That Time We Wished We Had $150,000

I recently wrote a post about why we felt under pressure to buy another house in Northern Virginia by early 2020.

The main reason? The Metro Silver Line will be completed at that time.

And since Amazon has two huge buildings within 2 miles from each side of the Herndon Metro Station, housing prices in that area are bound to go up.

Mr. FAF also heard rumor that a big tech company was considering between Northern Virginia and another city for their second headquarters.

We felt that buying a house within 1 mile of a new metro station would be a good investment for us.

Since a house that meets all or most of our criteria will be at least $600,000s, we won’t be able to cash flow if we rent it out.

But we plan to make our primary residence while renting out our current home.

We bank primarily on the future appreciation rate after the Silver Line is completed.

We also want to rent out either the basement or a space upstairs if need be to defray the mortgage payment.

I am one scanning all the listings in the area on Redfin and informed Mr. FAF of anything that sounds promising so that we could go take a look.

Related: Why We Feel Under Pressure To Buy Another House

Loss of interest

Recently, however, Mr. FAF seemed to have lost interest in this whole process. And it’s not because he doesn’t want to buy a house.

It’s because of one simple reason: We don’t have the money for a down payment, not 20% ($120,000), 5% ($30,000) or even 3% ($18,000).

If we hadn’t tried to pay down the mortgage principal on our current house over the past year, we would have put aside about $50,000 for this purchase (which is still not a lot for a $600,000 house).

I told Mr. FAF that, and he brushed that aside. He didn’t like the idea of having two mortgages hanging over our head. I didn’t either. But in moments of desperation, I almost rationalized that option.

For Mr. FAF, we will be ready to buy another house after we have paid off our current home AND saved about $150,000 for a 20% down payment and the associated closing costs.

After realizing that it would take a really long time for us to save, he shut that plan down and refused to continue looking at listings. I, on the other hand, never stopped.

RelatedWe Just Put $15,000 Towards Our Mortgage Principal. And This Is What Happened.

The right house

I receive Redfin notifications every day and only check houses in certain zip codes in Northern Virginia. There’s one house I’ve been watching that’s only a two-minute walk to the metro.

The house is a 4bd/3.5bth and has a finished basement with two additional rooms. It shows well despite the lack of updates in the bathrooms and was listed for $715,000. It sat on the market for three months before I got the notification from Redfin that the priced was reduced to $680,000.

They even had an open house on Saturday, which was perfect since we generally spend Sunday doing chores in the morning and cooking in the afternoon. I showed it to Mr. FAF, and he immediately said he wasn’t interested.

He simply didn’t want to go. I, on the other hand, told him I did. Finally, he agreed to go with me.

RelatedWhy We Are Shopping For A Second House

Change of heart

On our way there, Mr. FAF even said that he and our son would sit in the car waiting while I went to check the house, to which I said okay. Once we pulled up in front of the house, however, Mr. FAF had a change of heart. He wanted to check it.

And I could see why. The house had great curb appeal: nothing extravagant, but it looked clean and well maintained. As we walked into the kitchen and down to the basement, Mr. FAF looked at me with a smile and said, “This house is good.” And I agreed.

Mr. FAF was excited about this bathroom. It’s 3 times the size of our master bath.

The house is colonial style, so the layout is pretty basic and clear-cut, which is what I prefer.

We wanted to check the basement more than anything else because it would become our additional/passive income stream.

The basement is finished with a French door that let all the light in and a small window. The backyard shows well and comes with a 2-year-old deck.

I could tell Mr. FAF was already excited about the prospect of owning this home. When we walked into the master bedroom and saw the big bathroom and walk-in closet, I knew Mr. FAF was sold, as much as I was.

RelatedHow We Manage Our Rental Property Out of State

Hidden facts about the house

We were excited. Before we even started to explore the house, the seller’s agent told us the following facts about the seller:

— It was a diplomat couple who just accepted a promotion and had to live within a certain number of miles from DC.

