From $500 Down to 6BR Home

Some people purchase real estate as an investment, anticipating price increases and making money from rental payments or property sales. For us, we just wanted to own the place that we live in and be in control of how long we could stay in it, paint walls and remodel as we like, and have set monthly payments that did not increase year-over-year. We ended up hitting the market at the ideal time and with a couple smart decisions and bold moves, we now outright own our amazing new home.

In short, it started when my husband purchased a condo in 2009 with $500 down. In eight years, the condo gained enough value for the equity to be the down payment on a modest home. Then in five years, that home gained enough value for the equity to fully purchase a brand new 6 bedroom view home in a lower cost-of-living area. If you’re like me and love the details and numbers, here’s our story.

2009 was the year of “growing up” a little bit for Dave. He was living with a group of friends who had all met just after college when they each moved from different areas to Seattle to work at Boeing. One of the guys was getting married, Dave and I were getting more serious in our relationship, and it was time for the guys to each find their own places. 2009 also happened to be the year after the housing crisis and the government was quick to incentivize first-time homebuyers by offering an $8,000 tax credit. Not only that, but a local credit union was offering qualified first-time homebuyers a loan with a down payment of only $500!

In September of 2009, Dave and I found a great 2 bed, 2 bath, 690 sq ft top floor condo in Seattle with a view of Lake Union. It was listed at $269,950 and he purchased it for $246,000 with $500 down. He took out a 30 year loan at 5.25% interest, making his monthly principal and interest payments $1,356. His other yearly costs were roughly $2,700 for property taxes, $200 for homeowners insurance, and $5,400 in HOA dues. So Dave’s total monthly payments for his condo were about $2,048.

We lived in the condo for three years and then rented it for five years at a rate that covered the costs. We moved out because we had to cut our monthly expenses while starting our business - where we lived while starting the brewery is an interesting story for another day! In 2017 we were married and ready to start a family and it was time to upgrade from the dingy basement apartment we were renting. First move was to sell the condo and then have the cash and loan pre-approval ready to enter a very competitive housing search.

Dave’s condo was listed in May of 2017 for $395,000. A week after listing we met our realtor and had multiple offers that escalated it to a sale price of $465,000 (18% over asking)! Of the sale price, $193,040 went to pay off the condo loan, $36,505 went to expenses like realtor fees, taxes and closing costs, and we walked away with $235,455. Unfortunately because we hadn’t lived in it two of the last five years, we had a larger tax burden as it was considered an investment property. Lesson learned, but nothing we could do about it then.

We were looking for a home that was within a couple of miles of our brewery, which put our search in a very limited space in the Ballard neighborhood of Seattle. We heard stories from friends who had been putting in offer after offer and getting outbid or having a cash offer chosen over theirs. The first house we liked and put an offer on was listed for $750,000. If you’re not from Seattle let me be clear, this was not a mansion of a house, this was a 2,020 sq ft home that was 100 years old. It had 4 bedrooms, 2 of which didn’t have closets and had peaked roofs that meant you couldn’t stand in half of the already small space. There was barely a pantry, no laundry room (the washer was in the kitchen), no master bath or walk-in closets, and no garage. It did have a daylight basement that could function as a separate living space.

We loved it and put in an offer Sunday afternoon after the open house for $800,000. Our realtor called us that evening with news that they would sell it to us before going to the offer review day if we went to $820,000. Knowing the crazy market, it was not an unreasonable guess that it would escalate even further above that with multiple offers. Dave and I stared at each other for a minute and then said yes! We put $200,000 down (keeping over $35,000 from the condo sale) and took out a 30 year loan at 4.125% for the remaining $620,000, making our monthly principal and interest payments $3,005. Our other yearly costs were on average $1,980 for insurance and $7,200 for property taxes, so our total monthly payments for the house were about $3,770.

We Airbnb’d the basement studio for two years, managing and cleaning it ourselves, and brought in about $20,000 each year. We decided to stop for a number of reasons that all boil down to my sanity - our 2nd child was just born, the pandemic hit and both kids were home full-time with me while I worked from home, and I hated being stressed out all the time about how loud my kids were on the wood floors above.

In June of 2020, three years after purchasing the home, we refinanced to drop our rate from 4.125% to 3.375%. This saved us $400/mo in mortgage payments, but also cost $4,640 in fees to set up. We planned to stay in this house for many years and though that didn’t end up happening, we did make the right decision doing the refi because we were there longer than the break-even point at 12 months.

In the fall of 2021, we started looking at our lives and what changes we could make to reach financial independence sooner. Housing was a huge part of our expenses as we were currently paying over $40,000 each year just to live in our house – not including utilities. We spent the fall researching different areas and during a 48hr whirl-wind trip to Tucson in December, we put money down on a dirt lot that would one day have our new home standing on it.

We put our Seattle house on the market in March of 2022 for $950,000. The market was still very hot and we received four offers escalating the price to $1,312,000 (38% over asking)!!! I was bawling tears of joy when I read my realtor’s email, which also happened to be on my birthday. Best birthday gift ever. Of the sale price, $568,597 went to pay off our loan, $92,917 went to realtor fees, taxes, and closing costs, and we took home $650,486.

The house we picked out in Tucson is amazing. It’s a brand new 3,305 sq ft house on a view lot, looking out on a desert landscaped mountain bike park with mountains beyond. It has 6 bedrooms plus an office, 5 bathrooms, a walk-in pantry, laundry room, master bathroom with two walk-in closets, and three-car garage. The neighborhood also has great parks and a pool. This amazing house would cost at least $2,000,000 in Seattle, but in Tucson we bought it for $656,000 cash. Our yearly costs will include about $3,600 in property tax, $550 in insurance, and $1,110 in HOA dues, making our total monthly payments for the house only $438.

While our goal was not to “invest” in real estate, purchasing that first condo and then our first home ended up being extremely profitable investments. We made smart decisions at lucky times and made a bold move to relocate to a lower cost-of-living area. In 14 years, that $500 down payment turned into a 6-bedroom view house. The last move not only gave us a much bigger and nicer place, we also dropped our annual expenses by more than $35,000. As I sit at my desk looking out at the mountain views while sipping my tea, I am thankful for our luck and choices that have led us to this place I now call home.