I’m not exactly sure where the idea to buy my first property right out of undergrad came from, but I can tell you I was HELLBENT on getting one. I wanted to go from my parents house, to the college dorm, to my own home. It didn’t quite work out that way, but I did come close. In my senior year of undergrad, the idea really started to weigh on me as my future was beginning to take shape. I also have to thank my undergrad for having a series of “life preparation” seminars to help us coddled students adjust to life out in the real world.
I remember talking to my parents about buying a house after I graduated, and they actually thought it was a good idea – who knew!?!? In one of my senior design classes, I remember chatting with another soon-to-be graduate. He mentioned that he had plans to move back home to save money so he could buy a duplex with a buddy of his. Well, anyone that knows me, knows that I cannot be outdone. It took it as a challenge. A lighthearted one, but I was pretty sure I was on to something if my parents didn’t tell me I was crazy and another classmate had a similar idea.
By my second semester I had decided to go to graduate school. I figured there had to be a way to be both a graduate student and a homeowner. As an engineering student, I would receive a graduate stipend (verifiable income) and I had a long term employment contract I could give to the bank … I’m pretty sure this is the ONLY positive for why PhDs take so long. I was fortunate enough to have had an internship every summer from high school junior year through the summer after my senior year in undergrad so I had about $10,000 that I was planning to use as a down payment. Fortunately, I got one of those freshman credit cards they give all 18 year olds so I had 4 years of solid credit history.
So at this point, spring of my senior year, I set out to find my first property. I had to be a bit of a daredevil looking back, because I had every intention of executing the transaction site unseen from my dorm room across the country. I read everything I could on mortgages and affordability, then I got pre-qualified for a mortgage. I took my pre-qualification letter, and set out to look at properties for less than $95,000. Turns out there weren’t many. At that time, there were typically 3 properties or less on the MLS at any given time in my city. Considering that most were condos, I knew the HOA fees would increase my monthly payment. I determined that I would have to buy something for less than $85,000 if the numbers were going to work.
My parents lived about 3 hours away from my grad school, so I asked them to drive down to view properties that looked promising online. I had strict criteria for this property: it had to be a priced less than $85,000 for a condo or $95,000 for a house, on a bus route to the university and it had to have at least 2 bedrooms so I could get a roommate. I actually bid on 2 properties before I was actually able to close on the 3rd property I considered. The first condo didn’t work out because the owner really wanted $95,000. We went under contract at $90,000 but the inspection came back with a number of repairs. The seller was not willing to complete them without raising the price back to the $95,000 list price, so I had to walk away. After that, I called off the search until I started the semester and lived in the city. I rented a one bedroom furnished student apartment for my first year and picked the search up in the spring. The next property would have been perfect and I probably should have purchased it. It was a one bedroom condo about a 7 minute bus ride to the university (bus stop directly in front of the unit). The price was only $75,000 and the HOA fees included cable and internet. By that time, however, I had resolved that I wanted more space so i could get a roommate to reduce expenses. I was willing to drive further for more space to accommodate the roommate. I ended up buying a 2 bed, one bath 1000 sq ft condo in the north part of the city for $84,000.
The funny thing is that just before spring break, I was poking around online and read about something called down-payment assistance for first time homebuyers. At this point, we were in the middle of negotiating the terms, so I was fortunate that the contract had not executed before I discovered the program! The city offered downpayment assistance for low-income individuals and my graduate stipend met the income requirements! I contacted my realtor and let him know that I now wanted to use the program and to write that into our next counter offer. The program required me to attend some homebuyer training classes in exchange for a 10% of the purchase price or $10,000 toward downpayment and closing costs, whichever was greater. This meant that I got to keep my $10k and use it for fix up on the property instead, score! I ended up renting out the spare room to other grad students until I left the city. It turned out to be a great set of training wheels to start my real estate investing.