There have been times in my life where I have wanted things that would become to difficult for me to handle. What stands out the most was a rental condo that I bought at the height of the real estate boom. At the time I thought to myself ‘self, this is the only time you will ever be able to afford a rental property. Prices can only go up from here.’
Oh yeah, and do you remember the 3 most important things about real estate? Location, location, location, right? Well, I guess that might be true in most circumstances but not in mine. I bought in a prime area, within walking distance of luxury stores, fine dining, and just south of one of the highest end communities in our state.
The condo was on a land lease and that lease happened to renew in 2010, lucky me. The lease went up nearly 10x the original monthly payment. I lost a renter and began to realize quickly that I could not be able to rent it out for what I was getting. In fact, I came to find out that there were nicer units in my complex that were substantially less and they were struggling to find renters. Lastly, my income became extremely volatile and it became apparent that I would not be able to afford the condo anymore.
Don’t let your eyes become bigger than your stomach. Be patient. Make a game plan to get what you want. My recommendation is to buy everything with cash and if it is a house you want, puchase it with no more than a 15 year fixed mortgage and put 20% down. This can save you 100’s of thousands of dollars in interest and it will be a much shorter term of debt than is normal. I don’t know about you but when it comes to debt, normal is the last thing I want to be. One more thing, the monthly payment should be no more than 30% of your take home pay, 25% would be even better. This way if you are temporarily out of a job or your income fluctuates for some reason, it will be easier to manage.
Have you ever read the book ‘The Tortoise and The Hare?’ Keep in mind the Tortoise ALWAYS wins.
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