Q&A with Lauren Bowling
At some point in our adult lives, almost all of us will buy a home. We’ll opt out of expensive rents and decide it’s time to have something to show for our money. It’ll also be a big and necessary step toward achieving the much sought after American dream.
That doesn’t mean buying a home is easy… or cheap.
There are numerous studies saying that Millennials are putting off homeownership in favor of paying off student loans and contributing to our 401(K). This is true – but, it doesn’t mean we don’t want to buy a home at some point. It just means we prefer to get some financial ducks in a row, first.
However, Lauren Bowling, the blogger behind L Bee and The Money Tree, doesn’t think you should put it off. In fact, she maintains that buying a home can be a great investment. We spoke with Lauren to get the scoop on her experience as a first-time home buyer (the good, the bad, and the ugly).
Lauren, from your blog we know you’re an ex-actress and a reformed shopaholic (me too, by the way). How did you get into blogging?
I was unemployed and looking for a project to occupy my time. I’d just returned home after living in New York and working as a receptionist at a hedge fund. That’s where my love of personal finance really began because everyone there was so smart and successful. I wasn’t allowed to blog back then because of compliance reasons with the fund, so after I left that job and moved home I decided to start writing about personal finance, just so I could continue those money conversations I’d begun having in NYC.
You own the fact that you’ve made some financial mistakes along the way. I think we all feel that way. What has been your biggest slip-up?
Getting into so much credit card debt at an early age was easily my biggest, dumbest, most expensive mistake. I racked up $10,000 in debt by age 21 thanks to my nasty shopping habit. The kicker is that my parents graciously gifted my college education, so I graduated student debt free. I shudder when I think how much further along I’d be if I hadn’t been so irresponsible. Like, would I have an island right now? A puppy farm? It’s entirely possible if I’d made good financial decisions from an early age.
I hustled at my first job in NYC to pay off that $10k in about 14 months by using a very strict budget. By the time I moved home to Atlanta in 2012, I had zero debt.
At what age in your life did you finally feel like a financially responsible adult?
I definitely have days where I feel like I’m “killing it” with my finances, but there are (many) others where I still feel like a rookie, especially with the uneven cash flow that comes with being your own boss. I will say that becoming a homeowner in 2013 did validate a lot of my financial behavior and made me feel like I was finally a functioning, semi-responsible adult.
In 2013, you made the transition from a NYC apartment renter to an Atlanta homeowner. What made you take the plunge into homeownership?
I received a bonus payout from my job in NYC right before I moved home. It was a large chunk of money, and I felt it dwindling away…a little bit here, a little bit there over time. I wanted to put that money to good use, make it “stand” for something, so I decided to buy a house.
I’d also been blogging about finance for about a year at that time, so owning seemed like a smart money move. After running the numbers I saw that owning in Atlanta was a much more economical option than renting, so I started my search after I’d been back in Atlanta for a year.
Buying a home is a huge financial commitment. And, you did it at a young age! Did you have any reservations or concerns going into it?
I didn’t have any concerns about the finances or commitment required when you own a home. It doesn’t mean I shouldn’t have been nervous, though. My confidence in the decision was largely because I was so clueless and uneducated. I was definitely very naive to jump in without doing more research.
Did anyone give you financial guidance on the decision?
My parents had been homeowners for a very long time and, thus, hasn’t gone through the home buying process for a long time. Other people I knew has been badly burned by the 2008 housing crash and were very negative about me dipping my toe into real estate as an “investment.” As for my friends, I was the first in my social group to buy a home, so I couldn’t turn to them for advice either.
That seems daunting! How did you feel going into it?
I think I’m a lot more daunted by it now that I’ve been a homeowner than I was going into it. I was excited about taking the next step toward my future. Again, uneducated and clueless, but sometimes that spirit is what you need in order to take the leap and do the scary things.
Many studies say that Millennials are placing the “American dream” of owning a home on hold, as they don’t want to tack on more debt on top of existing student loans. What do you think?
Being without a large student loan burden is one of the main reasons why I was able to buy my first house at age 26. I was lucky. However, I do believe that homeownership, for those who live in areas where homes are of a reasonable price and value, can be a smart choice. For example, Atlanta is an affordable market to buy a home in, where as if you want to buy in New York City, it can be hard to fit a $1 million condo into your budget. But, if you can afford that $1 million condo, it’ll likely go up in value in NYC’s constantly increasing housing market.
How did you determine how much you wanted to spend on your first home?
I was only making about $40,000 a year at the time I bought my home, so I didn’t qualify for a large mortgage. Because of that, I didn’t buy an expensive house!
I was also very adamant that I wanted my mortgage payment to match what I was paying in rent, because that number fit so comfortably into my budget. Doing the math on that, I think I was offered up to $160,000 and I ended up getting a loan that could cover both buying my home and the necessary renovations for ~$125,000.
If you don’t mind us asking, did you put down a significant down payment? How did you save for it?
I’d been saving consistently for a year before buying a home. However, saving on a $40k income doesn’t add up to a ton of available cash. Fortunately, I had a small nest egg left over from my bonus in New York to fund a down payment, but I ended up not needing it because I qualified for a down payment assistance program the City of Atlanta was doing at the time.
That’s convenient! What was the program?