— They were willing to negotiate with any offer and make any kind of upgrades requested by the seller before closing.

— They were living temporarily in a hotel on a lease that was running out in 13 days. They didn’t want to move back into the house and was looking to buy a new house, which made their decision to sell this house even more urgent.

— The owner hires a company to do regular maintenance and repairs on the house, so the house is in good condition with no own water or structural damage.

I asked the seller’s agent a couple of questions, including the following:

Some potential buyers complained about the lack of upgrades in the bathroom. But we didn’t mind that at all.

Me: How much do you think the seller is willing to negotiate on the price ?

Agent: I can check with them. But I can tell you that it is highly negotiable. The seller is willing to do ANYTHING to make the sale happen.

They can put in hardwood flooring on the second floor, upgrade all the bathrooms, and replace the roof if you’d like. They are really tight for time and would welcome ANY offers.

(We checked the upstairs and thought everything she mentioned was just fine. Sure, it wasn’t shiny with granite and such, but everything in the bathrooms was clean and functional).

Me: Have they received any offers yet?

Agent: They got an offer contingent on the sale of the buyer’s house, which we don’t want to deal with. The owner wants to sell the house fast.

Excitement & regret

The agent also wanted to get our email address and phone number to discuss our offer. But we didn’t want to get her hopes up since we weren’t in a position to buy. We excused ourselves and left the house with both excitement and regret.

We didn’t mind the popcorn ceiling. After all, the bathroom was functional.

We were excited to find a house we would definitely put in an offer if we had the money.

We had been looking at open houses for the past six months, and it was the very first home we thought met most of our criteria.

However, we also regretted going to the open house since we didn’t have the money to buy it.

We talked about the house on the way home and wished we had saved up $150,000 to put in an offer.

Since the buyer desperately wanted to buy the house, we would entertain putting in a $610,000 offer ($70,000 below the asking price) and requested they reconfigure the basement to make it more rentable. We would also request hardwood flooring on the second floor.

There didn’t seem to be much competition for the house, so we wouldn’t be entering into a bidding war either. But we didn’t have the money. We weren’t willing to do anything crazy like getting a HELOC on our home or putting in an offer with 0% down, so we just went home and moved on with our lives.

RelatedA Landlord’s Worst Nightmare Comes True

Curbing the excitement

In order to make myself feel better about the whole situation, I did the following:

— I told Mr. FAF that another similar or better house would come up on the market one day. Our job right now is to pay off our current mortgage and continue saving like crazy for that second home.

— I started to focus on the cons of the house to make it less desirable in my mind:

1. The living room is close to a community road. We could hear the noise when we were standing there. I think the noise will get worse in the future with a train station nearby and more traffic due to the increased flow of people and vehicles.

2. The house is within a two-minute walk from the Metro. It could be a huge plus since it’s so Metro accessible. However, it could be a con due to the number of random people riding the train who have easy access to the backyard, which could pose a burglary threat to the house.

3. The backyard was tiny, which might save us time and money from not having to mow the lawn. But if we wanted to grow a garden, it would be limited in space.

4. Although the house is listed as single-family with no shared walls, it still has an HOA. The monthly HOA fee was below $50/month, but I really want our next house to have no HOA so that we can rent out the house in the future and not have to get approval from a group of people we don’t even know.

5. Mr. FAF knows the area relatively well and said that there are not a lot of grocery stores and shops around. I think that after the Metro station is finished, there will be more stores and fun places opening up around that area. But for now, I think he’s right.

6. The rating of the elementary school in the area is 2 out of 10. I read in a forum that the low rating is due to the large population of low-income households living in the school district, which is a sharp contrast to the middle-income community where the house is located. We don’t really pay much attention to the school district, but it could be a problem when Baby F1 goes to kindergarten in about 1.5 years.

This strategy definitely helped. I felt much better after typing up all of the cons above. The dream is still there. But the action now is more important: make and save at least $150,000 for a down payment.

