The Story of My First Property Purchase

My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

The following is a guest post from Investor Junkie, who shares the details of his first condo purchase. His blog discusses all things related to investing and being an entrepreneur.

The time was 1998. I was 28 years old, and still living with my parents in Long Island, New York. I did so, not because I had to, but because I wanted to. Even my girlfriend at the time was bitching I should move out as I made enough money. Needless to say that girlfriend wasn’t my girlfriend for much longer.

Unlike all of my other friends who enjoyed paying rent, I was on a mission. I wanted to own a condo as to me real estate is one of the best ways to increase my wealth. I made many sacrifices and pinched every penny I could. I knew exactly the area I was in the market for, and what type of property. There was a 134 unit condo complex next to the local train station. This made a primary location for New York City commuters like myself since, by railroad it was only an hour away. I got a hold of a friend of the family who was a real estate agent, and asked for comps of sold units for the previous year. The two bedroom, one and half bath units all sold for around $125k, plus or minus $5,000. With these condos the primary variable was how much was renovated since all had the same layout. These units were built in 1973, and were at the ripe age of needing must done improvements. I spotted an inefficiency in the market, and knew my target.

I looked at 5 other units in the condo complex before I found “the one”. After a few months after my initial research I spotted a unit for sale in the local newspaper. It was for sale by owner, and had an open house that Friday. After work I quickly hopped over to the place to take a look. As I entered the unit the first thing I noticed was an older couple walking out in disgust. I walked into the unit, and quickly figured out why. There was the distinct smell of an animal’s wet fur. I found from the presenter this unit had been a rental property since it was built. Everything was original, and nothing had been upgraded since it was built. Too my surprise the smell came from the living room, which had a caged ferret in it. After I inquired about the ferret, the presenter of the property explained to me the tenant had his two sons living all living in this two-bedroom apartment. This explained why the living room ceiling had pinholes in it. It appeared the tenant used a blanket to cordon off the living room into a makeshift bedroom for the oldest son. The story gets better from here.

Upon reviewing the upstairs bathroom I notice a rotting hole in the floor next to the tub. It was literal hole that you could stick your foot into. It appears the tub was never sloped properly, and all stagnant water on the lip of the tub would flow outward instead of staying within the tub. This in turn would cause the cork like material for the floor to expand and eventually rot. The flow of water then proceeded to cause damage on the first floor, which the kitchen was right below. It was obvious from viewing the place it need work and a lot of it. My first thought looking at the unit was, what a dump. But instead of smelling the stench of the ferret, I smelled opportunity.

The owner of the unit was an out of town landlord (California), and for personal reasons needed to quickly sell the unit. I knew other units were going for around $125k and I estimated the unit needed to at least $25k to repair the kitchen, bathroom, and other portions of the property. I instantly knew that this was the unit I had to buy. I would be able to rebuild the unit exactly to my liking and the kitchen and baths are where you get the best bang-for-the-buck when doing home improvements. In order to break even I had to pay less than $100k. Based upon this I initially offered $94,000. The owner waited for other offers that never came. She then countered with $96,000 in which I immediately accepted.

It was great I had an offer within my target price, except I only had enough saved to put a 15% down payment. Where was I going to get the $25k to improve the property so it was livable? In talking with the mortgage broker, they stated I could get the first loan as a 30-year fixed loan, and a second loan that was 10-year $25k home improvement loan. Unfortunately a week before closing the second loan fell through, and I was only left with one loan on the property. I was beginning to get nervous, was where was I going to get the finances to improve the property?

Ironically I bought the condominium so it would make my commute to New York City easier, but I just started a new job. Unknown to me at the time the new job would have me literally traveling around the world. Within the first year of owning the property very little work was done because of my travel, and needing to get the second loan approved by another bank. I calculated I did over 100,000 miles of flight travel, so you can imagine how much work got done on the condominium. My travel time also hindered me from applying for a second loan, and for myself limited whatever time I could put into demolishing, and improving the unit myself. Six months into owning the property, I was beginning to wonder if it would ever be completed so it was in move in condition. I finally got a loan, and then had to wait another month for the work to start. My contractor had to finish other work before he could get to my project.

