Buying a House at the Peak of the Market…a story from 15 years ago

This week was a dramatic week in the markets. And the headlines in every paper are talking about market crashes, soft landings, hard landings, government bail outs and housing value drops. It is easy to let the panic overtake you, but, it makes me reflect back 15+ years ago when I bought my first investment with my parents. **check out the article Julie wrote for our free newsletter – she talks about the recent headlines and the best way to make investments in troubled times)**

It was in the early 90’s and the market (in B.C.) had been steadily climbing for a few years (at a more gradual pace than seen recently). At the time, I just wanted to start buying properties and with a bit of help from my parents (we split the down payment 50/50 and they signed as guarantors on the mortgage), I got into the market.

It wasn’t a perfect real estate investment – the rent didn’t quite cover all of the costs, but it was in a good area and hey, the market was rising so we thought we’d be fine! After a year or so, the market stalled and then the slow, but painful, drop in values began.  The drop continued and continued until the value of our investment had dropped 15% from the high when we bought it.

This sounds like a bad story, and it would have been a bad story if we had given up and sold the property then. But, we didn’t panic. We kept feeding it with a bit of cash each year while our tenant continued paying down the mortgage. After over 10 years of owning it (and when the market was starting to appreciate again), we sold it for a decent profit – even taking into account the money we had supplemented it with over the years.

The moral of the story – even if you buy at the top or near top of the market, if your rent covers most of your expenses and you can keep your rental occupied with decent tenants, over time, you will get your money back and if all goes well, a lot more than you put in. And while it wasn’t our best investment, it taught me how to better assess the peaks and valleys of the market.

We sold a bit too soon in terms of maximizing our return, but I can tell you this, if I had not put my money into that property at that time (I was in University), my money would have just been spent and I wouldn’t have made an investment that put $50,000 in my pocket 10+ years later after selling.

Next blog I’ll tell you about buying (so far) an absolutely gem of a property when no one else wanted it!


Filed under investing, real estate

4 responses to “Buying a House at the Peak of the Market…a story from 15 years ago

  1. LM

    I’d like to know how many properties you own where the rent doesn’t cover the costs? That doesn’t seem like a great strategy for the long term. Perhaps another reason for selling it was that it wasn’t a money maker?

    I do agree that the media is not the place to get your real estate investing information. Decisions need to be made on market fundamentals not the histeria that the media is creating.

  2. Dave

    Thanks for stopping in LM. When we bought that property I was in my early twenties. I really didn’t have a strategy. That is really one of the things Julie and I focus on now for our own investments and other peoples. Know your goals, set your criteria and then only buy and hold the properties that meet that criteria. Easier said than done sometimes, but sticking to it helps you make better decisions and avoid holding too many properties that cost you money each month. Because, you’re right, you can’t hold too many money losing properties or you’ll be in big trouble.

  3. Pingback: Ignore the Fear and Loathing in Real Estate « Life as Real Estate Investors

  4. Pingback: Ignore the Fear and Loathing in Real Estate –real estate investing made easier

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s