Real Estate lessons my Dad taught me
Dad was a son of a Swedish immigrant who decided to start a dairy farm in northern Wisconsin. My dad grew up milk’ cows every day and not having much fun. Back then dropping out of school was a common practice and you were not looked down upon when you stopped going to school. My dad lacked an education since he never finished high school; he’d say “don’t need a high school diploma to milk cows”. “You were going to milk those damn cows”, as he called them, “for the rest of your life and who needs to go to college or finish high school to milk cows? The cows don’t care; you just need to know how to work and work hard every day”. Also back then you milked those damn cows by hand. No milking machines. One would sit on a stool, milk one cow and then another until you were done with all thirty cows. “It wasn't until my late twenties that I realized that you had to milk those damn cows twice a day”. That’s right; you milked them every 12 hours. So if you did it at 4:00 PM you better be up early at 4:00 AM to do it again. And no days off, no holidays, vacations, sick days, every day 365 days a year you were going to milk the cows. You even had to milk them on Christmas. I believed, based on the stories I wanted to hear, dad got up at 4:00 AM, milked those damn cows for three hours, walked three miles to school though five feet of snow and back home and you were done; no time to watch TV, raid the refrigerator and play video games. How hard of a life can that be? Based on what I know, my dad quit school because of shear exhaustion, he ran out of energy. Plus the lack of electricity, central heat, in-door plumbing, and no refrigerators were also good reasons.
But dad’s best accomplishment ever was just around the corner; he stopped milking those damn cows. As soon as my dad’s father passed away, he sold those damn cows, the house and moved grandma into town. (I saw the farmhouse; it was a good idea to sell it). Later after marriage and four children, with $500 in his pocket he packed up the old 1957 Mercury, put the three kids in the back seat with me and mom in the front seat and took off to California towing a popup camp trailer. Fortunately during the time he stopped milk’ those damn cows and having 4 kids, he learned a new trade, fix-in TV’s.
I’m glad we moved out of Wisconsin and did not learn to milk those damn cows. Dad said “if we stay in Wisconsin we’ll either freeze to death or starve to death, if we move to California at least we won’t freeze to death”. Dad would often say this as a joke, but deep down inside he knew with four kids, living in northern Wisconsin, and very little job prospects, he knew it was a possibility.
Dad’s first home he purchased in California was in Monrovia on Pamela Rd, which he purchased in 1960 for some ridicules low amount and to long ago to remember, but he sold it in 1972 for $11,000. Dad should have kept it and rented it out. Payments on the house were $29/month. Rents would generate around $100/month; a positive cash flow of $71. But for some reason he thought he could not do it. It just did not make sense to dad. He probably never thought of the idea and never looked at the possibilities.
Dad started fixing those damn TV’s for Sears and he was good at it; he became an expert at it. So good that Sears wanted him to teach to others the skill of fixing those damns TVs. As a result, he received a promotion and more money, but there was one major problem coming back to haunt him – no high school diploma. Mom and Dad would talk about it at night in whispers; they would say “do you think Sears will find out, will you lose the job?” I heard a new word for the first time – Night School. I was too young at the time to know what it meant. We did not discuss it and I did not know until to later in life that dad went back to school and done did get educated and graduate from high school. Fortunately, he keeps the job and continues to make more money and he is now able to purchase a second property.
This second home, a vacation property was up in the mountains in Frazier Park, about 70 miles north of Los Angeles at the time the middle of nowhere. It was nice cabin with two small bedrooms, a much bigger house than the house on Pamela road. Two homes at the same time, a nice leap in finical prosperity.
The interim home, between the house on Pamela Rd and the Cabin, was a house on Ridgeside Drive in the upper class part of town of Monrovia. This was a great purchase for him. Cost was $29,000 in 1972 in a great location up in the San Gabriel Foothills of Monrovia; purchased at the right time and the right finance terms of a fixed 6% note. A bigger house, with views of the city lights, where all the rich people from church lived. When the cabin was finished, he rented this property to move to the mountains. Good idea to rent the house. A very good positive cash flow and the homes in the area were appreciating. The mistake here was making the mountain home his permanent residence. Mom always said “it was a mistake moving here” and will tell dad often. However he got the cash fever and did not want to rent it out any more, dad sold the house for $110,000 in 1979. A great investment he netted around $90,000 and quickly put it in the bank and then began to spend it on depreciable assets (cars).
Fortunately when he had to make the move to the fourth house due to mom’s illness the house in the mountains appreciated in value. He realized his mistake of moving to the middle of nowhere, no jobs, no income and no medical facilities. The nearest hospital was 90 miles away down Interstate 5 – the “grapevine”. Dad desperately needed to move again. His final purchase was another mistake, a double wide in Castaic CA. He netted around $100,000 for the mountain house, but again started to spend it on depreciable assets (cars) for himself and my sister.
I can’t blame my dad on doing the moves. To him owning a second home was just not right. To this very day when I try to explain real estate to some of my relatives; they just give the deer-in-the-headlight-stare. My relative once said this about owing two homes; “oh that can’t be legal”.
It’s just that we were not taught this in school. We were told to get a good education, good job, a house and get a mortgage. Hopefully in say 30 years you can have your home paid for and you can retire on social security. This financial plan is still what two of my siblings live by.
In fact it took me to the age of 50 before I realized the number 1 rule.
If my dad were to keep the homes, finically he would be ok. The first house appreciated from $12,000 to around $550,000. The second house from $45,000 to $250,000 (cabin) and the jewel in the upper class part of town changed from $29,000 to sell over $950,000.
Of course looking back is always easy to see the mistakes. There were down turns in the market where nothing was selling.
Rule 1 Don’t Sell real estate – accumulate it.
Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
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