After nine months of owning the property, the work was completed and I was finally able to move in.

In 2003 I sold the property. I was living with my fiancé and didn’t think it was worth holding onto the property to rent. Rental rates for a 2-bedroom apartment in the area were only going for $1350 month. Enough to cover the mortgage and common charges but left very little profit. I thought it wasn’t worth the trouble renting, and best to take the profit I had (tax free since I lived in the unit). I wound up selling the unit for $230k with a net profit of $110k. Not bad for five years of ownership, and less than four years of living in the unit. As luck has it a little more than a year later, I could have sold it $335k. The new owners made only some minor improvements, and sold the unit for that amount.

My first real estate purchase was a very interesting experience. In retrospect was probably one of the best investments, and learning experiences I’ve ever had. At the time though, I never thought it was going to be completed and made a big mistake purchasing the condo.

Lessons learned:

  • With any investment, short-term sacrifices can lead to long-term gains.
  • When making an investment, research as much as possible before taking the plunge. Know the subject better than anyone else. This allows you to make quick decisions and spot opportunities.
  • When selling an investment it’s impossible to time the market and sell at the highest value. Don’t be disappointed if you left money on the table. You make money when you buy an investment, not when you sell it.
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

User Generated Content Disclosure: Comments and/or responses are not provided or commissioned by any advertiser. Comments and/or responses have not been reviewed, approved or otherwise endorsed by any advertiser. It is not any advertiser's responsibility to ensure all posts and/or questions are answered.


  1. I’m always fascinated to see how people bought their properties. Great job on taking the time and making the effort on getting the unit. We hunted before we bought so when we took out a mortgage, we felt good about the purchase. I enjoyed the post, thanks!

  2. Not surprising or anything I’m shocked about. You made a purchase right before the bubble on Long Island. If you purchased during the bubble you would probably be stuck with that property and losing money. I’m assuming that property sale has made a huge financial positive impact in your life so 100% kudos for you. I know people who purchased $250K homes in 2000 and sold in 2005 for 1.5 Million. Long Island is still way overvalued and it’s amazing how many millionaires were made off of the easy financing that drove home prices so high.

    The questions I have for you, would you give advise a 28yr old to buy a unit in Whalers Cove, Babylon Village today?

    Units in that complex are selling for $330K today. If a 28yr old looked for an undervalued unit and purchased for $300K it would have to increase well over $720K to have even close to the returns you had, due to the bubble.

  3. I will share mine.

    Same deal .. I graduated in 2003 … Saw all my friends flushing rent money down the toilet .. so I figured, I will buy — great investment and I am paying down principal, why rent? Great investment everyone said, everyone thought I was so smart.

    Bought in May 2005 for $217k. Well we all know what happened next. Its down about 40+% and MIGHT be worth $150k today. The banks wont let me re-finance and I pretty much screwed for the rest of my life. To top it off I bought this with a friend as well. He moved his girlfriend in and got engaged, forcing me out. Unfortunately, theres no way to get my name off the mortgage either, because they won’t let us refinance and won’t let us do a qualified assumption.

    Luckily for me from 2005 to current day, my salary has jumped extraordinarily due to my opening my own business. So end of the day, I had to do a back-door agreement with my partner, paid him HALF the losses in the house and move out. Sadly, I am still liable as I am still on the stupid mortgage .. and the best part is, he broke it off with the fiance – which was the only reason I moved out.

    So, long story short … Lost about 40% in a property within 5 years, don’t live there anymore, but can’t get my name off the mortgage, lost all the money yet am still legally liable for the property.

    How about that?

  4. @Kevin. I learned the hard way, when you take on a partner, their problems become your problems.

