recently, i visited for work the city where we used to live, and where we once owned a condo. on a whim, i drove past our old building, which brought back a flood of memories — how we came to buy it in the first place, all the work we did there to renovate it top to bottom, how tough it was to say goodbye, and what it did for our finances.
mr. onl and i have discussed many times whether purchasing that condo was ultimately a good decision or not, since we tend not to buy into the idea that you “make money” on a place if you sell for more than you bought it — that ignores the many large costs of ownership, and all the interest you pay the bank in the meantime — but it definitely set certain things into motion that have brought us to where we are today. it’s a reminder that it’s not always easy to tell good decisions from bad decisions — or good investments from bad investments — but rather it’s about what those decisions do to your trajectory, and what other decisions they influence.
think butterfly effect: a butterfly flaps its wings in the amazon, setting off a chain of events that ultimately leads to a hurricane in the atlantic. one decision impacts a lot of other things, and that’s definitely true about that condo for us. here’s the story:
the story of our worst and best investment
flashback to 2008, the year we got married, and also the year the economy tanked. we had been working for years to save for a home, and had felt for our whole adult lives the way that many millennials say they feel now, that we’d never be able to afford a home. but then bear stearns failed, and lehman failed, and aig failed, and the phrase “too big to fail” became etched into our collective consciousness. in less than a year, the landscape was much different. because we’d saved a good amount and had good incomes, we were in a position to buy something bigger than the dumpy, rent-controlled, one-bedroom apartment where we lived for four years (man, do we miss that $900 rent, though!). we jumped at the chance.
after several months of tracking listings, and feeling like we had a good sense of what was out there, we got a realtor in early 2009, who told us that we couldn’t get a house for our price range, and we’re still not sure if that was true, but we believed her at the time. probably she sensed that we were being conservative with our budget, but we weren’t willing to budge. we wanted to know, this being kind of a scary economic period, that we could easily cover the mortgage and all of our standard bills on only one salary without being forced to go hungry. so resigning ourselves to a condo, we went out to look at places. we saw a dozen or so places that day and decided to place an offer on the one that later became ours. (fun fact: we’ve bought two homes for ourselves, and have spent a grand total of two days house hunting.)
over the course of the next three years, we fixed up every single room — we scraped down popcorn ceilings, we painted every surface, we ripped out carpet and put in bamboo, you get the idea. we did most of the work ourselves, but did outsource some of the electrical and flooring work, plus the messy popcorn scraping. still, we achieved a full renovation of the 1000 square feet for under $20,000, which we felt pretty great about at the time, especially because we didn’t choose the cheapest materials in every instance. and the best part about doing the renovation was that we loved the space, and loved it all the more for having designed it it all and having done most of the work ourselves. not to mention that we learned a million diy skills, from carpentry and painting to tiling and electrical.
a butterfly flaps its wings
after we’d been in the condo a few years, we got the opportunity to buy our mountain home because we both became remote employees in the aftermath of the 2008 crash, and were no longer attached to an office. we spent virtually all of our vacation time and most of our weekends traveling to the mountains, so the idea that we could actually live in the mountains some of the time was like a magical dream. at first, we thought we would split time until we could retire full-time to the mountains in “a decade or two.” so, given our conservative attitude toward spending, we were determined to constrain our spending on the house in the mountains so that we could still cover both mortgages on only one of our salaries, even with a 15-year mortgage on the house. (it would no longer be “comfortable” to cover both on one salary, but we didn’t want to be in a situation where we couldn’t cover our own bills, even if we went into rock bottom budget mode, if one of us got laid off.)
once we had the mountain house, we actually spent very little time in the city place, but didn’t decide to let it go right away — that took nearly two years. and when we finally did sell it, we sold for more than we’d paid, but not enough more that we’d call it a true profit. so was it a good decision to buy it, or should we have stayed put in the apartment where we had lived before, and which would have let us save more money more quickly?
the butterfly effect magic
we’ve done the math, and we’re certain we would have come out ahead if we’d stayed put and rented for a few more years until we moved to the mountains, if it had been possible to predict at the time that that’s what we’d ultimately decide to do (and we couldn’t actually have predicted that). but, we don’t regret buying the condo, even though it wasn’t a good investment on paper, with that perfect hindsight. despite that, i’d go so far as to say that buying it created some magic in our lives that put us on the path we’re on now. that magic came not from any direct financial effects (which weren’t awesome), or even from the joy that came from fixing it up (mostly) with our own hands (which was awesome).
instead, the magic was what that purchase did to our future decisions, namely constraining how much we spent on our mountain house, where we live full-time now. we certainly could have spent a lot more on a house in our town without much effort, even in the down market of 2011. just moving to a different neighborhood in our same town and buying an identical house could have cost us another $150K, no exaggeration. and we could have “afforded” a much higher price tag than we ended up spending if we didn’t have another mortgage on a condo in the city at the time we were house-hunting in the mountains.
now that we’re in ultra-focused early retirement saving mode, and part of that for us is paying off the house, we’re beyond grateful that we ended up buying modestly when we bought our mountain house. we’d have to work a lot harder to save enough to retire fully and to pay off a more expensive house — it could literally mean adding a year or even two to our timeline, just because of a different home choice. and that difference is far, far bigger than the money we spent unnecessarily on the condo.
so that’s how a not-so-great investment turned out to be — accidentally — our best investment ever. if we hadn’t rushed to buy that condo as soon as we could, who knows — we might have bought a house in our mountain town that cost double what we actually spent, and be on a much longer timeline to early retirement. that’s a bad investment we’ll make any time!
can you relate? any investments you’ve made that look bad on paper but had some other big benefit? any other fun butterfly effect stories you want to share? spill it all in the comments!