Anatomy of a Home Sale (or How I Got Free Housing for Over 2 Years)

I closed on the sale of my home on March 31st.  Through no skill, just a rising tide of increasing home values, I managed to live in a brand new house for 31 months with zero costs.

I sold my home to Zillow for $266,700.  I bought it for $214,990.  That's a $51,710 profit, or an average increase of $1,668 per month.  

The largest expense of homeownership was the interest I paid on the loan.  My mortgage was 4.75%.  I tried refinancing - twice - and both times our broken underwriting process decided I could not afford to save money on my monthly payments.  Frustrated, this became the impetus for selling.  I don't like being taken advantage of.  I paid a total of $19,990 in interest while I owned the home.

There were significant other expenses to owning this home.  I bought in a new development, and most neighborhoods these days have an HOA.  That only scratched the surface of the nuisance of owning in this neighborhood.  You see, I also paid CDD (Community Development District) fees.  This included interest on debt the developer took on to build the neighborhood, from laying fiber internet and street lights to a zero-entry pool and playground we never used.  Combined, HOA and CDD fees were about $400/month.

There was also homeowner's insurance.  This wasn't significant, a few hundred dollars per year.  New, concrete-block homes don't cost much to insure.

Last, there were some closing costs, both when I bought the house and when I sold it.  

Add everything up, and my profit from selling the house completely covered my carrying costs while living there.  

Our New Home Costs Less

We moved into one of my rental properties.  I bought it during the housing recession.  It was a foreclosure.  I could sell it today for 4x what I paid.  It's in a very convenient location, less than a mile from downtown  and the beach.  There's no HOA, no CDD.  I don't even pay for trash pickup since it is a service the city provides.  Since I bought the house with cash, there's no mortgage payment.

Did I Leave Money on the Table?

It isn't healthy for me to dwell on whether I got the very best price for selling my home.  I am happy with the price I sold for.  But one must assume Zillow knows their data. Ten days after selling, Zillow listed it for $290,900.  That represents a $24,200 premium over what they paid me.  They will have some transaction costs when selling the home, such as the commission they pay the buyer's agent.  It's been listed for just over a week now.  Traffic has been insane - almost 6,000 views and over 200 "saves" online.  As of now it is still an active listing.

Selling My House to Zillow

 A few weeks ago we decided to move into one of my rental properties and sell our current home.  When I started researching how much my house was worth, I noticed on Zillow that they are purchasing homes in the Tampa Bay area.  

About a year ago I inquired with one of the companies that buys houses (maybe it was OfferPad, but I can't remember) and they offered $212,000 for our home.  I paid $215,000 for it in August, 2018 and, while the offer wasn't enough to convince me to move, it made me feel good that our home was sustaining its value.  I assumed that Zillow would lowball the offer like those "We Pay Cash for Houses" outfits.  This wasn't the case.

So far this has been a very easy process:

1. On January 23rd, I answered some basic questions about the home on the Zillow website.  Things like square feet, number of bedrooms, and whether any updates had been made to the house.
2. On January 26th, I received an email titled, "We've Calculated a Market Value for Your Home."  When I clicked through the email, I discovered my house, according to Zillow, was now worth $266,700.  This was justified by a list of other houses that had recently sold in my neighborhood, so it was easy for me to see that my offer was within the range of what houses are selling for.
3. The next step was setting up an appointment for an inspector to evaluate the home.  I had the option to be present, but I chose to sign a waiver allowing the inspector to come while we weren't home.  
4. In addition to the market value, Zillow provided a couple of line items detailing what they would deduct to come up with a net price.  This included 4.9% in Transaction Costs (comparable to the 5% commission I would have in a normal transaction), 0.1% Selling Costs (described as the fee to let me select a closing date in the future), and Prep and Repair Costs of $2,490.  There was a breakdown of the repair costs, which included replacing carpet and touching up paint, along with a couple of other minor repairs.  I think the repair costs were reasonable.

I have signed the contract and responded to the standard information requests, nothing out of the ordinary.  Since one advantage of selling to Zillow is being able to set your closing date, I decided on March 31st.  Our tenant is due to move out at the end of February, giving us a month to get the rental property cleaned up and to move.

My personal opinion is that pretty much all asset prices are irrationally exuberant right now.  Stocks are in a bubble, and real estate is pricey, though not as crazy as stocks.  I can't time the market, but I was already looking at moving, and now seems like a great time to sell a home.