  5. Rachel Goede says

    I am thinking of buying my first house here in Phoenix, AZ. There has been a big slump in sales recently, and prices don’t appear to be going up anytime soon here. There is just too much built up property, much of which has been bought by “investors”, who are waiting to unload. I am thinking of looking at bank owned properties in decent communities, with a price range of about $150K. Rents are generally in the $1100 region for these houses. I am currently paying about $800 per month at a 3-bedroom condo, so there would be increased expenditure if I get a comparable mortgage, but I could also start building up some equity quickly.

    @Investor Junkie – Part of the whole deal is getting lucky with timing!!! I’m glad that it turned out well for you. So are you renting right now or do you own?

    @Kevin – Is there really nothing that can be done? Can you not “sell” your share to your partner and get your name off the mortgage? The biggest risk right now is that he goes under and does not pay the mortgage, thereby losing the house and destroying your credit.

  6. @nycguy

    “The questions I have for you, would you give advise a 28yr old to buy a unit in Whalers Cove, Babylon Village today? ”

    So you know where it is eh? I never mentioned that in the article. 🙂

    As a pure investment play? No. As far as living? Maybe, though depending upon other factors for that person renting might make better sense.

    I also own a rental property bought in 2001 that wasn’t mentioned in the article. I sold the Babylon property because I felt the market was overvalued in 2003, I was only a few years off though. If I kept the property instead of selling it, I would have done OK and would have had some positive cash flow. Again IMHO it wasn’t worth keeping and didn’t want to be over exposed to RE market. As we also own a primary residence on Long Island also.

    Like I said in the post, know your market. Not just a specific area (in this case a specific condo development) but also the macro. The rental/price ratio is still too high on Long Island. I’ve been looking for properties to invest and have yet to find ones where the numbers work for me to buy.

  7. My apologies for pointing out the location, as I’m sure you wish to keep some level of anonymity in this post and your online identity. I just recognized the property fro the picture you posted and know from your blog that you’re on Long Island.

    I do agree your situation does show a sense of knowing your market, as you found an undervalued property and bought low and sold him. What I didn’t get from your post and maybe I over looked you mentioning it, was if you actually purchased as an investment or a place to live.

    Me being a 29 year old on Long Island I question purchasing anything that is not in the location and size home I wish to live and raise a family in for the next 30 years. I know many people who are ‘stuck’ owing more on the mortgage than they can sell, and now have more children than bedrooms in what they believed was their ‘starter’ home.

    I think in your situation and due to the times, you had a perfect situation and it worked out great for you. I just hate to think if I followed your footsteps today, I would be crammed up living in that condo at 39 with a wife and three children.

  8. Thanks for sharing. It’s always fascinating to hear how people buy their first homes.

  9. @nycguy

    I don’t care about mentioning about that and privacy, I just never expected someone from a picture would know the specific unit.

    It was a place to live first, but the plan (before I got married) was going to move out of that unit and move into the other property I still own today. I also rented out the second bedroom in the Babylon condo to a friend also

    Also not mentioned was my wife’s property we also sold in 2005 (which was a starter home), we would have been stuck in a three bedroom with three kids wouldn’t be nice either but workable.

  10. @ddelj — partner or not, the situation is horrible …. point is … anyone could have written this story back in 1998, or about 1998 .. or about any time PRE-2005 … I just don’t see the relevance of this article right now ….

  11. @Kevin: No not everyone could state what I did. How many thought their home was an ATM, cashed out the gains they had, and thought housing could only go up?

    Am I not stating I know it all. Some of it was luck but there was also more skill involved than luck. Unfortunately I have no public record of me stating housing was overheated. So if you think I’m BSing this is your decision.

    The overall purpose of the post were the lessons learned, which IMHO are timeless.

    I can state the next boom (bubble) in our economy will not be housing, at least for quite a few years until another cycle occurs.

