Hello everyone! Welcome to the second post in my new series, Learning from Money Mistakes. The idea behind this series is simple: I have certainly made my fair share of money mistakes along the way, and luckily I have learned from all of them! So I am sharing my money mistakes with you all with hope that you can avoid making some of the same mistakes that I/we have made.
Here is one of our biggest money mistakes ever: we bought a home in a city that we did not know how long we would be living in. I was completing some training at a local university, and so we knew when we purchased the home that we would be there for a minimum of three years. Truth be told, I’m not sure why we decided to buy a house there; I think originally we thought we might like it and decide to stay longer than just three years. In theory this was a great idea but it turned out that hubby HATED his job there, and it was really far from our home state where our parents and other relatives live. So at the end of three years we were really ready to hit the road.
Our home there was actually pretty great, in a suburb about 20-30 minutes commute from our jobs in a major metro area. We had painted just about every room and done some other nice updating, including a DIY backyard paver patio install. One would think that selling it should not have been a major issue. Just one problem: right as we were getting ready to list our house to sell, the local school district changed their enrollment policy to allow open enrollment for students from other districts. Parents were in an uproar, and basically the school district that our home was in suddenly became a much less desirable school district compared to the surrounding districts. That, combined with the fact that the housing market in our area had been hit pretty hard by the housing bubble and recession anyway, meant that selling our home became Much. More. Difficult.
Long story short, we could not sell it after several months on the market. Luckily we were able to rent it out quickly (it was only empty for about three weeks between when we moved out and the tenants moved in). However, we now live several states away so we HAVE to have a property manager, which eats up 10% of the rent. Despite the fact that we are actually getting a lot of rent for the place, we still lose about $180 a month on that house after we pay the mortgage and the property manager. Yeah. That sucks.
Here’s the good news- we do have another rental property that does actually make money! But that property only makes something like $135 a month, so our net rental property income every month is currently standing around negative $44, and that is during months when there are no expenses. Both homes are in pretty good shape so there aren’t too many expenses, but random things do come up once in a while.
So what is the learning point here? The moral of this story, and my strong recommendation to all you prospective homeowners out there: don’t buy a home unless you are absolutely certain that you are going to stay in it or want to keep it for at least five years or so (probably longer!) This is something that you often hear mentioned, and we have now learned it the hard way.
So what are we going to do about this situation? Well, first of all we are thankful for having good tenants and a good property manger. We are thankful that the mortgage is not underwater. Our current tenant’s lease is up in August 2014, so our plan at this point is to list the house again late next summer. We will probably price it “to sell” in the interest of getting it sold ASAP. We have also been diligent about making sure that we have a solid emergency fund these days, since we have these two rental properties that anything could go wrong with and we are also hopefully going to be adopting a child in the coming months.
As I finish typing this I have to actively remind myself not to beat myself up too much over this situation. Seriously, every article about buying a home starts off with the advice that you should not buy a home unless you know you are going to stay in it for a certain amount of years, right? In some ways I can’t believe that we made this mistake. But here is the silver lining: we have learned this lesson well, and we will never make this mistake again!
Anyone else out there guilty of buying a home when you would have been better off renting?
Photo credit: http://www.flickr.com/photos/jwthompson2/