Building Wealth, Part 1: Primary Residence

Dated: April 22 2021

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Is green shag carpet on your list for your dream home? It wasn’t on mine either, but that’s what we got as first-time home buyers. We were 21, William had been making a decent living for almost a year. Outsiders probably thought we couldn’t afford anything else. I admit to driving through shiny, new neighborhoods and being really drawn to them. But we did the math, put our long-term goals on a sheet of paper (Yes, we were type-A, even then) and decided a 1974 outdated split-level would help build our long-term financial foundation.

Start with equity. We’re children of the 80’s. For those of you who are younger, that generally means we grew up in a time with the mentality, “Bigger is better.” So it’s no surprise that when we bought our first house, we felt pressure to buy as much house as the mortgage company said we could afford. Instead, we did the opposite. We didn’t put the minimum amount down on our house. We bought a less expensive house that needed some cosmetic work. In fact, it appraised for more than we paid at closing. In short, we started with equity. That was our capital to seed growth.

Look for good bones. Don’t be misled, our first house wasn’t a total dog. It was a four-bedroom, 2.5 bath house on a ¾ acre lot with a huge backyard. The floor plan was functional. It was immaculate, even though outdated. The neighborhood was great and in a new school district. At the same time, we were young. We didn’t have a ton of cash to put into updating the house. That meant we needed to thoughtful about the improvements we did. Our most expensive investments were a new roof and carpet for the house. Second, we replaced the kitchen appliances. Other than that, we just removed dated wallpaper and painted a neutral color top to bottom, inside and out. For less than $10, 000, we gave the house a fresh update and let the quality of the original home shine.

Shelter from taxes. The choices we made in our first home came with purpose. Did you know that you can avoid capital gains tax on your property as long as you’ve lived in it for two years? At 21, we didn’t grasp the impact of those laws. Still, we knew that our first house wasn’t our last and definitely not our “forever” home. We approached it as such. Knowing our first home was a vehicle for our future financial goals, we did understand that the profit we made on it would aid in our next purchase and so on. When we sold the house after 3 years (and lots of sweat equity), we walked away from the closing table with the equivalent of a YEAR’s worth of salary, tax free.

With over 25 years of reflection, we can undoubtably claim that our first home purchase directed our path toward meeting our long-term financial goals and in-turn, building wealth along the way. This series is going to be practical and simple, like we aim to live and serve. It’s not glamourous, but wealth is earned over time, with our small choices leading a large pay-off. When we take this approach in our home purchases, we realize that each step, each home, can be a way to climb the ladder toward a larger financial goal, even if you have to endure green shag carpet for a couple years.



Part two of this series will address purchasing real estate needing rehab and larger improvements.

What questions do you have? Send us a text or email. We’d love to address them and your personal needs.

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William & Alison Smith

An internet search is easy. With just one click, we can find out more information than we can even read or sometimes understand. Finding information about real estate is not a problem. It’s finding ....

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