I run a quick Net Worth check at the end of every quarter and this past Tuesday was no exception. The dismal performance of the stock market from October through December, though, meant that this was, for the most part, a rather depressing exercise. With one exception—real estate.
Soon after moving to New York City after graduate school, I decided to buy a house. Why? Because I had no money—duh!—and wanted a place that I could both live in and rent to other people. I was essentially repeating what my parents had done when they came to this country—spend what little money they had on a rental property, an easy-to-understand business, while they figured out how to make a living in other, harder-to-navigate professions.
Is this an immigrant thing? A Chinese thing? Both? All I know is that almost everyone in my extended family either owns rental property or is saving to buy rental property. I was just doin’ what we do … albeit in a relatively expensive town. Back then—this was a few years before the 2008 housing crash—you could buy a house with very little money down. So I did. A two-family brownstone on a tree-lined street in Bedford-Stuyvesant, the neighborhood you probably know by way of Spike Lee’s Do the Right Thing. The white guy in the movie wearing the Larry Bird jersey? Take away the bike and the part about being born in Brooklyn, and … umm, make him an Asian woman—me, basically.
Almost immediately, it became clear I had no idea what I was doing. Don’t get me wrong. I did get some things right. Like actually living in the neighborhood first. I can’t believe how many people don’t try before they buy! Especially in NYC. Two adjacent blocks can be radically different. Cross a street and, all of a sudden, jerk chicken joints turn into Hasidic haberdasheries. By the way, this know-what-you’re-getting-into gambit does not work for having children. I don’t care how many times you’ve babysat your nieces and nephews. YOU HAVE NO IDEA.
I found a sublet in Bed-Stuy, as the neighborhood’s called, and used it as a home base as I looked for a place to buy. I saw, by day and by night, the places I would eat, shop, and walk past on the way to and from the subway station. It became pretty obvious pretty quickly that I had to be OK with people assuming I worked at either the local Chinese take-out place or the nail salon. *shrug* There are advantages to being invisible, seamlessly blending into a neighborhood’s background.
The other piece I made sure I got as right as I could was the financial part. I took out a plain vanilla 30-year fixed mortgage. I made sure I could cover all the costs—taxes, insurance, utilities—even if I had no tenants. I had the house inspected before I bought it. I was making my claim on a tiny corner of the best city in the world … but I didn’t want to be stressed about it.
It was everything else I was clueless about. The house needed quite a bit of work before I could rent out the top floor apartment. The basement was perpetually damp. The boiler looked about a hundred years old. The water heater stopped working, leading me, at one point, to send a panicky email to my boss that literally contained the line, I’m sorry—I won’t be coming in today because I have a gas problem.
Good times. For awhile there, all my energies (finite!) and money (ditto!) were tied up in figuring out how I was going to make the house … work. You can imagine how much I was enjoying that.
Next post—how I learned to love this asset class.