Not long ago I was afforded the opportunity to sit down with Gary Keller,
Founder of Keller Williams Real Estate and was so fortunate to be interviewed by the man himself!
This was done for his forthcoming book "Storytelling About Home Selling".
He specifically wanted to know about my first-time buyer experience as an unlicensed real estate investor: Here's how it went...
Gary: "Thomas What made you decide to buy your first home?"
TJN: "I was renting a 2 bedroom / 1 bathroom 800 sq.ft. 1924 house in The Bay Area city of San Mateo, CA and was studying real estate through a TV Infomercial guru, Dave Del Dotto and his Cash Flow System; my first real peek into what would become my real estate career 10 year later. Anyway I was learning about buy & hold properties, so my creative wheels were spinning a big 'What If'.
So I reached out to the landlord and asked if he'd be interested in selling, using creative financing...and he was!"
Gary: "Oh that's too funny! I remember that guy, always broadcasting from Hawaii and bragging about how rich he got from real estate investing."
TJN: "Yeah, seems silly now, but back then, I was lured in by his sales pitch and all the possibilities of mailbox money."
Gary: "Did you work with an agent? What was your experience like?"
TJN: "No, I was my own agent. The owner drew up a contract creating a rent to own scenario with a purchase price of $317,000 where (my memory is bad so I'll hypothetical say...) 40% of my payment was applied towards the purchase and the other 60% was applied towards the rent. There was a balloon payment due in 5 years and I think I was paying $1800/month initially. The owner would continue to hold the title, pay the homeowners insurance and the property taxes until the balloon payment was paid."
Gary: "Did you work with a lender or hard money?"
TJN: "No I had settlement money so I was able to use it as both my down payment and supplement my monthly payment as well as leverage it to get the owner to do Seller-financing at 12.5 % for the balance of the payment. This was basically like a hard money loan and I eventually refinanced out of it in 1992-ish with Citibank and lowered my rate to 9% and accomplished my balloon payment between the loan and savings. That's when I learned about closing costs by the way - that was a surprise to me."
Gary: "What if anything would you have done differently?"
TJN: "Nothing! I was so damn happy to be investing into equity in 1989, I was 20 turning 21 that year when I bought the house. I had the foresight to invest settlement money into a house and my DJ business which turned into a 30 year career and a $950,000 sales price."
Gary: "Did you have to look at several homes or did you decide to buy your rental right away?"
TJN: "No I didn't look at anything else, I was just taking a shot at this house and because this landlord was open to it. I never thought it would work - imagine my surprise!"
Gary: "Were there any unexpected benefits to buying your first home?"
TJN: "Yes! I was able to sublet a room because now I was buying it. That rent I collected helped me save up for the balloon payment and occasionally make capital improvements to the property, which was a bit naïve of me to do prior to the balloon payment. Years later in 2008, I would sell my $317,000 investment for $950,000! It was a 2 bedroom 2 bathroom 1 car garage house. It was a 2/1 when I rented it so yes I did add on. That sale helped me buy another investment property in San Mateo and my primary residence in San Diego!"
Gary: "So you really took a leap of faith because you didn't use CAR forms, perform any inspections, or shop around did you?"
TJN: "Oh Gary when I look back on it now, I think 'wheeeew!' I got lucky that everything worked out. I did end up getting stuck with some deferred maintenance, but I just accepted it; I still couldn't believe I was getting away with buying a house this way and That's the blind faith or youthful ignorance of a 20 year old that thought he was an investor because he read some books and watched some VHS training tapes 😂! God bless the fearless clueless youth!"
Gary: "Wow what an fortuitous journey and huge return on your investment!
Thomas my friend, thanks for sharing your story with the KW Nation and beyond!"
TJN: "It was my pleasure to enjoy the poetic license of sharing this story Gary!"
Photo 1 by Shiny Diamond: https://www.pexels.com
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