  12. @investor — I do not think anyone is BS’ing … but it is what it is . You bought in 1998 and sold in 2003 … its no wonder a profit was made. 2003 – 2005 was peak

  13. I don’t think Kevin’s referring to the three lessons you mention, but the mention of the profit you made on your first investment is a bit of a distraction to people looking at the state of the market today. Part of your decision-making was using real estate to increase your wealth. The timelessness of this part of the story is what he’s questioning.

    I don’t think it’s a lack of skill on your part, but I don’t read this post and understand how to generalize these timeless lessons for someone who is 28 and looking to buy and increase wealth to a large degree now.

    Kevin, I believe the “timeless” comment just refers to the three lessons learned at the end.

  14. chew on it says


    I liked your lesson learn #3. Many of the people I know complain about how much money the leave on the table after exiting an investment, only to get burned the next time because they tried to squeeze very dime out of the deal.

    One advise I always remember about investing is to have a target return when making the investment, and be happy when you achieve it. Then, go to the next investment. rinse and repeat.

  15. @chew on this: Yup exactly. Warren Buffet once said..

    Rule No.1: Never lose money.
    Rule No.2: Never forget rule No.1.

  16. Yes, exactly — I was just referring to the profitability of all this. If this happened in a different time (not in the hyperflation of housing prices), you would have been up sh*ts creek. No one knows the future, but as much as I believe the market is at or near its lowest … I haven’t seen any indication its coming up either. If I knew the future I’d be rich already.

  17. I admire someone who at a young age, saved his money and took the risk of buying real estate. Yes, he had timing on his side, but he still took the necessary steps to make it happen and he did his homework. He didn’t just jump in with blinders on thinking that everything would be okay. He thought about what his options were and how to go about making it happen. That is timeless advice.

  18. Hey Investor Junkie, nice work, but I think you may have learnt a valuable lesson in the process. 110k sounds good, but 335k sounds a lot better!

    I agree that you make your money when you buy to a point, but why didn’t you keep the condo? You said that the repayments would have covered the rent and charges, so what if you weren’t making much? You would just get taxed on it anyway! Much better to keep the property and leverage the equity on further investments wouldn’t you say? You could have even drawn down a cash for yourself tax free if you really needed it.

    Good story though, I really like hearing stories about people winning with propeerty, it makes me feel good about my own investments!

  19. @Shaun: The profit would have been approx $240k not $335k. I didn’t want to be overexposed to real estate and thought it was the prefect time to sell the unit. The two primary reasons:
    – felt there were better investments I could put the money into (in this case stocks).
    – If sold it then the sale would be tax free. If I waited (I believe after 2 years) I would have had to either do a 1031 transfer or pay the tax.

    In retrospect I would have done better holding it for 1 year longer and sold it then, than investing the money in stocks instead. Monday Morning Quarterback is always easy. The investment in the stock did pretty well but not that good.

  20. @kevin – I lived out your exact story, line by line. I bought in 2005 with a friend after graduating, market started tanking, he found a fiance who moved in last year, I couldn’t stand the situation so I moved out. She now pays me rent to cover my costs (barely) and the property continues to loose value.

    It’s all about timing – those who gradated with good jobs around 2003 – 2005 thought they were making a good decision by investing in real estate b/c everyone thinks its a great investment. The market was still hot hot hot when i bought and no one was there to say “this is a bad move”…

    So i’m stuck with this crap property for 10 years unless i want to take a loss now.

  21. @Mike and @Kevin: I feel bad for you guys and your situation… That being said I think we can all learn something from your situation:

    – What was considered a good investment by most obviously wasn’t.
    – Any investment that has double digit gains a few years in a row was either undervalued or is overvalued
    – Sometimes renting is a better option.

