Estimated Reading Time: 8 minutes

It was Fall of 2005 and I just started working for an airline in Miami after determining my first job out of college wasn’t what I hoped it would be. It was a rather tumultuous time for my new company in their second bankruptcy and a potential merger was in the works. A few months later I was asked to fly up to our HQ in Washington D.C. and given the option to take a role in Phoenix, AZ with the new airline. Little did I know but I was about to make a $175,000 mistake.

What happened to penny beers from my college days?

I enjoyed my time in Miami. I was broke as shit but being single and living on South Beach had its perks. Paying $900 a month for a 600 square foot studio wasn’t one of them. That was probably where my mistake originated. I got sucked into the allure and with a salary of $31,000 a year I certainly didn’t belong where I was. My thought process was I couldn’t afford owning property so I might as well enjoy where I lived. The problem was you could only partially enjoy it because to reap the rewards of the benefits you had to pony up $18 for a drink (it’s even worse now after my latest visit in 2019). Places like the Delano Hotel are full of glamour and ambiance but it’s a one-way street to debt if you aren’t careful.

When I decided to leave that first job I got a nice $10K raise. It helped but I quickly realized if I wanted to get ahead in life I’d have to trade the beach and luxury in for a more economical domicile so a year to the day after moving to Miami I said adieu to South Beach and made the cross country journey to Phoenix, Arizona.

Welcome to the Wild Wild West!

My plan was simple: I was single with no roots, I craved adventure, would save, and after 2-3 years continue on to Los Angeles to work in my dream industry of film. Rather than make the same mistake in Miami, however, I would purchase a condo and start building equity. And indeed I did build equity! For 6 months.

The beauty of participating in a company sponsored move is they pay a large portion (if not all) of the relocation costs. This includes the realtor fees and any associated closing costs. Typically, a firm is hired that manages these various aspects of the relocation process. The benefit is it makes pretty much everything seamless. As a 23-year-old I embarked on this daunting process thinking I would get ahead, way ahead. There aren’t many 23-year-olds I know buying their first place; rather they are buying drink after drink at the local club or neighborhood bar. I lived it up on South Beach for a year, remember? I know the game.

The real estate market was heating up. Phoenix was one market in particular that was on fire in the United States. Little did we know it but banks were dabbling in risky derivative investments and lenders were approving borrowers for WAY more mortgage then they could afford. It was easy to come by and leverage is great when everyone is winning. Until they don’t.

my 401K just lost 50% AND my house is worth 28% of what I paid?

Timing is everything. I probably don’t have to go into grave detail of all that unfolded for those that lived through this and for those that didn’t…well, you’ll get your turn in 2020 don’t worry. The fact of the matter is the couple I bought my condo from made almost $100K in less than 2 years. They were expats from Austria and painted the ENTIRE house yellow with one red accent wall. So not only did they make a cool six figures off me I got to repaint the entire place as a parting gift. I was indeed winning!

It was the best condo in the entire development. Corner unit. Looking out at the pool. Split floor plan. I repainted the entire place. Put in stainless steel appliances. Upgraded the shower. About the time I was done with all of this everything pretty much came crashing down, including the leak from another unit.

The community was pretty well maintained and kept up and as a result it was tough to get a unit. It had a low HOA of $115. Lots of Canadian’s would come down for the winters and I loved it because it was mostly quaint and quiet and traveling the world for my job I didn’t have to worry about maintenance or a yard. Suddenly there was an abundance of units getting listed as short sales. Of the 124 units there were probably 15-20 listed. Some of the one bedrooms were going for $30K (in hindsight if I had the resources I should have bought at least 5 of them). Each one that eventually sold would reset the market and I was so underwater, despite putting down 20%, it wasn’t funny.

Be ethical and play by the rules or make a business decision?

At the end of the day, it probably made more sense to just let the place go. A vast majority of Americans were doing the same thing. Not sure if it was pride or the fact I just didn’t find it ethical but I choose to stick it out. I continued to live there and justified it by if I had just been renting, I wouldn’t have anything to show for it anyways and my mortgage was the same or better of what the market rate rents were. The most frustrating thing was as the mortgage rates came down I couldn’t refinance without putting more money down, which just seemed illogical. I was paying 5.875% and rates were down below 4% and even after having put 20% down initially and paying down a 30-year fixed mortgage for several years I still had to come up with a massive amount of cash.

Eventually I met ‘Mrs. Spender’ and she would move in. We would get married and made it our home for a few more years as we chipped away our debt and built our financial foundation. Ultimately, I was pressured by her to buy a house so we could enhance our quality of life with the prospect of starting a family. It was a little scary after having been burned, not to mention we still couldn’t sell it and would be forced to rent it.

Timing is everything and sometimes things have a way of working themselves out!

Some things have a way of working out. After an 18-month period of stop and go we eventually pulled the trigger on a place that suited us and now 7 years later it was definitely the best decision we could have ever made. I have ‘Mrs. Spender’ to thank for that. Her transformation has been solidified in my eyes.

We rented our condo for what the mortgage was and took a small monthly loss in the form of the HOA, insurance, etc. We were fortunate to rent it quickly and had the tenants agree to a two-year lease. Upon the conclusion of the initial two-year term they agreed to extend an additional year. At this stage 12 years had passed since I had purchased it and I STILL couldn’t sell it for what I paid. But I was done. The market had recovered enough that I could sell it for more than what my mortgage was, put $30K in my pocket, and sell it for a “loss” which had its tax benefits in the way of a nice tax return the following year.

All said, I paid $174K for it. Sold it 12 years later for $149,500. Learned a ton and still feel like I came out ahead. I was able to obtain major tax benefits as it afforded me the benefit of itemizing before the standard deduction was raised and the $24,500 I “lost” would have been pissed away to rent over 8 years (where could you live for $255 a month without roommates? [$24,500 / 96 months].

Sometimes things work to your advantage. The day I walked out of the condo was the last time I would ever step foot in it. It was rented until the day before I closed. I never had to deal with anything during the 3 years it was rented and it sold quickly. We literally took photos for documentation purposes on the condition before it being rented, locked the door, and never went back. Our realtor earned her commission! Also, a special shout out to my good friend and amazing photographer – Mark Skalny! Great images help market and sell stuff. Check out his happenings: http://www.markskalny.com

At the time of this writing almost 3 years removed the condo is now valued at $207,489 per Zillow. No regrets though. When ‘Mrs. Spender’ lost her job 2 years ago it would have been even more stressful had we run into renter issues or some big-ticket item like a new air conditioner, not to mention that the house we bought has more than doubled in 7 years of ownership and Zillow is currently estimating it at $540,255. Life has a funny way of working out. Timing is everything!

****************

*You should assume that any links leading you to products or services are affiliate links that we receive compensation from. While it isn’t always the case we want to be transparent if there is any possibility that could result in a benefit to us. Most often our intent is simply to share ideas, concepts or products that we see great value in and hope you might as well. If you’re curious or have concerns head over here where we’ve outlined some things. It’s definitely never a prerequisite to receive compensation when we mention items specifically but if there is an opportunity to earn a little something from time to time we might not object either 🙂