Back in 1993 there was a project in San Francisco called the Clocktower Lofts. Lofts had gone from artists hijacking electricity to live in old buildings they had “liberated” to rehab projects by industrious and forward thinking developers. At the time the Clocktower Lofts were the crown jewel in San Francisco. They wanted to sell me a loft for around $320,000. At the time I could afford it. But it was only one bedroom. And the freeway was right there. And what if I needed a roommate? And that was a lot of rent to pay. Because I was still thinking like a renter. Does any of that sound familiar? Feel familiar? Well, I passed. I have regretted that decision from just about the moment I made it. Currently there isn’t a Clocktower loft on the market. The last one listed at $1,440,000. I used to be the smartest guy in the room. Whenever I think of that loft I passed on, I know I’m not. I wish I owned that loft today. Right now.
Buyers. If you found this, you’re on the internet. The internet is your best friend and your worst enemy. I didn’t have the internet in 1993 when I made the wrong call on that loft. All I had was the voices in my head who were saying “What if you get laid off?” “What if something happens?” ”Can you rent it out and cover the note if you have to?” Those were my drunk monkeys back then. In reality, I didn’t lose my job for another 15 years. By then I could have paid the mortgage with my eyes closed, my income had doubled. As a matter of fact, by then I probably would have paid that mortgage off all together. Even for the two years while the real estate sector was in a free fall and I was building my real estate career I only missed a few house payments but was able to catch them up. At the end of the day, I never lost a house. But y’all have the internet to be your drunk monkey. ”Now is not the time to buy”, “The market is going to pull back” “Interest rates are going up” “Interest rates are going down”, you can even find articles out there telling you our President is a communist and plans to take all of your real estate and turn this country into China. All of this adds to the natural fear of making such a large decision, but very little of it has anything to do with any one of us.
I get that this is scary stuff. Since then I’ve bought three properties, all in the East Bay. I could not get back into San Francisco. The first one I bought for $136,000 and sold for $242,500. The next one I bought for $215,000 and sold for $555,000. This one I bought for $489,000 after the market and contracted about 20%, this neighborhood used to be $620,000-ish. Then in contracted again and homes in this neighborhood were going for $250,000. Three years later, the current value is around $500,000. I’ve done well, but I could have done a lot better if I had better advice in the beginning.
The thing is, over the last five years I’ve had a lot of buyers. Some of them are living in homes and some are still renting. Many of those who are still renting are done. The market has passed them by. They made a decision that seemed correct at the time, like not buying a Clocktower Loft, and it has come back and bitten them in the butt. Several of these buyers I’ve had as closes as $5000 to owning a home and the market has gone up $20k, $25k, $100k and they are out of the market and won’t be able to get back in until something very major happens in their financial situation. Those 3.25% interest rates are gone for a long long time. And I feel bad for them.
The difference in their situation and mine is that I know they had proper advice. One guy was certain there was going to be a “double dip”. I knew it was unlikely. We are still waiting for that double dip five years later. He’s out of the market by about $100k. Another family didn’t want their payment over a certain amount. Their rent has gone up that much since I worked with them. They are priced out of the market and in no position to save any more. Several wanted to save more down. That down isn’t going to help them now. I know all have our own journey. Theirs isn’t going to involve home ownership for a while.
Salaries are not keeping pace with growth in the housing market. It reminds me of the line from Boiler Room. ”I just wanted in”. Once you’re in the door, you’re in. Initiation is scary and sometimes brings some pain. I promise, it’s worth it.