Budgeting Tips to Get out of Debt and Build Wealth

We bought our first home for about $170,000 (with a 5% downpayment and a 30 year mortgage).  It was actually my second home purchase, having owned a little house when I was single.  We bought the house before we were married, when we were each in pretty good financial shape.  I had one smallish credit card balance out there, and my then-fiance just had a car loan.

The day that we closed on the house was like a bad dream.  We were idiots, because we went to the final walk-through to find the house was filthy, the tub drain was plugged up and filled with water, there were wet rugs molding on a floor in the basement bathroom, the basement exterior door had been left open, and the whole basement was alive with huge black crickets.  Why we signed off on that condition can only be attributed to our being distracted by our wedding in just a couple of weeks, and our honeymoon to Rome when we would be blessed Pope John Paul II.    But accept it we did, and then there was a long, drawn-out session at the title company where the couple selling the house, who were divorcing, were at each others throats about the settlement, and we had to wait in a separate room by ourselves for a long time.  But eventually, it was ours.

Our first home, a brick cape cod house, after we renovated.

We proceeded to start racking up debt.  Our first act was to rip out all the carpets and have the hardwoods refinished.  Then I started on a frenzy of painting and wall-papering that went on for a year and a half.  We re-did the tiny kitchen from top to bottom, adding a dishwasher and putting in natural gas for the stove.  Soon we replaced the oil furnace with a gas one, having the old oil tank removed.  We found out we had to waterproof the basement, installing two new sump pumps and a french-drain system.  Then we finished half of the basement with drywall, a larger brand new bathroom, and nice closets.  We updated the oil tank room to become a nice workshop.  We knocked out the old ceramic tile in the second floor bathroom and drywalled and put in new fixtures.  We added a drop-down ladder to access the attic.

I should mention that somewhere in there we also were able to connect with a builder who was in the business of plopping houses on tiny postage stamp lots around town.  He was interested in our big back yard, and took care of all the legalities of subdividing our property, and paying us a nice big check for the land plus a free driveway.  That did help defray some of the work we did on the house (in fact, it was another time we were debt free for approximately 16 hours or so).

In the end, we had credit cards and a second mortgage, and a really nice little house.  This is when we decided to move closer to my family.  It was 2004, one of the last shining moments of the up real estate market.  Our nicely renovated house went on the market for $230,000.  The smaller lot size didn’t seem to matter.  We ended up selling for  $219.000.  This more than covered the 1st and 2nd mortgage, but also paid off our credit cards.  We had no car payment anymore, and we were debt free.

That seems like an old-school experience in the current real estate market.  Like I said, we remained debt free for 24 hours before we started fixing up this house and starting a side business.  Our current home has been renovated to a large degree as well.  We are not upside down in the market (yet) but we would not get all the money out of it that we put in now.

But we are optimistic.  What else can one do?  For now, live in the house and make it your home, and don’t worry about selling until you have to.  Oh, and don’t start renovating unless you have the cash!  We’ve sworn that off forever.  YES.  We have.

Posted By: Home Buying, Renovation and Selling by Darcy