We're Moving!

Big changes are ahead.  We've made the decision to move in March into one of my rental properties.  There are a few reasons for doing this, but the top reason is because our current home has high monthly costs that are outside our control.  Specifically, we have both an HOA ($200 every quarter) and a CDD (over $300 per month).  Additionally, the interest rate is a ridiculous 4.75% and I was turned down for a refinancing.  I'm still not sure how I justified this since we knew about these costs before I bought this house.  I think the excitement about building a brand new home got the best of me.

Advantages of Moving

There are several positive benefits to this move:

• I paid cash for the rental property, so there won't be a mortgage.  
• We will be 15 minutes from the Airbnb.  Based on 2020 trips, this will free up 135 hours of drive time and about $200 worth of gas, plus it will reduce wear and tear on the car.
• We will be more physically active.  The rental is on a major bicycle trail that runs through the county and is an easy bike ride to the beach.  It's a more dense area which means we can run most of our errands without getting in the car. 
• Instead of paying a mortgage, I'll be spending money on improving the home.  The area around the house has improved since I bought it and I think I can add value by updating it.  More to come...
• Because it's a smaller house, the cost of utilities should go down.
• Last, and maybe best:  once our current home sells, I will be completely debt-free!!!

Unless the real estate market crashes, I expect to sell the home we live in for a modest profit.  If I'm lucky, the increase in value will cover all our carrying costs for the 2+ years we've lived in this home.  

This won't be our forever home.  It's more of a house hacking opportunity - live in it while we make improvements that will raise its value.  Our "forever home" may not even be in the United States.  I still have a lot of thinking to do about that.

I'm Buying a New House

This is our new house!

Three months ago I updated my plans to include increasing recurring income by $2,300/month.  The first phase of the plan is in action:  we are moving to a new home.  This week I signed a contract on a brand new home on the other side of Tampa.  The house is about 40 miles from where we live now, but it's in a high-growth area where real estate is significantly less expensive.  My preference was to stay near our current home, but the few new houses we looked at cost nearly twice as much as the house I am going to buy. 

Our new home is in a master-planned community that features fiber optic Internet and is smart-home ready.  There is a beach entry pool and cabana as well as miles of walking trails.  The lot is 50% larger than the lots we looked at in other neighborhoods.  There are no houses directly behind the one I am buying.  Instead, there is a pond with a beautiful fountain.

On the surface this would not seem to be a frugal decision, but since 2006 I have built my real estate portfolio by moving into a new house every few years.  It's the way I've been growing my net worth.  But this time, instead of finding a long-term tenant, I will try AirBnB.  From the research that I've done, I am confident we can rent our current house on AirBnb for an amount that will more than cover the mortgage on the new house.

I should close on the new house by the end of July.  In the meantime, we are preparing our house for rental.  Such an exciting time!

My Home Remodel Update

Master bathroom before

I bought our house in 2014 for $45,000.   It was a real steal.  The MLS listed the house as a 2 bedroom, 1 bath foreclosure.  In reality, the house was a 3 bedroom, 2 bath.  In Tampa Bay, the institutional buyers who were buying up hundreds of homes site unseen were buying three bedroom houses, so mine flew under their radar.

Even then, $45,000 was ridiculous for a house in this area.  It was so low because there were so many problems, including water damage.  Not being scared of a little work, all I saw was opportunity.  We did much of the work ourselves.  The back yard was grass and sand.  Now there is a 224 square foot patio, partially covered, and an extensive tropical garden with seashell paths and bird fountains.  We added drywall to the walls and ceilings (the bank replaced the roof before I bought it), gutted and re-did the kitchen, and painted the whole house.  When it was time to start the bathrooms, I was a little burnt out.  We began demolition in one bathroom, and I started to realize there were a lot of little things I had no idea how to do.  Ultimately, I decided to hire a contractor.

During the last few months I've had contractors working inside our house to remodel both bathrooms.  I am really happy with the work they did and don't regret the expense.  In total, I spent close to $18,000 to completely remodel both bathrooms.  In the master bathroom, this included converting the green bathtub to a full shower with insets for soap and shampoo.

Master bathroom after

Behind all that's pretty, the plumber replaced the old shower valve as well as all the shut-off valves.  Drywall was replaced with mold-resistant tile board.  The old vanity was so damaged that the drawers wouldn't open and close, and the 70's era wallpaper was peeling.  Now I have clean, bright walls, with a full tile shower and four feet of tile that wraps around the entire bathroom.  There's a brand new window to let in lots of sunlight.

