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Longtime readers of Humble Dollar will know a semi-recurrent theme to my writings involves the idea that luck, timing and not-following-certain-financial-rules have helped shape my financial journey.
Perhaps most notable is the purchase of a home I made in late 2018. I was well-acquainted with the rule that stated nobody should purchase a home if they don’t intend to live in it for at least five to seven years. And yet I really had no choice. My soon-to-be husband and I owned four large dogs between us. Anyone who knows me knows very little means more to me than my dogs.
I also knew my plan was to retire in mid-2022. If my plans held, I would only own the home for three-and-a-half years.
Living in Portland, Oregon at the time meant housing costs were relatively high at the time. I finally found an 1100 square foot home in a nice neighborhood that cost $375,000.
From 2018 through mid-2020, the valuation on the house changed very little. As my retirement date grew closer, I hoped I would at least be able to list the house for $400,000 and perhaps, lose just a couple of thousand dollars on my purchase.
By early 2021, housing values began increasing. I was growing more hopeful I wouldn’t lose money on my housing gamble.
By 2022, housing values were hitting new highs. In hind site, I would discover it was the peak of the market. By March of 2022, the house was listed for $475,000 and two days later I had a cash offer of $600,000. My husband and I were allowed to stay in the house, rent-free, for two months. The new buyers waived their right to have the house inspected, which meant I had no financial obligation to make any repairs.
Walking away with such a large sum of cash just prior to retirement made me feel much more secure than I could have imagined. In addition to the good timing of the housing market, I also had good timing in regards to interest rates. My credit union was offering a rate of 5.5% on cash held in their ‘select’ savings accounts.
Just a few weeks ago, I found out that the house I sold in 2022 is back on the market. The initial listing price was $540,000. It is now down to $500,000. From the listing, it sounds like the current owners invested at least $15,000 in various repairs to the home after they purchased it.
I’d love to hear how other HD readers have had luck, timing and ‘failing to follow the rules’ work in their favor!
Foolish housing gambles have worked for me not once, not twice, but three times. At my first wife-to-be’s insistence, I sold my comfy condo, which had doubled in value in three years of ownership (Bay Area real estate insanity). I bought us a house nearby for about 30% more than I could afford, which I almost lost after two years (I was two payments behind).
Jump ahead 15 years and wife #2 and I sold the house for double its purchase price, purchasing an Oregon beach house that promptly became a money pit. Jump ahead another six years, past cancer and repair projects and the pandemic, to another burst of real estate insanity that turned rural oceanfront properties into uranium mines. Realtors were literally knocking on the door. We profited handsomely from what had clearly been a bad idea, and fled to Seattle.
Again I strained myself to the financial maximum — very unwise at age 65 — to buy an oversized house, much too big for just the two of us, in a near-panic to buy a place in the midst of the mania. However, four years later it has become clear that we lucked out again. The place is perfect and full of family. I call it my frog house. I’m here until I croak.
And none of the three previous homes significantly appreciated in value since I sold them. I could have sat on them like eggs in a nest and never done any better. Pure luck.
The Portland Oregon real estate market was good to me, for sure. My first house was purchased for $62,500. Sold five years later for $120,000. Second house (located five blocks away from the first house) was purchased for $173,000 and sold for $420,000 about twelve years later. Third house was the one I wrote about. I occasionally look at all of them via Zillow. The first house is now worth $394,000. The second one is estimated to be worth $650,000. And the third one, the one for sale right now, just sits there, apparently worth at least $100,000 less than it was three years ago…
I was let go from a job that I thought I would retire from, doing it for 25 plus years. During that time my wife and I had saved through her defer compensation account and she also was working toward a pension. After I was let go I ended up working for an municipality for 8 and 1/2 years and ended up earning a small pension. I figured out that what I put toward my pension I was paid back in four and a half years. I’ll be retired now for 9 years in 2 months. I also opened up a deferred compensation account while why being employed with the municipality. I started it day one of my employment with them and now have a nice amount invested and not touched since I’ve been retired. I don’t know if I strike it up as luck and timing or Divine Providence. Things worked out better than I thought they would after being let go from a job that I truly enjoyed.
Where are you located? I noticed you used “deferred compensation account” not common phrase in the US.
