So, at the risk of getting lost in a sea of posts about avocados, I'll offer up a modest strategy that netted me a modest home in a modest area for a modest price. It's not sexy. It's not perfect. I made plenty of mistakes along the way.
I worked retail while I was in school (relatively unimportant other than the networking), which led to my first bank gig after chatting with the tellers about how much Electronics Boutique sucked after going public. Finished my degree in '02, but at that point the piece of paper was less valuable than my body of work, but that's a story for another day.
From '02 to '13, I lived in 4 (maybe 5?) different apartments, looking for the best combination of affordability and lifestyle. Didn't save much (only thing I did well was invest in my 401(k) to the extent my employer matched). Didn't have much to save. Pissed away more than I should have, but hey, wanted to live a little too. Went through a divorce which changed a lot of my philosophies.
In 2013, I decided I was stable enough in my career that I wanted to buy a home (and I'm from central NJ if this helps from a cost of living standpoint). I didn't have a ton of cash. My 401(k) was really my only asset and the only thing I could really be somewhat proud of. Still, I sensed the market wasn't going to go any lower in the wake of '08 (I was wrong), so I searched high and low, ultimately finding a 2 BR/1.5 BA small little townhouse in a totally nondescript suburb an hour from Philly and 1:45ish from NYC. Still had no real down payment. However, I checked the county I lived in, found a homebuyer grant for those making under the median income (as I wasn't and am still not a millionaire) and borrowed a small amount from my 401(k) to cover the rest. Since it was a nothing townhouse in a neighborhood considered boring to a fault, the price I paid was well below market value as the seller just needed to get out. Took me quite some time to find (north of 6 months iirc from searching to the closing table), but their loss (in terms of sale price) was my gain.
And I know the response is "but the real estate market here blows!!". It does now. I'm not taking that away from you. But markets are cyclical in nature. This is all about being ready when the cycle swings (even slightly) into your favor. Anyway.
With the equity from buying a place for less than its appraised value, I took out a home equity line of credit to replace the HVAC and a few other very small repairs (outside of the HVAC, nothing else I did to that place was more than $1k). I'm still not happy. There's nothing to do in this town and frankly, my ride to work was pretty shitty. But prices were starting to come up a bit as competition was picking up and rates, which I thought would never go lower, did. Opportunity knocking.
I put the house on the market but chose a shitty real estate agent who didn't really offer the direction I needed and let the house languish on the market for longer than it should have. What goes around comes around I guess. But while my townhouse is out there on the market, I take a job in Philadelphia which would make the commute that much worse. Shit. Need to figure something out pronto now.
Which brings me to last July. I started by looking right in the heart of the exact area I wanted to live in. Found either homes in shambles or with asking prices out of touch with reality. Started making small, concentric circles outside of that area, in the hopes of finding that location/value mix. Settled on a nice 1900 sq ft colonial on a quarter acre 10 minutes outside of Philly.
But I still needed to sell my townhouse. Ended up taking it on the chin and selling the townhouse for $20k under asking, with me giving an additional $5k assist at closing. Now, the only way I could have supported this was by buying my initial townhouse at under value because it was in an area that wasn't "ideal" and lacking in the entertainment value. Led me to putting down less than the 20% I had wanted to on my current house, but the cost of my mortgage including PMI was less than the opportunity cost for waiting and the quality of life cost of what my commute would have been.
So the moral of the story is this-- once again the market sucks right now. You won't hear me say otherwise. Instead, what I will say is the market is cyclical and to get ahead, it's a matter of being able to read the signs and think both logically and outside the box. I got that first townhouse, that one at a fair bit under it's market value, because I bought in an area that my contemporaries thought was too boring. I bought it because although I didn't have children, the school district was good. Turns out, I sold to a single mother who chose my house because of the school district for her son.
And now back to your regularly scheduled avocado bitching already in progress.
