In Part One of this series, I talked about my overall transition to San Francisco.
In this entry, I'll talk about some of the stresses involved in moving and cleaning up the personal finance life along with the move. As I wrote about in a series of posts in 2013, I purchased a house in Texas... Lovely carpeted bathroom. Oldest and smallest in the neighborhood: 1994 and 2,100 sqft.
I snagged an adjustable-rate mortgage in May 2013 for 2.50% APR. Boom. (Look at that timing! I predicted it perfectly!)
(Actually, I just got lucky and was giggling as rates were skyrocketing.)
At the time, many were doubting my usage of the ARM, especially with rates so historically low. I was planning on not having to sell for a while but I wanted to secure the better cash flow in my time in the house. Situations change. Within 17 months from the purchase of my house, I had a job offer across the country and I decided to take the plunge and move.
My last day for my previous company in Texas was December 1st. My first day at my new company in California was December 2nd. It was quite the commute! (Thank you, Spirit Airlines... I'm missing that DFW hub).
I flew into San Francisco and it was raining the entire week there and it has barely rained since. (I am not joking.) I still had the house in Texas rented out, though. I had checked Zillow and had gained a bit of equity in my house but I had the house rented out to tenants so I thought I would hold onto it for a while.
Hail broke a skylight. Water heater broke. Dogs ate my fence.
The little annoyances of long-distance ownership started to pile up as I was getting acclimated in a new city in a new time-zone. It was always a delight receiving municipal calls about gas outages and the like at 8am Central time on a weekday.
Later in the spring, the tenants had decided to move on (I had known them previously) from the Texas house so I decided to sell it after checking the market.
Could I FSBO from across the country? The answer is yes! One of my friends from my time in Texas had been in the market for houses in the area and was looking for the exact specifications of my house. Hooray for generic 3br/2ba! I put a little bit of money bringing the place up to snuff and then wrote the papers. This is when the joy began...
I met with a real estate lawyer and had him draft up the documents (total expense of $1,000). We sent it over to the buyers and we had it signed the same day. The closing got pushed once and there was some escrow delay due to some confusion at the title company but everything cleared and we’re good now.
Now, I can share with you the numbers of my 25-month housing investment – with everything indexed to $100,000 for a bit of anonymity. Only the purchase price vs. capital improvements, etc. Sorry, not going to reveal some of the rent numbers and cash flow stuff:
- Purchase Price $100,000
- Air Conditioner $4,105
- Lawyer Fee - $1,000
- Repairs $465.78
- Carpet Installation $1,210
- Sales Price $110,526
ROA – 2.35%
So, was it a good investment? The keys the above calculations are missing is the rent cash flow and the leverage associated with the investment. It is difficult to calculate an exact ROE due to the many different inflows and outflows – rent payments, mortgage payments, capital improvements, expenses, etc. Most of my estimates have come to between 25%-35% per year during those two years. I took the proceeds, killed my student loans and am now just tossing the rest of the money in stocks now.
I made a bunch of mistakes along the way.
I'm going to have to pay LTCG on the sale of the house because I didn't live in it as a primary house for 2 years. I started capital improvements I wasn’t able to finish. I underestimated the necessity of an air conditioner in a Dallas August(!).
Overall, though, it was a very positive experience – I loved owning a house and enjoyed the process during both the purchase and the sale. Luckily, I was able to find a purchaser on my own accord and avoid the process with a realtor with having to sell from afar. I didn’t even have to go back for the closing! Although there was a surprising amount of faxing involved...
Come into the 21st century please title companies.