I’m located in the inland Northwest.I probably should have been more specific. As municipal worker I had a 457B as deferred compensation account along with a pension. The 457B was optional. Our employer gave us a match to our first $140 each month.
PS. RDQ I quite enjoy reading your columns also. They spur a lot of different perspectives, but you also bring a lot of different perspectives. I think we all will miss you after your final day here (at least I will) for what you’ve brought to Humble Dollar
I think it’s a more common term for government employees. My husband has a ‘deferred comp’ account (he was a deputy sheriff) and I know I was eligible to contribute to one when I was a state employee. It’s actually one of the first financial terms I became acquainted with.
Kristine, I remember your real estate story from a few years ago. It’s a wonderful feeling when good things happen as you experienced. We had a similar real estate sale last year and the house sold for way more than we thought we would get. Having the right realtor can also make a difference.
The title of your article is probably the way most R/E transactions happen. Hope your dogs made the transition to AZ fine.
I can think of two specific timing/luck events that have had a tremendous impact on our financial wellbeing.
First, we bought our second home in 1998 for $227,500. The housing market in our town had been struggling along for years, and we sold our starter home for only $10K over what we’d paid for it in 1992. But right after we bought the house in 1998, the housing market exploded in our town. We sold the house for $780,000 in 2019. Zillow values it at over $1M now, but oh, well. We were able to put a substantial down payment on our new condo, save our a nice chunk to furnish and decorate the new place, and have a nice cash cushion in the bank.
Second, I was head-hunted to change jobs in 2008. I was happy where I was—I’d been there 18 years, was a tenured full professor, and thought I’d retire from there—but an opportunity to move to a new university position that was in the town I already lived in fell in my lap. (I’d been commuting 25 miles each way to another university in Sacramento.) It was a more prestigious job and it eliminated my commute, but maybe the best payoff was financial. My first job had a capped salary scale, and I was already at the top of it when I left. My new job had much more room for continued salary growth, and I did extremely well over the years with merit increases, a promotion, administrative stipends, equity adjustments, and COLAs. When I retired 17 years later, I had come close to tripling my starting salary. But that still wasn’t the best part. The two university retirement systems had reciprocity, meaning that my pensions from both systems would be based on my highest salary average over three years. That meant that the university I left in 2008 is now paying me a pension based on my new job, not my old one. Talk about a lucky break!
What a blessing, Dana! Chris
Just a thought for anyone searching for their next HD article – what are the rules that might be worth ignoring?
Great article Kristine, thank you.
Thinking about luck led me down a lot of paths. Which in turn brought about a lot of gratitude for how many things I have had go my way.
First and foremost, I came into this world as a healthy baby to stable, prudent parents in a wealthy country like Australia. Without a doubt, this is the biggest head start I could have possibly wished for.
Then when I was 23 I was offered the choice of a job in 2 locations – Hobart or Rosebery. Hobart, population of 200,000 would have offered lots of young people, entertainment, sport, restaurants etc. Rosebery was a gritty little mining town with 1500 people, 2 pubs and an obscenely high annual rainfall total. I chose Rosebery, met my wife and that nearly random choice has improved every part of my life since.
Later in 2016, I was in dire need of a career change. A small business opportunity came up. We jumped in with little thought or analysis, but it turned out to be an incredibly positive choice.
I would like to think that once luck landed in my lap that I made the best of it. But I can’t deny the luck that I have had.
Kristine, I think it’s a combination of all 3 (luck, timing and not following the rules). In all these examples we all DID act, with some trepidation and good reasons for doing so.
In our case, we purchased a 2nd home, for vacation and family gatherings at the Jersey shore about 70 minutes away from our home, in 2017. The market was not great at the time for the condo we bought and we got it for a very good price, scraping together the 20% down payment and getting a mortgage at 3.625%. We’ve enjoyed it more and more each year with our growing family including our 4 grandkids who stay over almost every weekend during the summer. A unit across the hall from us (it’s a 2 bedroom vs. our 3 bedroom) just sold for almost twice the price we paid 8 years ago. Amazing! Not that we are looking to sell, but the equity we have in this condo is now at a level we never dreamed of and could serve us for unanticipated future needs if we ever needed to sell. Yes, we were lucky and the timing was good, but we acted when it was a bit uncomfortable to do so, and we’re glad we did.
