We have really HGTV'd ourselves, haven't we? Between TV design shows, Pinterest, Instagram, and lots of pretty pretty pictures, the idea of buying a homely home these days feels like a hard pill to swallow.
Did you know that in the DC Metro Area, it may only take 3-5 years to build substantial equity in your home? In 2004, when interest rates were hovering around 6% for a 30 fixed mortgage, we bought a 2 bedroom, 2 and a half bath townhouse in Reston for $295,000. We put 10% down. It was an automatic savings account because the money we put down was sheltered. It was spent but we also had collateral to show for it. A house. In 2010, as we were outgrowing that space with kids on the way, we sold it for $315,000. At that point, the mortgage payoff was about $240,000. So, after Realtor fees, we pulled out about $65k. We used that to put 10% down on a home we purchased for $635,000 with 3% back in closing costs (meaning, the Seller paid our closing costs). During our ownership of that home, we painted, replaced some flooring, and renovated the master bedroom and bathroom (a $30k expense). We had paid down that mortgage to about $580k. We sold the house for $750k in 2017. After transactional fees, we pulled $150k out of that house. We purchased our current home for $819,500. We used a 10% down payment again. This house was pretty homely. Bad curb appeal, silly kitchen, bad paint colors, horrible curtains. The list goes on. We used about $10k from the proceeds we got from our second home to repaint, replace the front doors, and replace the ugly tile in the foyer. In 2020, we spent $70k renovating the kitchen. Our home is currently worth $1.2M. And our current mortgage payoff is $700k. In 19 years, we have not only increased our wealth by gradually seeing income increases and saving, but we went from having about $65k in home equity with our first home to now having close to $500k in home equity.
Are there faster ways to make money? Sure. Compound interest, for starters. But we had to live somewhere all this time and this is just one vehicle for us to build wealth that we can use to fund retirement, pass on to our kids, pay for higher education, travel, or eventually move.
Was our first townhouse a dream house? It was not. Oak cabinets, linoleum flooring throughout the first floor and in all the bathrooms. There was no closet on the main floor so we stored our stroller and coats in the powder room. It was a tiny little place that we filled with significant memories, some elbow grease, and a few gallons of neutral paint. It launched us. Sometimes you just need a starting point. Is our current house a dream house? It is not. It is closer though. Plenty of space, some pretty finishes, and a quiet breeze in the backyard. And every year our children grow, or we embark on a new chapter, the value of our home grows. We depend on that for our future. With the ups and downs of the market, the line graph still moves upwards overtime and that has been a game changer for our future financial stability. I hope, if you have a dream to be a homeowner, that you will one day soon get the keys to an imperfect first home and enjoy that launch.
