Story of a Trying Newbie -- My 1st Purchase

[Fay Chen]

Hello, everyone. I'm a new real estate investor. I would like to share the story of my first home. It's not a success story, rather a learning experience. Since I'm not good at writing, I organized the story in the easiest form for me. If the pictures don't come out in the post. I'll post them later.

Time

Fall 2008

Situation

• Graduated from state college w/ no student loan
• Internship job paid for college expenses
• Parents gave me some money intended for college tuition. Majority of it’s saved.
• Living with parents in SoCal

Goal

• Move out of parents’ house
• Buy a property close to work (30min in traffic to Downtown LA)
• Target area: Pasadena, San Gabriel Valley (A neighborhood for safety reasons)
• Price range $300K~ $400K for 2bd condo

Action

• Budget expenses to save more money for 20% down payment
• Created a spreadsheet and figured I could save $1000 per paycheck, $2000 per month
• Created a spreadsheet to project my savings

Time

Spring 2010

Situation

Own more than $80K in the savings

Goal

Purchase target condo in Pasadena (short sale, some repairs needed)

Action

• Made spreadsheet to find out if I can afford the condo and the repairs needed
• Proceeded to offer and eventually got the condo with 20% down
• Received 1st time home buyer credit, $8000 from fed, $1000/3 years from state

House
Down payment	$71,800
House Price	$359,000
Loan	$287,200
% Down Payment	20.0
Loan Term (Year)	30
Loan Interest Rate	5.25
Monthly Payment	$1,586

Time

May 2010 – Jan 2014

Situation

• The majority of my paycheck is tied up in the house
• Frequent plumbing problems including leaky toilet from upstairs unit
• HOA reserve is underfunded
• Condo hacked by renting out spare bedroom at $900/mo

Goal

Upgrade to a more effective investment property

Action

• Fixed up condo with credits received
• Put in new flooring
• Sold condo at $428K, cashed out with a total of $200K
• Purchased SFR in the suburbs (Pomona) and leased it out for $500/mo Free Cash Flow
• Left with $80K in the savings and growing at $3400/mon.
• Now looking for another investment property

Lessons Learned

• My parent's education fund for me gave me a kick start. Not having student loan is great. I went to a state university. I felt I got quality education at an affordable price.
• Budget is my best friend. I keep track of every dollar I spend using an app.
• Not all short sales are created equal. Bank-approved short sales can be easier than what your agent says.
• Interview many contractors. I interviewed at least 8 contractors and tried to schedule them back to back with each other. I typed the scope of work and handed a copy to every contractor.
• Don’t overdo it. I probably spent more than I should on the flooring. The buyer purchased the property as a rental unit. So I don’t think a cheaper grade would’ve made any difference on the sale price.
• Staging is important. My cash buyer ended up paying for my furniture, which saved me the hassle of moving them out of the second-story condo.
• Some cities, like Pasadena, may require an inspection before you can sell your house. I didn’t know this. It was hard to schedule an appointment with the city inspector, and he withheld the permit because of a non-working electric outlet. That could’ve cost me the deal.
• HOA's cannot be trusted. They are quick to make rules, but slow when you need anything from them.
• Save your annual HOA reports. The buyer may ask for it. In that case, you won't have to beg the HOA for another copy.
• Now I can save $3400/mo after selling the condo. It’s a big relief that I don’t own a property that eats all of my paycheck every month.