Good topic Kristine. In the 15 years before retirement, 3 things happened that radically changed my life trajectory. First, my wife of 27 years divorced me. I thought things were okay, so I was unpleasantly surprised. In hindsight, she was right; our marriage was only a shadow of what a successful marriage could be. I realized that 6 years later when the 2nd thing happened: I found my soulmate. Having the right companion is soooo much better than not. Third, around the time of the divorce a very technically difficult project came along at work. I was a government contractor employee and none of the existing IT feds had the specific skill set nor wanted to touch it. To be fair, it was a very high stress and challenging long term task. I had the right technical skills and experience, so that afforded me an opportunity to become a federal employee. Plus, at my contractor job we’d gone through a recent contract change and I was part of the “unwanted but needed” old management team, so the new contractor management really wanted me gone. The resulting job security and pension (albeit at a lower salary) of becoming a fed was a nice boost to finish my career and go into retirement. Thinking back, it’s amazing how so many of these major changes in my life were luck/fate. Thinking about it, I’m amazed and grateful how well it all turned out considering how bad some of it seemed at the time.
Kristine, if you have followed my writing, you know that is the story of my life. Not following the rules and still meeting success.
I’m not sure if it is luck or that the rules are not as valid as we assume.
I was well-acquainted with the rule that stated nobody should purchase a home if they don’t intend to live in it for at least five to seven years.
I think that this is one of the rules that ‘they’ made up.
We outgrew our first small 1918 house in five years, but we were in our second house forty years. We have had our vacation home thirty-seven years.
My first wife and I owned five homes in 25 years of marriage. House #2 was a fine home, in a nice neighborhood, with a good public school system. It would have been paid for by age 45. It would have made financial sense to stay there.
😂
In our case, the luck, timing and not following the rules came from an employee stock plan. During the Great Recession, my spouse’s employer was having some difficult times and decided to offer stock for the employees. We had kids in college, so couldn’t afford much. We contributed $100/mo for 6 mos and they stopped the plan b/c the cost of the stock had gone down so much. Later, the company was bought and there was an opportunity to cash in our shares, but they weren’t worth much so we never did anything to cash them out. The years went on, and by the time we retired, the stock was worth $50k. We sold half of it, thinking we had done well. Fast forward to today, 21 mos later, and the shares we have left are worth over $100k. It is crazy! Like I have told everyone, we were pretty ignorant, but this time our ignorance ended up being one of the best investments we ever made. LOL! Too bad we weren’t able to put more in at the original time. Chris
The combination of making wise decisions coupled with good timing is what I strive for. Congratulations.
We also sold a home in 2022 in order to use the proceeds to build a more age appropriate home. We benefited from great interest rates as well. I’d love to claim financial prowess, however, it was nothing other than good luck.
I was so worried that housing values would crash before I could sell that I contacted a real estate agent in January of 2022, almost six months before I would actually retire. I didn’t think there was any way I could list/sell the home until after we moved out (in June of 2022). The real estate agent assured me that the market was so hot, anything would be possible via negotiations. He advised me to list it in March–which I did. And, sure enough, everything was negotiable. We got to stay in the house for 2+ months rent-free.
I can’t imagine we’ll ever have another real estate market like the one that existed during 2020-2022, but never say never…
When we bought a house in 1987 for $159,000 the market then crashed and we were underwater for ten years. Couldn’t even remortgage to lower the 9-3/4% interest rate. Today the house is worth at least $900,000, but I suspect that won’t hold.
Nice article, Kristine. Whether we call it luck or providence, much of the good that happens in our lives is contrary to our expectations, or even our efforts.
For starters, being born in a decent social situation in a prosperous, safe country gave me a leg up over many folks in the world. Despite that, my choice of friends in my high school years could have led to the same troubles that befell them in later years. Thankfully I made a clean break to a new social group, for business reasons. I didn’t understand the better consequences for me until later.
My physical therapy career began somewhat unexpectedly. I started night classes at age 30 with the idea of following a different path. But, while thumbing through a college catalog, I saw a description of PT. After talking with a local physical therapist, I realized I’d found my calling.
Another blessing came when I ran across a book on personnel finance published by the Wall Street Journal. It was my introduction to topics that are the bread and butter of this website. Jonathan told me the book was born from an idea of his for a series of articles. So, he had a hand in my financial education long before I heard his name.