  22. @mike — 10 years, depending where you are living it might be more than that …. but in my situation, I can’t even get out … I am lucky enough to have the money to get out, but still can’t … I can sustain the loss but my friend can not, I have sustained the loss actually … but they won’t let me off unless we refinance, and won’t let us refinance unless we pay it down to 80% of the value, which … is not feasible for my friend

    all around worst situation possible .. if this was just me, I woulda stopped paying and walked away a long time ago (if I didn’t have a job where my credit mattered)

    and yes @investor junkie — sometimes renting is a better option

  23. Now in hindsight, 2005 was such a good time to buy, would today’s market be right? Mortg is low I guess only if you have the funds will this matter. But we all know at some point real estate should recover. Wouldn’t now be the right time?

  24. I meant not such a good time to buy in 2005.

  25. @boo … yess you could speculate that now is a good time to buy, and I don’t disagree neccesarily … however the difference between now and pre-crash … is that before the crash, you bought and knew you could move to another city in 3 years and turn the house for a profit in 2-3 years and just move easily… now thats not a given, even if you won’t lose money, its not easy to move a house and not worth it to buy if you don’t plan on staying somewhere for atleast 5-10 years .. thats my opinion on the matter

  26. @Boo

    What would I recovery in real estate be like, if it has been extremely overvalued? I think real estate doesn’t need to ‘recover’ and actually needs to stabilize to appropriate levels. A home should not cost five times the average salary.

    I think the thought of recovery is a hope for people that want to keep their home profitable and not owe more than it’s worth.

    If you took this same logic of a recovery towards the bubble, everyone would tell you would have better luck wishing in one hand and shit in the other, and see which one gets filled up first.

    I feel for people stuck in bad situations trying to get out of these situations, but you have the luxury of not paying and ruining your credit. In most states they can only take that particular home and not go after other assets. You also have bankruptcy protection.

    I’m off on a tangent but what about people, who have $100k in student loans, can’t find a job, and have $1k+ monthly payments. They’re the real losers in this high unemployment depression, they can’t even walk away or file bankruptcy and will be burdened for years to come.

  27. vijaianand says

    Hey Investor Junkie,

    Good story about your first investment purchase. I know what do you mean because I bought my first rental property when I was 30 and doing full time job and waiting for the loan to approve. Actually I was living in my primmary residence at the time and this is truely a rental property. I wanted to get better rate so I played some taking advantage of the loop hole to get the primary residence rate. There is always something to learn in investmment process.

    For you doubt about losing tax free if you lived above 2 years, thats not true. You take the exclusion of $250k or $500(Married) if you lived there more than 24months out o f60 months and used the same period. You can take the exclusion. But you can only use it if you didn’t sold in past 2 years. In your case, you will be eligible. I thought I will share with you.

    FYI, I got 2nd rental which I bought this Jul after 3 years of my first investment rental property. As you said, short sacrifices can lead to long term gains..

    I hope you bought another investment property after you sold it and having fun with it.


  28. LargeTalons says

    @Kevin: I feel for you as I’m in a similar situation. I purchased a duplex in Oct. 2005 for $190K. Unknown to me at the time, the loan I was sold requires you to live there for 9 years. Not knowing this, time came that I needed to move, and so I rented out my unit. The orginal loan was sold, and the new bank is now asking why my address doesn’t match. Long story short, they are saying I must refinance, sell, or move back in, or they will foreclose. The appraisal came back at $160K, so refinancing is out. So, now the choice is between living somehwere far away from my job, or losing $40K including sales costs. Anyone could have made money on real estate up through 2007 without knowing anything, you got lucky because of your timing. Those of us who got stuck on top of the bubble when it popped financed your gains, and we’ll be paying for it for a while.

  29. Very good post. Thank you for the insight. I am currently looking at a purchase of a small duplex; however, I am going to be completing this one through my retirement account. I have located a company, My Retirement Account Services,, and they will hold my IRA and allow me to hold the property inside the account.

    I am looking at moving the money to a Roth where it could grow tax-free. I am excited about the opportunity that I have to purchase some pretty good income producing property and placing in my IRA for growth.

Leave a Reply to Mike Cancel reply