I bought my first home in 2013 when I moved back to Madison from the East Coast. I had enough saved for a down payment but I could only spend about $150,000 to $175,000. I was able to find a foreclosed condo on the MLS that was only five blocks from the Capitol. There was only one photo on the MLS which was a very dark blurry photo of the bathroom taken with a phone camera, so as you’d expect, there weren’t many showings. It wasn’t as competitive a market as it is now, but at that price point condos downtown were still moving pretty quickly. I was able to negotiate a purchase price of $157,000.
Because it was a foreclosure, I had to buy all new appliances - washer, dryer, refrigerator, oven, and microwave. I replaced the carpet in the bedroom and painted.
After two years, Jonathan and I got engaged, we got a big dog, and we decided we needed a little bit more space than this 900 square-foot condo, so we started looking at houses.
Now this was in 2015, so the market wasn’t as hot as it is now. However, the value of a downtown condo was very desirable. Because I had:
1) bought a property at below market value that had been overlooked because of poor marketing,
2) added value with all new appliances and simple cosmetic improvements,
3) listed the property with a full service broker with professional photography and marketing,
I was able to sell my condo after only 2 years for $215,000. Over $50,000 of increased equity to use to move up to a larger home.
As much as the local market has appreciated and continues to appreciate, home buyers have even greater potential to gain equity compared to when I bought and sold in 2013 and 2015.
So, if you think that you want to wait to buy the house with four bedrooms and three bathrooms and a finished basement and all of the things that you think you need to live there forever, that is not always the right path.
You don’t need to wait until you can afford your forever home. A great way to grow your money now rather than trying to save up for a huge down payment and keep throwing your rent money away, is to invest it in a lower priced condo or home. Just get started and watch it grow! Buy something that’s small or something that needs some cosmetic work - put in some sweat equity, and let the appreciation grow your investment so that you can turn around and upgrade to the larger house in a few years!