And its $200,000 price tag all came from net profits on the sales of our 2 previous houses. We got a "FREE" house, baby!
Oh god, what? No, you didn't get a "free house." You sold two other homes and rolled 21 years worth of equity into your current house...
No, we did not buy our present house with "21 years worth of equity...". We bought it with
profits directly or indirectly resulting from the sale of our 2 previous houses,
factoring out equity built up from down payments and from the pay down of loan principal. And we planned it that way. Which makes for an interesting -- and hopefully instructive -- story.
We bought our first house in South Florida in 1992, putting down $10,000 against a $100,000 buy price for a 3 bedroom/2 bath on a standard lot. In the year 2000, we were able to sell that house for a net $190,000 and walk away with the original $10,000 down payment, $18,000 in paid-in equity, and $62,000 in sale profits.
Even as we closed on the sale of our South Florida house, we bought our second house in Maryland, putting down $40,000 (from the South Florida $90,000 sale proceeds) against a $200,000 buy price for a 4 bedroom/3 bath on two-and-a-half acres.
And we invested the "surplus" $50,000 proceeds from the South Florida sale. By 2012, that sum had grown to $112,000, producing a further $62,000 profit traceable to the South Florida sale proceeds.
By 2011, even with the real estate market crash, the Maryland house was appraising above $350,000. And we were ready to make our "free" house maneuver.
I wanted a milder climate. My wife wanted a more rural setting. We both wanted to keep the space and access to big-town conveniences that we had in Maryland. And we both wanted it not to cost us any more out-of-pocket money.
An internet search found us a promising candidate town in Virginia. A scouting road trip confirmed the town’s ideal fit for our living expectations. And not too long after that, we were able to make our move.
By then (2012), ownership of the South Florida and Maryland houses had resulted in an aggregate $156,000 in taxable income itemized deductions and a resulting $39,000 in income tax savings. That $39,000 was extra money in our pockets directly due to the ownership of those houses. And investment of those funds over the previous 20 years had resulted in another $49,000 in investment profits directly traceable to our ownership of the houses.
We managed to sell the Maryland house for a net $335,000 and walk away with the $40,000 original down payment, $52,000 in paid-in equity, and $43,000 in sale profits.
At that point, we had a war chest that included $62,000 South Florida sale profits, $43,000 Maryland sale profits, $62,000 invested-sale-proceeds profits, $39,000 home ownership tax savings, and $49,000 invested-tax-savings profits. A total of $255,000. NOT counting a net cummulative $80,000 of paid-in equity.
And so we took $200,000 from that war chest to buy and totally refurbish our present 3 bedroom/2 bath Virginia home on two-and-a-half acres. And that sure as hell feels like a "free" house to me.
