Sometimes the power of owning real estate hits me in the most unexpected ways. I distinctly remember a listing appointment I had in Washington DC.
I walked up the steps, knocked on the door and was greeted by the seller’s daughter. She invited me in and gave me the opportunity to tour the home
It was a classic, Petworth, DC rowhouse with beautiful wood trim, exposed brick and a gorgeous mantel over the fireplace. The sellers’ grandkids were playing on the living room floor. The grandfather, daughter and grandkids all made me feel welcome in this intergenerational home.
The family sat me down and explained how their grandfather needed to sell his vertical home to move to a one-level home. Whatever proceeds we got from this sale would be the dollars they could use for the next purchase.
I asked the grandfather how long he lived there. He went on to explain that he grew up on a farm in the South. Their family did not have much. He moved to the DC area in the 1950’s to take a government job. Since he served in the army, he was eligible for zero down financing through the VA Bill. This allowed him to buy a home with no money down.
They purchased the home for under $20,000. That was a lot of money back then and they had the same fears that buyers today have about overpaying. However, in the end, this was the best decision he could have made. Over the next several decades he had a wonderful home to raise his family in and the home increased his net worth.
Real estate wealth is created in two ways, through debt reduction and through appreciation. Over the next 30 year he made 360 mortgage payments to pay off the loan. More impressively, the home’s value was now worth more than 25 times what he paid for it. He had an asset that increased his net worth by over half a million dollars.
We went on to sell his house and helped him purchase a new one. He realized the importance of owning real estate and wanted to put his money right back into it.
I think back to his humble beginnings. He started with very little, invested in real estate, and accumulated real estate wealth. More importantly though, he can initiate a cycle of passing generational wealth on to his kids and grandkids. I am hopeful that this will have a positive impact on his family for generations to come.
