The Road to FISE: Bye Bye Fahrenheit Condo! You Were Not A Good Buy, But I Still Made Money.
October 8, 2021
I’ll be honest with the blog readership. I’m pretty financially savy, but I’m no savant. Actually most phyisican personal finance bloggers are full of hot air. My personal finance journey has been simple. I’m super frugal (hey, I make trash art for fun!) and we are a dual income physician family, and our savings rate is in the 50% range. And everything we save, we invest back into safe target date mutual funds, retirement accounts, 529 college saving funds, and real estate. I bought fancy Challa bread at the local bakery yesterday, but buying a $8 loaf of bread is a luxury for us. We drive paid off cars. Indeed Mr. Plastic Picker still drives his 2012 Toyota Prius with a small scratch on the side that my father-in-law had a great time coloring in with a special kind of car coloring marker?
I wanted to share with you the funny story of the San Diego downtown condo we just sold in the fancy Fahrenheit building. I love real estate, because each property we buy and sell is a story. And it’s the story of my life. Real estate is in my blood because that is what our family does. Some of why I love the earth so much, is that the earth is all of our real estate. Our collective real estate. So this particular condo was a studio in East Village. It was not particularly a good buy. But I still made money off of it, because in general real estate prices in San Diego are skyrocketing. It makes sense right now to sell my single family house rentals and reinvest in other parts of the country.
This particular condo I bought five years ago. We had already had a larger downtown condo that we still own, and that one was a good buy. I guess I got greedy or overconfident. We had saved a sizeable downpayment about 80K because we just don’t spend money from our take-home pay. So I went shopping, and I found this condo. In retrospect, I think I was just trying to get attention from my older brother as he was my broker back then because he said he’d buy me lunch if we were looking for condos. I’m the younger sister and as the younger sister, I’m always trying to get attention from my brother. This particular condo was modern and concrete, and the building had won the coveted architectural Orchid award. And it was literally within spitting distance to Petco Park. Only a large studio though and one parking spot. But I bought it, and was happy. Didn’t get a particularly good nor bad deal, and I thought my older brother was going to take me to lunch. Instead, he took me to Carls Junior drive through because he had another meeting and got me a burger. I remember being so sad that day, and realized some of my real estate shenanigans were due to trying to get attention from him as he is a REAL real estate investor. He is a much better real estate investor than all the physician supposedly real estate savants masquerading on the blogsphere. They are so annoying.
Fast forward five years, I just sold this condo and used the proceeds to pay off my portion of the Oregon Farm. Now that’s a LIFETIME INVESTMENT. I love love love our Oregon farm! But I sold this condo, and I’m reviewing the numbers are trying to figure out if I made money? And indeed, even this “not great investment” – I did make money. These are my back of the envelope calculations.
55 000 (property appreciation after 6 years) – 22 250 (real estate agent commission) – 7500 (cash for keys) = 25 250 (net proceeds but closer to 20K because there were other fees)
20 000 (gain after 5 years in my pocket) / 97 000 (original investment) = 0.206185567 (percent yield I made)
20%/5 years = 5% gain per year?
So in this transaction I made about what you would make just on normal real estate apprecation or a little less than the stock market in a normal year. The real estate brokers always do well. But I did decently. Our renter made out like a bandit, given I had to pay him off to get him out of the condo so I could sell it. I always had a good mortgage, a 30 year fixed at about 4%.
But the reason that this condo ended up being a great buy, is that the 80K that I used as the downpayment is money we had saved from our takehome pay that most other physcians would have spent. The key to financial independence is easy, save a good chunk of your take-home pay and invest it in things that are safe and will grow. And for 5 years, it did grow and I made money even though the property was vacant for a few months. Those were painful months. Real estate is not for the feint of heart and you need a good sized emergency fund. But I now have paid off a family member the rest of our portion of the Oregon farm!!! Yippee!!!! I am so happy. And I still have about 20K extra to do something. And see, with that 20K – I am going to “spend” it. But I’m going to “spend it” improving something on the farm which continues to raise it’s value. We are finally going up sometime in November and we’ll decide as a family whether to build that bridge across the creek or fix up the small guest cottage.
That is it. That is the story of the Fahrenheit condo. You were not a good buy, but because I had equity in Fahrenheit, I got to be a FARMER and buy half of an Oregon Farm!!!!!