My Dumbest Real Estate Move
Published | Written by Sarah McCormick
My Dumbest Real Estate Move
Originally published November 17, 2007
There have been lots of dumb moves, so it’s hard to pick just one. But this was a biggie, and it was my first.
It was spring of 1990, and Seattle’s real estate market was HOT-HOT-HOT! Everyone from Emmett Watson (notorious Seattle Times columnist) to my grandmother was bemoaning the “Californication” of Seattle which had caused real estate prices to hop upwards in double digit increments for several straight years.
I was a new real estate agent, into my second year of selling, and was working for MacPherson’s Real Estate in the U-District — a very productive office, at a time when MacPherson’s and their 18 area offices had tremendous market share and a great reputation. So for a 24-year-old recent college graduate, the business was going fairly well.
But I figured I needed not only to sell real estate, but I needed to own some too. Inspired by Trammell Crow and his statement that “...you can get rich selling real estate, but grow wealthy owning it,” my future business partner and I had bought a triplex in Ballard earlier that spring, and we were gunning for more.
So when I saw a little FSBO ad in the Times for “Well-Built Triplex, Capitol Hill, Owner Terms: $170,000,” I hopped into my ’79 Saab and sped south. To 1231 East Spruce.
For you Seattleites, you know Cap Hill. How could we go wrong? Big mansions, two universities, lots of action, right next to downtown. And they’re not exactly building more property there. We’d make a freakin’ fortune!
So we pulled up, not noticing the graffiti on the boarded up businesses along 12th. Didn’t quite cruise a block south to the low income housing on Yesler. The gunfire coming up from what was then a tough Central District was well muffled. And when the owner, this kindly gentleman who had lovingly owned and maintained the property for years walked us through, pointing out the massive and ancient Douglas Fir Beams in this 1906 triplex, we just needed to be shown where to sign. He was also careful to point out that the block directly across the street to the north, which was currently vacant and being graded, was going to be this fantastic city park. So we plunked 10% down ($17k), signed a note for 9% interest to the gentleman, and owned ourselves another winner.
Or so we thought.
Turns out the “park” became the county’s juvenile detention center, complete with 25? high concrete walls with slit windows. And this wasn’t Capitol Hill. Not by a long shot. It was First Hill/CD/I-District, and still tough as nails. And the market, which hit its peak in May of ’90, started to quake and continued shaking for about two years.
When we had to kick out our first tenant, a full physical drag-the-stuff-to-the-curb ordeal, with the crack-dealing former occupant screaming at us the whole time, we knew we had a problem. We started drawing straws and taking turns going to the property to show units to a revolving door of tenants, to meet the pest guy (lots of rodents), the painter, the roofer. And so it went for several years. When interest rates when down to 7%, we tried to get the former owner to drop his rate — no thanks, he said. And our equity was gone — in ’92 it would have been hard to sell that triplex for $140,000 (the market hadn’t slid that much; we had just bought that badly and there weren’t any greater fools handy to bail us out). So refinancing wasn’t an option.
We toughed it out. Our loss was about $5,000/year, year in, year out, for ten years. But the market did improve, and that neighborhood, once downtrodden, improved. Seattle U bought the UPS law school and built a shiny new building three blocks north. Urban renewal hit the CD and all points around.
In 2000, ten years after the purchase, we decided to sell.
The market was better, and we thought maybe we had finally been rewarded for our patience with some appreciation. So we sold: $285,000. Minus our $170,000 purchase, minus our $50k carry loss…about a 400% return on our $17,000 investment…it’s a good ending to a really bad story.
Our lesson, which has served us well these intervening 17 years: know your market. The neighborhood, the rentals, the land use and plans of property which could affect your building. With all of the resources online it’s so much easier to do this today than in 1990, but that’s not a great excuse. The info was there then, too. A trip to Seattle’s DPD, maybe talking to some more experienced owners and real estate agents, a run to the county to look at sales comps. It doesn’t require a ton of due diligence.
Gordon Gekko: “The most valuable commodity I know of is information.”
That movie came out in ’87; maybe I should have been paying more attention to Mike Douglas than to Daryl Hannah
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