Prior to Starting My Business
It was 2008, about a year before the financial meltdown which we now call The Great Recession. I owned just one property at the time (currently rental house #1) as my primary residence. I had owned this house for approximately 2 years. I had also taken advantage of easy financing by only making a down payment of 5% on a 205k property. The great part was I didn’t have to come up with a lot of cash to buy my first house but I had a higher monthly payment.
Of course, you would think that a higher monthly payment would come with further financial difficulty down the line, but I think I was pretty lucky that I was able to handle this with little to no problems at all. Although, not everyone is lucky and I know some people who have had to take out an installment loan, with somewhere like Tower Loan (https://www.towerloan.com/lending/installment-loans/) to help cover the cost of their mortgage payments. They do still need to pay that money back in monthly installments but this will be made at a set price, so they should be able to pay back all the money they’ve borrowed. It sounds like a good option to me, especially if you’re struggling with your bills. For me, I think I found myself in a pretty good situation.
This was the year I decided to quit my day job and start my own business. I mentioned a little about this on my ABOUT ME page. My total mortgage payment with taxes, insurance and PMI was $1920. My interest rate was 6.5%.
I was living with my soon-to-be wife at the time. We were in a suburb just outside of the city. Her commute downtown with traffic was an hour each way. So what we decided to do was look for a cheaper property that was closer to downtown and try to rent out our house.
We first found a location that was much closer for her and actually slightly closer for me. This area was a great compromise and there were many affordable condos here. I checked out Eddie Yan real estate but we couldn’t find one in the right location for us.
Next we started looking at viewing these condos that were in our new price range of less than $120k. I had actually looked at condos before a while before this, looking at Marco Island Condos For Sale but never pulling the trigger on a deal so I knew what I was doing. We ended up finding one that was about 750 sq. ft. This would be a big change from being used to about 2200 sq. ft. but we both agreed we could make it work. My wife took advantage of the first-time homebuyer credit as well of about $8,000. We were able to purchase the condo through the FHA with a minimal amount down at an interest rate of 5%. We figured our new total monthly payment would be right at $1050 per month.
We then had our realtor pull rent figures in the neighborhood our house was in. They averaged about $1600/month which is what we ended up getting.
INCREASING OUR DEBTS TO SAVE MONEY
So here’s what the new numbers looked like:
House Monthly Bills – $1920
House Monthly Rent – $1600
Condo Monthly Bills – $1050
New Monthly cost of $1370
Monthly Savings: $1920 – $1370 = $550
As you can see, these numbers look pretty good. Not only could we save $550/month but we were investing into another property that would eventually become our condo rental. My wife was also happy about her new commute time of less than 30 minutes! It even cut a few minutes off of my commute time as well. It also meant that we weren’t so tight on cash and could actually focus on repaying our debts. We got close to needing to take out a loan to afford our monthly bills and I found myself on this Website looking at the reviews a few times! We got there in the end though and it all started to get better from there.
So we downsized, sold a lot of our furniture, and I began finding ways to spend less. The $550/month savings at that time was huge when I wasn’t making any money yet, not to mention the gas savings that we now had with the shorter commutes. This point in time was a giant turning point in my life. I was now working for myself and learning how to live on less than ever before.
Now fast forward 6 years and the house is still a rental. It was refinanced a couple years ago and is currently getting $1700/mo in rent. The house has also had some nice appreciation which is just a bonus if I ever sold. The Condo is also a rental, currently at $1000/mo. You can find details of these plus my new Rental #3 on my REAL ESTATE page.
In the end, I’m extremely happy with our decision. It was truly life-changing!