Conclusion

We were just so enamored by all the pros of the house when we checked it that we almost forgot about the cons.

Our lack of money for a down payment also taught us to be patient. If anything, I feel more motivated to make and save more money since we have a goal in mind.

We haven’t forgotten about the 2008 financial crisis and want to avoid getting foreclosed at all costs. That’s why we want to choose the safer route of having a 20% down payment, which could take us a couple of years to save up.

We might end up not buying a house, but it feels great to have a plan with your spouse and to look in the same direction together.

Most importantly, the housing purchase plan shows us the power of frugality and cash. Without frugality, we won’t be able to save up that much cash to make our dream come true. And without cash, no house purchase will happen.

And we want to do both to make dream of buying a second house come true one day.

Related:

How We Bought Our First Home

How To Save On Furniture

The Pain Of Home Ownership – Our $3,000 Headache

We Just Put $15,000 Towards Our Mortgage Principal. And This Is What Happened.

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13 thoughts on “That Time We Wished We Had $150,000”

  • I remember Suzy Orman’s advice for people who are house hunting, do not fall in love with a house–always be able to walk away. It sounds like that is what you have done.

  • Can you take a HELOC out on your current house? You need to leverage if you’re going to invest in real estate. If you don’t want to leverage, real estate investing might not be right for you. That’s how you gain an advantage over stock market investing. I’d stop looking if I can’t buy. I don’t have time for that.

    • I guess we could, but I’m too scared to take a HELOC on our home. We stopped looking now, especially with the arrival of our second baby. It is indeed a huge time sink!

  • Great job of wading through a lot of emotional impulses and making a reasonable decision. Just as likely as that house going up in price is we have another 2008 and it drops to a 3 or 4 hundred thousand value leaving you in serious trouble. What’s that? It’s different this time?…. Riiiiight!

  • Ooof must be so hard to walk away. A lot of people get PMI these days though. Leverage and cash flow is what makes the RE world go around. There’s a special temperament for it just like regular investing. That’s why I didn’t want much to do with RE anymore – wasn’t fun as I thought in my head, and banking on growth depends on risk tolerance.

    • I guess we’re not really meant to be REIs >_< I think Mr. FAF and I are still stuck in the Asian mindset that real estate is one of the best ways to hold/grow your wealth. The stock market in Vietnam/China means nothing to us since it's so stable. Gotta get used to the American mindset asap! Or maybe I listen to Dave Ramsey way too much. Maybe it's both @_@

  • I agree with your position that it’s best not to overextend yourself and put your finances in a precarious condition. You’re probably correct about the house appreciating in value as the metro stop comes online and some major firms locate in the area, however, is that potential reward worth the risk of stretching your finances?

    My wife regularly looks at houses on Realtor.com as a way to relieve stress but it ends up backfiring when she sees how expensive the best options are. We’ve currently got a rental unit and live in one side of a double I co-own with my family. I know she’ll want a house soon but we also recognize the importance of living within our means. I think it was wise to focus on the cons to temper your excitement and may have to do the same as we look at houses outside of our budget. Thanks for sharing!

    • “Is that potential reward worth the risk of stretching your finances?”

      I think the answer is No for us at this point. Great job on curbing your excitement about a new house! 🙂

  • I got a flyer in the mail from a company called Unison which will help with the down payment, but the catch is that they will take some of the appreciation when you sell. I’ve considered it since coming up with a down payment is tough in NYC. There is also the option of an FHA loan but the monthly payments would be higher. And in your situation, I guess you can make the sale contingent on selling your old house. As for cash flow…I know I didn’t have a good experience with trying to do AirBnb…I think it is completely different if you live there. I’m sure the location near DC near the metro line will have pretty strong demand and I still believe AirBnb is a great money maker!

    • Thanks for the great tips, Andrew! I’ve been following your AirBnB updates and find them really helpful. I’ve thought about AirBnBing a room in our house. But with the arrival of our second baby, I guess we’ll wait for a while before making it happen 🙂

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