When I was nine years old, my father proclaimed that we were going to buy a house in Springfield, Missouri, and I should draw a plan of what I wanted it to look like. That never happened, but the seed was planted and I thought and dreamed and schemed for the next 15 years. At one point right after I had graduated from college and started my first job, I went into a local bank and asked how I could go about getting a mortgage to purchase a home. I was told that single women didn’t buy homes usually, and that they didn’t offer any loans to people like me—fresh out of college, not long at my job, no real assets except my 1960 Volkswagen bug with the McGovern sticker still on it.
In 1975, I had just received my final divorce decree, had $3,000 in my savings account, and was working for the Monterey County Department of Social Services as a caseworker. I lived in Pacific Grove, a foggy little town on the Monterey Bay that had started life as a Methodist beach retreat. Many of the lots were about 20 by 40 feet and were originally for people to come and pitch their tents on for their beach vacation. Later, little board and batten cottages were built on those same little lots. I rented one, but I couldn’t afford to buy a house in my neighborhood because they were selling for $35,000 and up. I watched the ads in the paper and eventually found one of the least expensive homes on the entire Monterey Peninsula—just around the bay, in Seaside, for $20,000.
It was a Victorian cottage behind a white picket fence and it had a guest house in the back. And here was the best part—the seller was willing to carry the loan on the property! I could put down $2,000, the seller would carry the first loan of about $16,000 plus he’d carry a second of $2,000, and I’d have $1,000 for closing costs and incidentals. Sounds perfect, right? Well, the house was rented to a guy who had lived there for many years, didn’t take care of the property, and apparently did little besides smoke, drink and play cards. I think the seller figured the best way to get rid of the guy was to just sell the property.
My real estate agent (the listing agent who ran the ad in the paper) helped me write up a contract that included a clause that the property had to be vacant before I would close escrow. We didn’t do things like property inspections back then, but I had my stepfather look the place over and he thought it seemed ok. Also, I had a friend who was a plumber and he looked at the place for me. I remember we were all amazed that it had a basement, which was rare in that area. We worked out all the details, I waited about 4 months for the tenant to finally move out, and then I took possession of my first property! Now, you probably thought when I said it was a Victorian with a white picket fence that it was a cute charming cottage and I would move in and live happily ever after? Not hardly. It had lots and lots of deferred maintenance. I had no intention of moving into the place anyway because it was in a pretty sketchy neighborhood not far from a commercial area, in what was known to be about the poorest neighborhood on the coast between Los Angeles and San Francisco.
I rented both the house and the guest house for just enough to cover my monthly mortgage expense, to people who were willing to do a little fixing up in exchange for cheap rent. It was a good deal for everyone involved. Then a few problems came up, mostly because the two sets of tenants had trouble getting along. So the first tenants in the house moved out, but the second tenants were even better because the husband was a house painter by trade and agreed to paint the house as part of his rent. Unfortunately, the new tenants didn’t get along too well with the back house tenants either, so I received complaining phone calls from one or the other tenant on a pretty regular basis.
Oh, then my landlord decided that I had to move out of the place I was renting in Pacific Grove. So now I had spent my savings on this first place and I needed to move. I went to my mother and asked her for help. She lent me some money for another down payment and co-signed on a real bank loan, and I bought another house in Seaside for $27,000, that was further up the hill and I could move into it. It was a stressful situation and I have to tell you, I was often afraid that the whole arrangement would unravel and leave me with some big expense I couldn’t handle.
It worried me enough that I finally decided I should just sell the rental. The real estate market was pretty hot at the time, so we listed the Victorian for $33,000 and immediately got 3 full price offers, so I sold the place, also agreeing to carry back a 10% second. Now, remember how when I bought the house there was no bank involved? Well, this time there was a lender who sent out an appraiser, plus the title company sent out some kind of inspector, and lo and behold, we discovered that the house had no foundation! What? It had a basement, how could it not have a foundation? It turns out that the house had been moved onto the property at some point and set over an old basement from some previous structure that had been removed. Who knew?
Before you get too carried away with how stupid you think I was, you have to know that many houses in Carmel, Monterey, and Pacific Grove had no foundations. They were built on what they called a “mudsill,” which was pretty much a redwood frame with the house built on top, and gravity keeping everything in place. Remember, this was originally a vacation home for the most part, near the beach. Years later I found out that it had been moved from Pacific Grove by floating it across the bay on a barge and that was why it was the only Victorian home in Seaside.
So a crew jacked up the house and poured a foundation, which cost me about $3,000. After all was said and done, I netted about $8,000 on the sale, $3,300 of which was a second which I didn’t get for about 5 years, so it was kind of a forced savings account that paid a bit of interest at the end. Doing the math, I spent about $3000 to buy the place and I netted about $8000 at the end, meaning I made about 270% on my initial investment. So I paid my mother back for the down payment on the other house and still had money left over. Not too bad for a kid from the Ozarks, don’t you think? Here’s the kicker: this whole drama took about 9 months from the time I closed escrow in the beginning to when I closed escrow at the end. It was intense, but it all worked out and I ended up owning the home that I lived in, though not in the neighborhood I wanted, and I had been thoroughly bitten by the real estate bug. Here was the germ of my motto, Interesting Homes for Interesting People.
