How
I Went From Being Flat Broke to Owning My Own Home, Mortgage
Free, in Just 5 Years
Meanwhile, Do Some Homework to Find a More Affordable Area
Once you've improved the looks of your home, sit back and
enjoy it until your accountant and the local market says it's
time to sell. In the meantime, start looking for the area
you'll want to move to once your current home is sold.
There is really no way to know exactly how long it will take
before you can sell your first house and use the equity for
a mortgage-free home. This largely depends on market forces
that are outside your control. It also depends on how much
cash you need for your next house. In a really hot market,
you may be able to put the house on the market the instant
your accountant gives you the go-ahead. (You want to avoid
paying capital gains, of course). In other markets, it may
take much longer.
The one thing that is mostly under your control is the amount
of money you need for your next house. If you need lots of
cash because you can't give up the dream of owning the high-status
house on 40 acres, with a view and a four car garage, you
may need to sell the first home and then buy another intermediate
house, (or several more), leap-frogging your way to more equity.
The easier and faster way, if your family situation and your
personal demands will allow it, is to sell the house you bought
in a hot real estate market and use the equity to move to
a smaller city or town where you can buy a modest home for
less cash. The years you spend being frugal and saving money
may help in lowering your expectations, so that the prospect
of owning a smaller, less expensive home should no longer
feel like a sacrifice.
I realize that changing cities is not easy for many people.
Job skills don't always transfer to smaller communities, and
your family ties may be very strong in the city where you
now live. However, more and more people, from aging baby-boomers
like me to young folks just out of college, are looking for
a smaller community where the pace of life is slower, and
costs are not so high.
Younger families are discovering that schools in smaller
communities usually have smaller class sizes, and it's easier
to get to know other parents with children the same age as
your own. Kids tend to spend more times out of doors, doing
the sort of activities that give them a nice tan and a strong
body – a healthy change from the hours of computer games
your kids might be used to.
Older people are moving "home" to a smaller community
to get away from the city traffic. The slower pace of life
is a welcome change, and the lower housing costs help retirement
incomes stretch farther. It's also easier for many people
to get to know their neighbors in a smaller town, especially
if you get involved in the local church or social clubs.
If you do decide that you can make a move to another town,
and perhaps even another state, you'll need to find a place
that really "feels like home." Even if you could
buy a home cheaper in a far-away state, you may want to limit
yourself to towns and cities in the same state where you're
now living, so you can easily drive back to the city on a
weekend to go shopping or visit family and friends. Or you
may find a small city in another state that lies near a hub
airport, to make visits a bit easier.
You will also need to consider the employment opportunities
if you are not yet ready to retire.
I would suggest that you take your time to determine exactly
where you would like to live. For instance, a specific climate
may appeal to you. Perhaps it's important for you to live
in a city that includes a university or a large arts community.
You may be more interested in the types of activities available
in mountain towns, or in farm towns, or near the beach. You
might want to make sure your family isn't the only one in
town that practices your religion or that belongs to your
ethnic group.
When I started looking, I researched relative home prices
nationwide by going to the United
Country Real Estate website. I found some incredible bargains
in other states, like the one shown below:
LOCATION: Mentor
MN (P)
PRICE: $29,500.00
ACRES: 1.39
BEDROOMS: 2
BATHS: 1
KEY FEATURES:
MINUTES FROM THE LAKE
1,035 SQF FT
LOT SIZE; 1.39 ACRES
TAXES; $532.00/2007
HARDWOOD FLOORS
Yes, that says that in June of 2007 there was a house on
1 1/3 acre of land, near a lake and with hardwood floors,
that was selling for under $30,000!
During my initial research, I found many inexpensive areas
on the United Country website and when I found an area that
looked promising I pulled up other local real estate websites
so I could get a good feel for the houses available in the
area. I then checked out websites that gave information about
the town, like City-Data.com,
and when possible I talked to people who had previously lived
in the area.
But in the end I simply "went home," to La
Grande, Oregon where I was born. This area is beautiful
and affordable (but not as affordable as that place in Mentor
MN!), and I can still visit with the rest of my family anytime
I want to make the six hour trip by car. There is a university
in town that offers plenty of intellectual and cultural events.
The city just built a beautiful library, and just this month
a nationally-known author will be visiting and giving a reading
of her newest book. The town also has several large employers
in addition to the university, and also has a temp agency
where I could find work if people stop buying my books and
I need some extra cash.
An additional reason for this area to be so attractive to
me is the rising home prices, brought on by recent write-ups
in national magazines like The
Mother Earth News. I may someday wish to sell my house,
and when I do I would like to sell it for more than I initially
paid for it.
There are a number of very important considerations when
looking for an affordable area. Of major importance, of course,
is the ability to make money so you can still pay your bills
and put some away for retirement.
Some skill sets can move more easily than others –
for instance, many high-tech companies are moving to Montana,
and many smaller towns are opening up customer service call
centers. Little Burns,
Oregon has several high-tech companies such as web design
services. Microsoft is building a new datacenter in Quincy,
Washington, while Google
appears to be doing the same in The Dalles,
Oregon. Amazon.com
operates customer service centers in West Virginia and North
Dakota, and has distribution centers in Nevada, Kentucky,
Kansas and Delaware.
With the increase in communications made possible by the
Internet, many smaller communities now have employment opportunities
that never existed before.
Even if you don't have a skill that would be needed by a
high-tech company, when a big company moves into a smaller
community the influx of professional people will often cause
an increase in real estate values and improve the tax base
for the local schools. It also helps build other small service
businesses in the area and makes it easier to find work. Many
industries have discovered smaller communities, so don't assume
that you won't be able to find a job in a smaller town –
but do your research to make sure something is available before
you make your move.
If you have a valuable skill such as nursing, car mechanics
or carpentry, it will be easier to find work in a new area.
Other people may be able to achieve their dream of starting
a bed and breakfast business or a small farm. My personal
choice was to learn how to market ebooks, (like this one),
online, because the business isn't tied to a specific area
or customer base.
Remember - even if your skill can be transferred to the new
area, your new employer may not be able to pay you as much
as you received in the city – and your food and gas
bills will still cost just as much. However, you may be able
to afford a lower salary if you don't have a mortgage or rent
to pay every month, and if you have a shorter commute to your
new job.
Obviously, if you don't have a business that can go anywhere,
such as Internet Marketing, you will want to very carefully
research the employment potential in any area you choose,
and figure the true costs of living before making your final
choice. Having a job lined up before you buy a house in a
new city is definitely a good idea!
If you do decide to move to a smaller town, be sure to visit
the area in all seasons. The place that looks beautiful in
the springtime may be humming with giant mosquitoes in the
summer, or could be under six feet of snow in the winter.
If those things are fine with you, that's great – but
you don't want any surprises that will make you unhappy with
your choice.
Moving to a smaller town is not your only option, of course.
You may even be able to stay within commuting distance of
your job or talk your employer into allowing you to telecommute
for several days a week so you can move just a few miles from
your current house. This may allow you find a less expensive
neighborhood or a small town just outside your current city,
where houses are still affordable. Other people will be able
to make their move to a mortgage-free life simply by taking
the equity out of a large house and buying a smaller one,
or by moving into the next up-and-coming neighborhood.
Next: Step
Four: Sell the House to Claim the Equity
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