Buy Now?

We are in the market for a new home. Most people would probably judge us; we currently reside in a decent home and now is just not a buyers’ market. Prices are high and interest is even higher. Regardless, this is the first time we’ve shopped for real estate using an emotional versus a strictly business lens. Of course, we’ve got a plan to mitigate the impact of a not so favorable market!

Before sharing our plan, I’ll try to explain how we got here, searching for a home in probably the worst possible time for buyers, as I think our story is a cautionary tale. We’ve lived financial truths that are paving the way for financial freedom in the not-too-distant future. What’s financial freedom? Early retirement with enough resources to live our desired lifestyle without worrying.

The truths we applied in our financial life- frugality, investing often and real estate have produced outstanding results but also came at a personal cost. Over the years, we deprived ourselves of some wants, focusing more on providing for our family’s needs with an eye towards saving for the future. Perhaps nowhere was this more apparent than in the homes we lived in.  

While many of our friends lived in nice single-family homes, we lived in one side of one of our duplexes. When we did have an opportunity to purchase our first single family home, a mere eight years ago, we purchased the home as we always had, through a business perspective. We chose a nice but relatively modest home that could be easily converted into a rental.

And this is where we sort of goofed up. When we purchased our current home, prices were excellent and interest rates very low. Hindsight is always 20/20, if we had known we would put down some roots in this area, we could have stretched a little more and chose a home that we’d be happy in for many years, perhaps forever. Even after a few years when it became apparent, we weren’t leaving, there was ample opportunity to catch a good buyers’ market.  

But we didn’t. We let wonderful homes and low interest rates pass us by. In fact, on one particular home, we walked out of a contract losing some earnest money in the process. Now we are looking to buy in these awful market conditions. How did two fairly experienced real estate investors get into such a pickle?

Fear, plain and simple. While we’ve purchased 11 homes in our life, they were all investment properties. We never really considered what we would look for in a dream home. Now we are questioning our every move. Will we like the location? Will we like the features? Could we make improvements if needed? It sure is a lot easier to buy a home through the lens of a business decision!

Compounding this fear was some uncertainty in our lives. In 2019 I left the relative security of a military career. I hadn’t been a civilian in a quarter century and really didn’t know anything about the job market. As it turns out, I had nothing to worry about, but still it made us hesitate on several opportunities. Finally, a three year long global pandemic didn’t help ease our fears of making the wrong move on a home either!

So how do we get out of this mess and find a “forever” home in these horrible market conditions?  Well first of all we have to stop dwelling on the past and focus on the future. My wife and I both have a tendency to “what if” ourselves too much. What if, we had just bought that house we looked at in June of 2019 at 2% interest! While we need to learn from our past mistakes, we don’t need to dwell there. We are shopping for a house like a couple of newlyweds and moving on from our past mistakes!  

Second, we do have to work the numbers much harder than before. We are planning to put nearly 50% down on our new home. Fundamentally, I’d never want to tie up so much capital in our primary residence, but desperate times call for desperate measures and it’s the only way we can mitigate a higher mortgage interest rate. On that note, there is one bright spot, all that mortgage interest will certainly look good in the coming years itemized deductions!

Additionally, as soon as rates lower (assuming they do) we will refinance. Thanks to our rental property investing experience, refi’s are a piece of cake for us. With a little luck, rates will fall again. Lastly, part of our definition of “financial freedom” is to pay off our primary residence mortgage. We aren’t there yet but on glideslope to do so in around 10 years. By putting more down, this will make that goal even more achievable.

So even though the prime buyers’ market from just a few years ago is gone forever and we completely blew it, there is a lot of hope for the future. There will always be a home for sale, we just have to put our fears aside, find the right one and close the deal. Something we’ve done almost a dozen times before, it’s just personal this time!

Interested in rental property investing? Look for “Collect Rent, Don’t Pay It: A Beginner’s Guide to Rental Property Investing” on Amazon to learn how our family turned rental property investing into a successful side hustle!

Looking for a good how-to on wealth building? Check out my book, Millionaire on a Worker’s Budget: Five Financial Truth’s to Build Wealth on sale now at Amazon!

The commentary provided in this blog is for informational purposes only and is not intended to be a source of financial or investing advice.

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