In the second bathroom, the pink (yes, it was PINK) tub with the broken sliding glass doors was replaced with a white tub with tile walls and a curved shower rod.  It too was gutted and all the plumbing was upgraded.  A new window was installed there, too.

The contractor is wrapping up one last (small) project for me, and then I will take a break from any major work to replenish the bank account.  One advantage to buying a foreclosure is that you have some control over how much the house costs you.  I paid cash for this house, so I don't have the traditional expense of a mortgage.  Instead, I decide when to spend money on the house.  There's plenty left to do, but nothing that keeps us from living here or that makes us uncomfortable.  Well, the air conditioner might need to be replaced, which is a comfort issue.   In the coming months, I hope to replace the old wooden fence that's falling apart with a vinyl one.  There are a few electrical upgrades that need to be done.  The laundry room needs new walls and I might tile the floor.  Then there's the carport and the peeling blue paint.  Oh, the list goes on!

Update on the Kitchen Remodel

This new kitchen is tough work!  Other than some mystery shopping, this past week I have focused on getting the kitchen done.  I added a pantry, which was more work than I ever imagined.  In so doing I realized I am NOT a carpenter.  Fortunately I am nearly finished with it.  Inside, I still have some drywall to hang and then the shelving will be the final touch.  I had to re-route an electrical outlet that was inside, which turned out to be harder than I expected.  Pretty much every task has been harder than I thought it would be.

One task we did complete was installing new insulation.  My partner did most of the ceiling work, and it looks pretty crappy, but it won't be visible after the new ceiling is installed.

Before we finish drywall I will probably lay the floor.  I am using vinyl tiles but will grout the edges to make it look better and more like ceramic tile.  The reason I have put off drywall is because we ran out of sheetrock.  I can't fit it in the Aveo and will need to rent a truck or van, but might combine that with purchasing the cabinets so I can get two jobs out of the truck rental instead of just one.

In all I am happy with the progress we are making, but it has been very slow.  Fortunately, we still have a working refrigerator, stove, toaster oven, coffee maker and sink.  There's no counter space, and the sink is just a single mop sink that drains into a bucket, but we are making it work.

The Week Ahead

We decided to take a day off from the house project.  We've basically worked on it every day since I bought it last month and my partner is getting burned out.  I have a movie theater mystery shop that we will do this afternoon.  Then we plan to visit the library before stopping at Lowe's to buy a few supplies for the house.

Speaking of the house project, it's going well (pictures coming soon), but there is so much left to do.  We are going to move in as soon as the living room is finished.  When we do move in, only two bedrooms and the living room will be completely done.  So much has been going on:  in addition to new floors and painting, I've repaired faulty plumbing, replaced blown fuses, serviced and cleaned the air conditioning unit, replaced interior doors, and done a thorough cleaning.  We've been able to do most of the work ourselves.  I did call an electrician out to replace the main breaker and check the integrity of the electrical system.  I'm also hiring someone to install new entry doors.  One of the largest unexpected expenses will happen in the coming weeks:  we are having the house fumigated to treat an active termite infestation.  I was under the impression when I bought the house that it had been treated already, but apparently not (and I did not require any termite bond or inspection because I really wanted this house).  This alone will cost $1,900 and we can't be in the home for three days.  They are putting a tent over the house to treat it.

Next week I have a few restaurant shops lined up.  On Friday I have a local route of gas station audits.  Saturday we fly to Vegas.  We are working a 6 day hospitality event in Laguna Beach, CA and then will spend five days playing in Vegas.  The work basically pays for a free vacation, plus it gives us a break while the house is being fumigated.

Things are coming together quickly.  My goal is to move everything into the new house in mid-August.  The remaining improvements can be made as my bank account recovers from all this spending I've been doing.

Remodeling a House on a Budget

I've spent much of the last three weeks working on this foreclosure that is about to become my home.  I just hate to spend so much money on myself, so I've been working overtime to find frugal ways to make this house into a home.