But the best boost to my life comes from the match I made with my wife. She moved to Georgia from California for grad school. I met her a few weeks before she was destined to return on the day after her graduation. We are well-suited for each other. The happiness she adds to my life is immeasurable.
Sometimes it works, and sometimes it doesn’t. I purchased my first house in 1978 during a time of rapidly rising prices in my area. I had been saving for a sizeable down payment, but concluded the prices were rising faster than I could save money. I capitulated and purchased a smaller house, reasoning that I could make it more suitable as the family grew.
A few years later I finished the designs for the expanded house, hired an architect who drew up and certified the plans. I lacked the funds so I borrowed a tidy sum; banks were loath to provide second mortgages. I was able to get a balloon note to cover much of the costs of construction. However, the government began tightening and interest rates quickly rose. At one point that note hit 20% interest rate.
I was able to pay it down quickly, but that interest rate raised the total cost of the project. I had budgeted a 15% contingency amount. It could have been worse. The house sold in 1995 at a tidy sum, which went to my first wife. =
By 2000 I had saved enough to purchase a condominium. My work required extensive travel so it was a choice to continue renting or purchase a condominium. I had tired of dealing with landlords. HOA boards are another problem.
We sold that condo in 2022 at a tidy profit. It had taken more than 40 years for things to turn around for me.
In 2013 we began travelling part-time. We decided we would retire in a warmer area but had some specific wants. Initially we used a car and stayed in motels as we explored potentials. We purchased a Class B RV for travel and after further explorations we set up a 30 ft. RV at a campground in nearby Michigan. This we reasoned would be our summer home. Continuing, we found a resort in Arizona and decided that would work very well, but not during the height of summer heat. We looked at Park Models, etc. but found nothing to our liking. A covered and improved site came on the market and we purchased it. We had been living in the small RV for 90+ days. We began looking for a suitable RV to put on the site. We eventually found two at a nearby dealer, but we couldn’t meet the price point of the one we really liked; we had set a maximum budget. We told the sales associate and said regretfully we would purchase the alternate. He told us to wait a moment while he got the manager. To our surprise the manager offered us the preferred RV at our price and agreed to bring it to our site. So, that’s how we purchased a very large 41 ft. 5th wheel.
We lived in Michigan and Arizona most of the time for the next 10 years. I ran my business remotely from AZ.
Health issues and age forced a change in late 2022. We sold that large RV and the improved site in AZ and moved into a home in the resort. Inspection revealed it needed some work, but we purchased it anyway.
We are finally down to two RVs; the Class B and the one in the Michigan campground.
I was pretty capable of maintaining and improving traditional homes, and after three RVs I’m able to say I’m capable in that area, too. Time to pause here and continue installing the larger solar panel on the Class B.
I think I mentioned once before that I came out of a fixed-rate mortgage during the very start of the 2007 GFC. Because I was a business owner, the banks saw me as a massive risk and wouldn’t let me have another fix. They offered me a floating rate—base rate plus 0.8%. Over the following year, the base rate was slashed to nearly zero, causing my mortgage to be massively below market rates for nearly the entire duration of having the mortgage. I never paid more than 1.3% until my mortgage was satisfied before retirement. Exceptional good luck and timing, all because I was considered a risky bet.
That’s a great example of timing and luck! My husband and I purchased our retirement home in 2019 because we sensed the real estate market was about to explode. We were able to get a 3.5% mortgage and I’m so glad we did!
We bought our condo in 2019 as well, with a 4.1% mortgage. We turned around and refinanced it a scant 16 months later because of the COVID-era drop in rates. We now have a 3.149% mortgage. I’m sure refinancing barely 16 months after purchasing is also against the rules, but we barely paid anything in closing costs in 2020. They wanted our business.
When we purchased our ‘retirement’ home in 2019, we only put a 10% down payment on it as we still had a mortgage on our Oregon home at the time. We wanted to get a home purchased before real estate values got so high that we’d get priced out of the market.
The values of houses rapidly increased shortly after we purchased the house. By 2021 we had enough equity in the home to apply to have the private mortgage insurance we were paying (about $70/month) removed. I assumed we’d have to pay for an appraisal but the mortgage company didn’t require it. They had a real estate agent write up a report on local home values and accepted that.