How I Bought A house for $1700 Out of Pocket

[Amanda Chandler]

I recently rented out my first home I purchased with $1700 and wanted to share how I did this in hopes of helping others get creative. 

Background/My Story: Grew up in a middle-class family in San Diego, CA. I've always loved real estate and been drawn to it. I got my license in California in 2016 while still in college. I hustled for a year and learned a lot about the business. It is tough. In 2017, my then-boyfriend, now fiance, won a Rottweiler puppy from a breeder (it's a whole other story). I've never been close to my family and things got worse as I got older, and we had nowhere to keep the puppy. We were naive and young, but basically picked up the puppy Saturday, stayed in a hotel 1 night, and headed out to Austin, TX, on Sunday with a little bit of savings and no jobs.

Fast forward a year. We lived in one of the few pet-friendly apartments that took our dog in an Austin suburb. My boyfriend worked in painting selling paint jobs as a 1099 contractor and I was an Executive Assistant making $50K. We were doing okay but living paycheck to paycheck and had a couple thousand dollars in savings. I knew absolutely nothing about personal finance, financial independence, investing in real estate (I know naive). Literally nothing. I thought you just kept working and getting raises and eventually, things just got better. However, I knew deep down we needed a house for our dog but no one would rent to us so I decided we were going to buy a house. It was never intended to be an investment as I had 0 idea how that worked, I just wanted a home for my dog. Here's where it gets interesting.

How I Bought the House:
Financing: When we first moved to Austin, we went to some model homes in a gated community and got a business card for their preferred lender. Somehow I held onto the card for about a year and called the lender. Full disclosure, the company was CMG Financial, but I'm not going to share the lender, connect with me and I'll share if you're really interested. Since I was in real estate for a year previously, I knew the basics of loans (Conventional, FHA, VA, USDA). I knew I couldn't put 5% down for a conventional loan, so I was shooting for FHA. One thing I did have in my favor was great credit (750+).

This lender was very thorough and creative which I very much appreciated. My fiance could not be on the loan because he was 1099 and only did it for about 1 year, so he did not qualify. I was going to be on the mortgage alone, and again, I made 50K a year. This lender told me about a program called HomeFundIt, link here https://www.homefundit.com/e. Basically, it's a 3% conventional loan where you can crowdfund your downpayment. You (the buyer) puts down 1%, the lender contributes 1%, and your agent can contribute 1%. Sounded great to me. I knew I could scrape together 1% of a purchase price. You can also use their site, like GoFundMe, where friends and family can contribute. We didn't do this, but it's a great option.

If you aren't aware, TX has very high property taxes, they really impact how much you can afford.
So, I was pre-approved for the following: 
-Purchase price no more than $240,000
-Tax rate no more than 2.4% (In the Austin area they can range from 1.8% - 3%)
-HOA $25 a month

My lender referred me to 2 programs to help with down payment since I was low income. The first is through BCL of Texas https://bcloftexas.org/. At the time, they had a program that would match what you put down. I believe for $1500 out of my pocket they gave me $7500. Here's the catch, it is interest-free money but is a 2nd lien on your home for 3 years. After 3 years, they will remove the lien automatically. If you sell within the 3 years, you owe a portion back to BCL. To get this money, I essentially had to have a meeting with BCL and bring paperwork like tax returns, pay stubs, pre-approval letters, and I believe I had to take a simple 1st-time buyer class. One caveat was BCL's money was a pool and the pool was going to dry up in July 2018, so essentially I had to close on a home by June 30, 2018, and we started this process in March. With my BCL funds, my lender suggested paying off my mortgage insurance premium upfront to make my monthly payment more affordable.

The second program my lender referred me to was a Mortgage Credit Certificate. Essentially, you get a tax credit based on interest paid. The goal is to make homeownership costs offset for lower-income borrowers. For me, this is $2,000 a year and is a fixed amount for the lifetime of my loan (maybe how long I own the house, I honestly can't remember this detail). That comes out to $60,000 over 30 years of my loan, not bad. I also believe there was a simple online course I had to take, took 45 minutes or less.

