much more cautious and deliberate with our money and our spending than we would have been otherwise.
So, if you ever feel that your personal financial hurdles are just too much to overcome, I hope you’ll stop to think about the fact that you are not alone. There are millions of people who have lost money in the housing crash, in the recession, through “fool proof” financial gambles that turned out to be pretty poor in hindsight.
You can, however, pick yourself back up and get your financial house in order! It might suck for a little while. But it will make you a stronger, more resilient person. I promise.