Journey of a Homeowner

A true story of a First Time Home Buyer.

I cant sleep. Today is the day I go see the Lender and the Title company. I must admit, I did not sleep well last night. I will be taking on an enormous amount of debt. Luckily my Realtor will also be there. He was been awesome through this entire process. He has helped me in so many ways. Always there to guide me and make the right decision.

I really don't know what to expect. All I know is that I will be signing A LOT of papers. Each of them protecting the Lender. I think about two are in my favor. Of course I know loop holes are built into them so the lender can still screw me. Of course, that's only if I default and go into foreclosure. Which I don't plan on doing. Knock on wood nothing happens. I see this as being a very sound investment. Im buying about 30k under the appraised value and if the market turns for the better I will see that number go up even more.

I plan to be in the house a minimum of two years. I will only sell for 40k profit after all selling expenses. After that the process will start all over again but with a bigger cushion to rehab the house with. Possibly even flip the home if the price is right.

The other option is to rent the home. That's something I have a lot to learn about. Probably wont even focus on it much for at least a year.

Back to what's at hand. Closing. I still need to go to the bank and get a cashiers check (yes, I don't have a checkbook. what's the point? That's what a debit card is for.). After that I will be making the trip this afternoon.

Heart is racing. What a day.

My Realtor has been really awesome to me. The biggest thing that he has done for me, was finally getting me to view the home as an investment. I was way to personal when I was first going into these homes. He showed me how to look at the house from a different perspective. Once I had the mindset of a business and not of my dream home. I was finally able to decide.

Another thing that he taught me was the "spread". This is just what it sounds like. Just like placing bets in a game. You look at the spread. Take the price of the foreclosure minus the appraised value minus and home improvements. What is left is the spread. This is what you have the potential to make when you go to sell the house.

My goal was to have at least a 20k spread. I can up with that number because I want to sell any house I buy in two years. I want to make about 10k a year sitting in the house. This is actually hard to do. But in a foreclosed house, you can have instant equity because you are buying it way under value. Some people also call this flipping. I dont consider it flipping because flipping is usually done much quicker. Sometimes within a couple months.

But sitting in the house for two years also has one very unique benefit. Any profit that I make off the house is Tax Free. Thats one thing I government has done right. If I sell before the 24 month mark. I owe taxes on all off the profit. That could get into the thousands really quick.

This is why flipping is such a fast paced job. They want to get there money back as soon as possible. The longer they are in the house. The less money they will make. Because there cashflow is tied up in a property.