Real Estate Agent: My lender referred me to an agent who had used this program with other buyers. I did not have my license in TX at the time so this worked great. My agent was great and helped us decide we wanted to buy new construction. Given our budget and time constraints (new homes are usually in high tax rates), we only had a couple of options. 

New Construction: We went with new construction for a few reasons. First, we didn't have the funds to buy a home that needed work. Even painting and 1 other minor cosmetic thing would have been out of our budget. New construction gave us a modern design and we would ideally not have any major repairs for 10 years or so. As stated, with budget constraints and time constraints, we found 1 home that met our timeline and budget. 

One underrated benefit about new construction is that they will usually pay a good portion if not all of your closing costs. Again, on a very limited budget, this really helped us out. 

Our builder also provided a 1-year end to end warranty on everything, a 2-year warranty on all major appliances, and a 10-year warranty on structural. 

Putting it all Together
Long story short, after a lot of stress, we ended up closing on the house 6/30/2018. Here's how I made the numbers work. 

Purchase price: $232,000 (my tax rate is 2.23 and HOA $25 a month)

Loan Amount: $227,000

Amount I brought to the transaction:

Deposit given to the builder when I went under contract: $1,000

Costs to close brought to closing: $744.59

Total brought by Buyer: 1,744.59

Other funds brought by other parties:

Closing Costs (paid by builder): $5,934.15

HomeFundIt Down Payment assistance (from lender and agent): $4,690.10

BCL funds (for mortgage insurance and other fees): $7,164

Total brought by other parties: 17,788.25

Annual Mortgage Credit Certificate: $2,000

In November of 2018, I stumbled across Rich Dad Poor Dad and my life was changed. I know many people say that book was life-changing, but it truly made an impact on me unlike anything else. I learned that there was a way out of working for others and that was what I wanted. I also realized I wanted to invest in real estate. Then, I found Brandon Turner's book on Rental Properties and David Greene's BRRR Book. I also started listening to the Bigger Pockets Podcast.

From learning, I still don't know how to explain how I bought the house but I think it was awesome. If I knew what I know now, I would have tried really really hard to find a duplex or a property with a guest house I could have rented out, but you live and you learn. 

Since December 2018, my fiance and I have worked really hard to make more money and save more money. I am happy to say, I alone have doubled my income from when I bought this house through my job (got into a new position and getting raises) and side hustles. We also have a 6-month emergency fund, savings, and money in our checking accounts - no longer paycheck to paycheck.

In July 2020, we decided to move to Knoxville, TN. We are under contract on another new build and I got my TN license to represent myself. We will be moving in late September 2020. We bought a new build site unseen, but it's impossible to rent with our dogs. I work remote and my fiance is starting a painting company in Knoxville.

Our home here in Austin that this post was about is officially rented and I'm self-managing. We'll be making about $250 a month after expenses. We had to keep the house for at least a year because of the BCL lien, but we are not mad about it. In a couple of years we plan to sell and reinvest profits. Right now we're probably at $40K in equity, hopefully that keeps going up. If not, we will keep renting it. I am just thrilled to be a landlord! I have a whole post on some lessons learned on that process here https://www.biggerpockets.com/...

A lot of drivers for our move, but one major one is investing. Tennessee property taxes are much lower in Texas which is very appealing to us. We are interested in getting into some BRRR properties to start. Eventually, I'd like to become a developer for 300-500K track modern homes and 100% pet-friendly apartments or townhomes. I feel like we're just getting started and there is so much good to come!

I share all this not to brag at all but to tell you that if I could do it, so can you, I promise. I was 23 when I bought this home and am now 25 and will soon own 2 properties. My life has changed completely in less than 2 years from learning and spending my time on working diligently to grow my income. 

If you have any questions about my post or just want to connect, I'd love to meet some like-minded people! Thanks to all who have read this and who are on this awesome platform! Pics are of my first property and my inspiration for all this, my dog King. Yup, I'm a crazy dog person!