I added “homebuyer” to my personal resume at the age of 26—a full seven years before the average first timer these days.
At the time, it seemed like a savvy move because I didn’t have any other debt, had some savings left over from a work bonus, and my hometown of Atlanta boasted very reasonable home prices. I was also in love with—and engaged to—someone I thought I’d spend the rest of my life with, and we wanted to put down roots.
At first, we disagreed about what we wanted—I, a manageable condo, and him, a single-family home, where we’d stay long-term. Eventually, I agreed to consider his point of view, but the only homes in our price range were fixer-uppers on the fringe areas of town. I was skeptical, but it didn’t take long to talk myself into the job. “You love HGTV,” I thought. “It’ll be fun!”
Besides, I’d always loved the idea of creating order from the chaos, and when do you get to do that more than during a home renovation? Getting to pick my own finishes also made a home more appealing than an apartment or condo, and, financially, I knew I’d get a lot more bang for my buck if I picked a home that needed fixing.
It only took a few weeks to find a place I liked, and I closed in July 2013. I spent just $65,000 on the house—via a mortgage—then borrowed another $58,585 from the bank for renovations.
Until that point, I’d never bought a car, started a business, or made payments on a loan. So buying a home wasn’t just my largest purchase to date—it was my only purchase. Yet I went into closing with a sense of adventure, naively thinking that renovating a home would be as easy as it looked on television. Ha.
My First ‘Adult’ Money Mistake
Though some might consider the entire process a mistake, I don’t. I think the most expensive error I made was not properly vetting my first contractor. Real estate agent friends and contractors I’ve worked with since have confirmed what I suspected then: I paid close to $75,000 for just $40,000 worth of work and upgrades. He knew I was young and inexperienced, and took advantage, consistently running late and going over budget.
About $60,000 of that cash came from my bank loan, but I financed the rest with $5,000 from my savings account, and put $10,000 on a credit card. And, no, I don’t have the tricked-out house you’d think $75,000 worth of renovations would buy you.
On top of everything else, my fiance and I parted ways around the time conversations with my contractor became contentious. Because the home was in my name alone, he could just leave and start over—which is exactly what I wanted to do, too.
But I couldn’t. I was an adult with a mortgage and could no longer move at the drop of a hat like a renter. Since the renovation wasn’t finished, I couldn’t find a tenant, either, and if I sold it, I’d suffer a big loss. The house had taken every penny I had—plus some.
As they say, the only way out was through.
The Big Pay-off
It took me two years, but I buckled down, and eventually built my savings back up and paid off the credit card debt. I cut expenses, found roommates, and began freelance writing as a side hustle, using that cash exclusively to pay down debt. Over time, I eventually began to enjoy living in the home I’d built, and new, happy memories replaced the bad.
Once I’d paid off my credit card balance, I could see the financial benefits to owning my home. Rents have soared in Atlanta in recent years, but my mortgage and renovation loan have remained a moderate $825 per month. When you factor in the $500 I receive monthly from roommates, that gives me a lot of freedom. Plus, the equity I now have can be used to fund more real estate investments in the future or anything else, whenever I decide to sell.
Of course, this experience has also taught me some key lessons about the importance of taking your time and researching big financial decisions before jumping in feet first. It pains me to think of all the money and heartache I could have saved had I just shopped around for multiple bids from contractors, called references, or considered a move-in-ready home.
But perhaps my biggest takeaway is that when life gets tough, adults don’t get to hide under the covers and wait out the storm. I had the fortitude to endure a tough situation, making a plan to get back on my feet—not because I wanted the participation trophy or because my parents wouldn’t let me quit the team, but because it was the right thing to do when my money and credit were on the line.
Although it was by far my biggest financial mistake to date—and it took me years to dig out—coming on on the other side is also my biggest accomplishment.
January 4, 2016