The city was working to revitalize neighborhoods in Atlanta that had been hit with a lot of foreclosures. As incentive to buy some of these homes, they were offering buyers $15,000 on foreclosed homes. I used this money for closing costs and the down payment. My out of pocket expenses were only about $1,800 at closing.
Seems like you had a pretty easy time figuring out the financials of buying a home. But overall, how was the process for you?
It was pretty stressful, to be honest. But, it’s worth it!
Because I was using a grant from the city AND using a 203k renovation loan product to rehab the home I chose, the underwriting process was very involved and (at times) stressful. So much paperwork. The “high” really didn’t come until after all the work was done, and I could finally settle into the house.
Unfortunately, that wasn’t the worst of it.
I hired a contractor to do a significant portion of remodeling to the house. He was such a snake and egregiously overcharged. Next to the credit cards, not properly vetting him, or educating myself on the costs of things when you’re renovating is probably my second most costly mistake. Other contractors have told me I had a $40k renovation that cost me $60k, so a $20,000 mistake. It still pains me to this day.
So, while I got a great deal with my place and a lot of assistance with buying the home because of the Atlanta downpayment assistance program, I still got my fair share of issues from going this route.
What is a 203k Renovation Loan?
A 203k loan is something banks offer to people who want to renovate and/or do cosmetic upgrades to their home. You basically have to buy a home and take out a loan to renovate that comes in under the amount you are qualified for. Like I mentioned above, it was a lot of paperwork and stressful, but it’s a smart choice when buying an old home that needs renovations.
Haven Life Note: If you’re interested in learning more about a 203k Loan, we found this helpful resource.
How would you hire a contractor next time? Would you base it on Yelp reviews or ask for references?
I have a great contractor that I work with on a regular basis now and he’s fantastic. I found him through a friend and fellow finance blogger who recommended him to me. I think things like Yelp and Angie’s List are fine, but definitely ask the prospective contractor for references and give those people a call.
I definitely think references from family and friends are the way to go though, if you can get one.
It sounds like renovations were your most costly expense. What exactly did you need to fix up?
I fixed everything. The home had sat vacant for more than a year before I bought it, so it had been pretty picked over by vagrants. I had to put what I like to call the “guts” of a home back into it: all new plumbing, electrical, HVAC, cable.
I also put in a new kitchen, new light fixtures, new floors, the works. It turned out nicely, and I’m really proud of it. Since I always knew I wouldn’t be in the home forever, it was important for me to consider the resale value of the home and not to “overbuild” the neighborhood. I really wanted to redo the upstairs bathroom, but I consulted with an agent who said I likely wouldn’t get my money out of that fix unless I waited at least a few more years to sell. Because it wasn’t my forever home I didn’t get too crazy with any projects or renovations–just the basics, and that has paid off well for me!
What’s the net-net? Would you recommend a “fixer upper” to a first-time homebuyer?
I think first time homebuyers should avoid the gut job remodels on the first go-round. Maybe buy something that needs a little love and cosmetic touch, but don’t do anything too involved. There is such a steep learning curve associated with being a homeowner, and being a homeowner that renovates is another huge leap. Save the big projects for your forever home or flips.
We have to ask, did you get life insurance once you took out that very substantial loan?
I didn’t have a cosigner and I’m not married, which is why I didn’t buy life insurance to protect against my family getting my mortgage. I definitely recommend it to those who have purchased a home and have a spouse or who enlisted the help of mom and dad. In the event you can no longer pay, a house is such a big burden to be saddled with!
We see you’re selling your home now. How come?
The intention with this first home was for it to primarily be an investment. I didn’t know if I’d rent it out or sell for a profit, but this summer/Fall finally felt like the right time to sell. Mainly because I had waited it out long enough to where the neighborhood could be deemed more “up and coming” than it was two years ago.
Also I began working for myself full-time in April and now that I have a digital, location-free business I’d like to be free to travel more without the worry of checking in on the house.
How’s the selling process going?
I listed my home in September 2015, and it’s already under contract! I’ll (at the very least) get my money back out of it when the home sells.
Let’s pretend we can send you back in time to when you bought your first home, would you do anything differently?
A million trillion things.
One thing is that I’d ask more questions about the people I was working with (mortgage broker, contractor, real estate agent). Basically, I’d have educated myself more.
Probably the biggest one, though, is that I would buy a home that suited my lifestyle at the time (small condo, less upkeep because I’m a busy, young 20-something). I didn’t need a place that included renovations and yard work at that point in my life.
There are many more things I’d do differently of course. I actually wrote about it on my blog.
Anything else we should know? Or, any parting advice?
My advice to those struggling with loans AND the idea of saving for a house is: start small, buy well below what the bank offers you for a mortgage and build room in your budget for furniture, maintenance, repairs, and taxes. Those are the wallet killers, but if you plan ahead for them it’s not so bad!
All this being said, I’ve read that some people have seamless home buying experiences. Just remember that homeownership, like most things, works best when you’re fully educated and prepared. When making the largest purchase of your adult life…the time to phone it in isn’t once you’ve already started the buying process.
Lauren Bowling is the blogger behind L Bee and the Money Tree and host of the web series Awkward Money Chat. When she’s not busy renovating houses and blogging about personal finance, you can find her hanging at home with her adopted pup Roo, along with a good book and a glass of red wine in hand.