I wanted to share a few of the ways I have saved money while remodeling my new home:

• I'm painting the house using Oops Paint.  When the home center mixes a batch of paint for a customer, sometimes the buyer changes their mind about buying the paint.  It's perfectly good paint, and the color is sampled as a splotch on the lid.  I've bought several $44 gallons of paint for $5 each.  I figure I will save about $200 by painting my house with someone else's unwanted color.
• Every time I visit the home improvement store, I look at the clearance shelves.  Yesterday I bought a $2,800 Samsung French Door Refrigerator for under $1,200.  It was a floor model and there is a noticeable dent on the bottom front.  The same warranty applies and it is being delivered to my home for free.  I've found numerous other items I needed that were on clearance, ranging from blades for my utility knife ($.25 for 5) to dying plants for the backyard (50-70% off original price).
• On top of the clearance prices, I use 10% off coupons or $10 off a $50 purchase Project Starter coupon.  I buy these in bulk off ebay.
• Probably the most impactful way I am saving money is by doing most of the work myself.  While not always fun, it's very rewarding when I successfully complete a task.  For this project, the DIY work includes painting, laying vinyl plank flooring, replacing faulty plumbing, replacing out electrical outlets and switches, installing interior doors, and building a wraparound deck.  There's plenty left to learn, and I hope I can tackle new insulation, sheetrock and cabinets myself.

I'm enjoying this project because I know I get to live in it soon.  I keep from burning out by only working 4-5 hours at a time.  Some days that's all I do; others I will return in the late afternoon to do more.  Once we are able to move in, I'l be able to finish the rest of the house more conveniently.  Hopefully in the next week or two I will have enough of the house ready so that we can do just that.

I Bought a House

My New Project:  My Future Home

Last week I closed on my second Florida property.  It's a 3 bedroom, 2 bath, 1,100 square foot home that needs a lot of work.  Only the kitchen and dining area have floors; everything else is bare concrete.  I think the air conditioner needs replacing, as do all the kitchen appliances.  There was interior water damage from a leaky roof, so some walls and ceilings are missing.  The good news is the bank (I bought a foreclosure) replaced the roof already.

This is what the kitchen ceiling looks like right now.

I have a fair amount of experience with rehabbing foreclosures.  However, this is easily the biggest project I've taken on.  The plan is to rehab two of the bedrooms first so that we can live in the house while we work on it.  These are the least damaged rooms in the home, as they only require a fresh coat of paint, floors, and some other minor repairs such as replacing damaged doors.

One of the ways we will keep our costs down with this project is by using 10% off coupons from Lowe's.  I was able to purchase 5 of these from ebay for $8.

 We have a big trip planned for September, so my goal is to finish the project by the end of August.

New York Bound, New Home Update

Early tomorrow morning I fly to New York to attend the Biglari Holdings shareholder meeting.  This will be my first time attending.  The CEO of the company reminds me of a young Warren Buffett and I would like to think I'm an early investor in what may become a profitable venture.  I haven't been to New York since my dad took us when I was twelve.  I'm not looking forward to figuring out the public transit system, but taking public transportation from the airport costs $2.50 versus about $50 for a taxi.

After the meeting I am shopping a hotel in Times Square.  Since my dinner and breakfast the next morning will be covered it makes this a frugal trip.

I haven't closed on the new house yet.  The agent has had me sign several revisions to the contract.  I haven't made any special requests; I suspect I am dealing with an inexperienced agent.  I'm not too bothered by any delays this causes:  we are flying to Omaha next Friday for the Berkshire Hathaway meeting and then to Las Vegas on the 10th so I won't have much time to work on the property until the end of May.

Buying a House

The Courtyard inside Bonnet House

We returned home from Miami late Thursday evening.  On Thursday we visited the Bonnet House gardens in Fort Lauderdale.  I really like that place.  It is the one undeveloped piece of beachfront land between Miami and Palm Beach.  What I most like is the courtyard.  Since it is surrounded by the house, it is a private oasis.

This brings me to a big update:  I've been quietly shopping for houses, and it looks like I finally had an offer accepted.  The property is an ugly foreclosure that needs significant repairs and updating.  Some of the walls and ceilings are missing insulation and Sheetrock from a previous leak, and all the floors are bare except the tiles in the kitchen.  The plan is to move there this summer as soon as I get a couple bedrooms ready to be occupied.  The other work in the house can be done after I get moved in.  My master plan includes creating a backyard oasis inspired by the Bonnet House.

So far April has been a steady month for mystery shopping, hospitality and auditing work.  The next several days I will be working on a business census that entails visiting every business within a designated census area.  I also have several gas stations to shop and a handful of restaurants and grocery stores lined up.