Congratulations to us; my wife and I just bought a house. Normally, not a big deal, but I think we differ from your normal homeowners…
- This is our third house in 10 years.
- This is our third house in our third country.
- We are not rich
- Big profile difference in 10 years: Since house #1, we had 2 kids AND our salary is just one third what it was 10 years ago.
To be clear, we don’t have 3 houses now. We sold house #1 to help buy house #2. We now own 2 homes: one in Prague, Czech Republic and one on the eastern shore of Nova Scotia, Canada.
Again, not a big deal. And I’d say it’s very possible by almost anyone.
Our home now is Eastern Passage, Nova Scotia, with our house located about 1200 feet from the Atlantic Ocean. During the quiet nights on the deck we both see and hear the surf pound on the rocky shore. It’s magical for us and the kids.
How Did We Do It?
I could say it took steadfast sacrifice, determination and hard work to get here, but that’s a load of BS.
Truth is, it was more like good timing, prioritizing, and common sense risk management.
And that’s all the more reason I want to share our “how” — because I’m convinced anyone could do the same.
What You Want To Hear
I know what you want. You want the country villa in Tuscany, a downtown flat in Prague, and an oceanside home in
Eastern Passage, Nova Scotia, Palm Beach, California. Well, that’s not reality. Not in the short-term anyway, unless you’re fabulously wealthy, and I’m guessing both of us are not.
What we want to hear is different from what we need to hear. Let’s change from the “infomercial voice” to the mentoring voice.
What You Need To Hear
Back to the good timing, prioritizing, and common sense risk management:
You hear people talk about timing the housing market, with phrases like “get in while rates are low.” It’s true, to a point. When we buy a house with low interest rates (and you lock that rate in with a lengthy fixed rate mortgage), your payments are going more to the house (hello, you want equity?) and less to the bank’s pockets.
Buying while rates are low is one point, but equally important is buying while prices are low. And what’s “low” mean? It relative only to the future. While banks and real estate agents try hard to convince you your new house’s value is due to skyrocket, they make their money upfront. You’re in debt until you sell. That may be next year, in 5 years or, if underwater in your mortgage – not for a long, long time. In short, you want to buy when a house is low compared to a price hike you want to come as quickly as possible.
To be sure, we’re not consumers. “But Jeff, you guys bought your 3rd house in 10 years! A house is the biggest purchase a person can make!! Your ARE consumers!!!”
No, really… I mean don’t buy stuff for owning stuff’s sake. I would argue a house is one of the few things you can buy that can sell at a higher value. And more likely, a house can make you money (rental income).
- our car is not new. In fact, it’s a 1997 Buick. Ugly as hell, but reliable.
- No TV (really, no television for 14 years now) and that means no cable bill.
- No iphone, ipad, stereo, or (insert fad-ish electronic gizmo here)
- …getting the idea?
I hate listing off what we don’t own, because it quickly sounds like we would judge others for owning those things. It’s not a question of who’s better off in the end, it’s a question of priorities.
Your priorities must make sense with your dreams. If you dream of ridding yourself of debt – then your priority must be to spend less than you make.
Common Sense Risk Management
I call it risk management, because that’s the field of my last job. But really, it’s just common sense.
- First task to do with risk management is to IDENTIFY the risks.
Let’s make an example.
Every week you need to buy milk, but the store is across a busy street.
The risk: getting hit by fast-moving cars.
- Second task with risk management is ASSESS the risks
Weigh Costs against the Benefits.
What’s the benefit? Having your fresh milk every week.
What’s the cost? A sudden case of fender poisoning. 🙂
However you weigh them helps you decide on the next step.
- Third task with risk management is TREAT the risks
With any risk, you can either remove it, minimize it, or accept it or offload it on someone else.
What do I mean? Try it out on your own.
To remove the risk, find a store on your side of the street. No cross the busy street = no risk of getting hit.
To mitigate or minimize the risk, cross during a slower time, like late morning or afternoon? Fewer cars = less risk.
To accept the risk, just decide the milk is worth it. Risk accepted.
To offload it, have someone else get your milk. Maybe they have better medical coverage? Someone else’s risk now.
The fourth and last task is to MONITOR the risks.
All risk management doesn’t stop with just treating them. You should watch to see how the risk may change. Maybe in our example, he finds he must get milk more often, or the street becomes even busier. In both cases, it’s a worse idea to accept the risk.
Now we come back to whether to own property somewhere else. Obviously there are many more risks involved. You need to identify those risks and decide for yourself how they affect you (whether to go or not, whether to buy or not). I can help
with both of course.
Like I said, we’re now owning our 3rd house in 10 years. From a total asset perspective, we’re better off now, then we were 10 years ago. And that’s true, even though, from a salary perspective, we’re not. How did we do it? We did our own risk management.
How Can I Help You
We did our risk management smartly and won. Now, with our current experience, I can help
you perform the same.