Episode Number: 196

Episode 196- Our Real Estate Journey Part II & How We Almost Lost $44,000

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Jamila Souffrant 0:00

You're listening to the Journey to Launch podcast, Our Real Estate Journey Part Two and How We Almost Lost $44,000.

Intro 0:13

Welcome to the Journey to Launch podcast with your host Jamila Souffrant. As a money expert who walks her talk, she helps brave journeyers like you get out of debt, save, invest, and build real wealth. Join her on the journey to launch to financial freedom.

Jamila Souffrant 0:37

Hey, hey, hey journeyers Welcome to the Journey to Launch podcast. In this episode of the podcast, I am going to be sharing my real estate experience where I bought a condo No, no, no, I'm promise this is not something you heard already. So Episode 193. I talked about buying my Dumbo property. This is a property that I went into contract with pre construction when I was 22 years old and closed on it moved in when I was 24. I have another tale for you another tale another Well, this is not spooky. It starts out a little spooky. And then it does end up okay. But I want to share this tale of another real estate journey that I went on. That has greatly also impacted my life and is a definite Stark comparison to what happened with my first condominium purchase. So if you have not listened to Episode 193, where I talked about purchasing my DUMBO property, you can listen to that after you listen to this one, or listen to that one. First, it doesn't really matter, you'll get both either way you get the benefit from both. But I'm sharing this with you want to share the takeaways from this experience that definitely did not end up the same way as the DUMBO property. And also taught me so so much. It's a experience where I and my husband Well, he was my boyfriend at the time weren't engaged yet almost lost our downpayment for a condominium that we went in, to contract on. And so I'm going to talk a little bit about how that came to be what happened and how we essentially were able to recover and make the best out of the situation. Before we hop into this week's episode, I want to bring you a word from today's sponsor.

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So to take you back, I had a great experience buying my first condo in terms of the luck all the stars aligned with the timing of when I purchased it when I you know, discovered Dumbo. You know, for me personally like this area that I didn't grow up too far from but here was this place that I had access to, and there was a pre construction thing I could buy it, you know, and I was able to buy the cheapest apartment in that building at the time. Right. And so that was in 2007 when I closed on that unit. And at the time, you know, dating my boyfriend, you know, we were together throughout college. So you know, we knew we we had a plan. We knew we're gonna get married. We knew we wanted to have kids eventually. And so when I had this experience with the Dumbo unit, I thought to myself Wait, what we me and him could buy something together. You know what if we could buy something together, buy a one bedroom, move into this one bedroom live there for a little bit and then you know move out as we start our family. And because the first purchase I did went so well and the condo appreciated before I even closed on it. I thought the same thing would happen with this next opportunity. And the opportunity was in a place called downtown Brooklyn. And for me, it almost felt like downtown Brooklyn was even a better not a better area than you know Dumbo, but it was more familiar to me. Dumbo was an area more tucked away. There's only one train access in Dumbo while downtown Brooklyn is you know, very accessible. Multiple train lines. Very close to Access to the bridges and the main roads, and Fulton Street and all these places where I went all the time as a child and growing up.

So when we saw that there was construction happening, that people were starting to build developers were, were building high rises, I thought, this is the next thing, this is the next thing that we can purchase. And you know, we can make money from it, stay there, live there, sell it, whatever. And so my boyfriend at the time was gonna call him my husband since he is my husband, now we went to the sales office. And we, you know, saw the plans for this building. And we saw one bedroom that we really liked. This building was, you know, going to be a luxury building had a pool. I mean, we were just like, yes, this is like the life we want to live. Let's do it. And so with that, you know, we did I don't think we signed right away. Like, I think we we came back the next day or a couple days later, but we decided on a one bedroom unit. And I want you guys to guess the date that we signed that contract or the about date. And the date was June 2008. Now, for those of you who are aware of what happened in 2008, you're like, Oh, no. Oh, no. And yes, that's right. Oh, no, because 2008 was the year that the market and real estate market imploded, they crashed. And it literally felt like we signed that contract. And everything went to hell, like right after this, let me tell you how it worked. So to secure our you know, apartment, so no one else would come in and, and try to purchase it, we had to put 10% down of the purchase price, we had to put 10% down, that wasn't unfamiliar to how I did it with my Dumbo condo, I had to put 10% down at signing, so no one else could buy that condo unit. And then you know, you they would start construction. And then at the closing, I needed the additional 10% and closing costs. And so with that my husband and I we put down 10%. And this condo, at the time, put down that money, we went into contract for it at $444,000. a one bedroom, and it actually thinking back on the square footage, it wasn't even that much bigger than my studio apartment. But you know, they made it work. This is New York City. And this is in the middle of like, the real estate boom, not even the middle, this is at the tail end. And we didn't know that. And so when the news hit, when everything started to collapse, we were left with a contract on a unit that was not worth what we were in contract for the unit for the condominium was not worth as much money as we went into contract for it.

And so we were just like, oh my goodness, right. And it was so crazy. Because if we would have waited a few months, we wouldn't have went into contract on it. But again, on feeling like, you know, we have to get in and having the experience that I had before I thought this was gonna be you know, a great deal, quote, unquote, deal. And as you can imagine, when everything kind of fell apart, we were just like, what do we do? Now? Luckily, I would say Luckily, we you know, we were able to connect with other people who purchase units in the building, you know, there was a community of us at this point. Now, like looking at each other, like what do we do now. And with that, you know, we tried to speak to the developers try to negotiate with them, because we figured like, there was so much now, units on the market, there were a lot of developers who were starting construction. And so we thought, okay, maybe we can negotiate and you know, ask for a better deal or some sort of discount on the unit itself, since no one wanted to close at, you know, overpriced condo in this market. But as you can imagine, they really did not want to work with us. And you know, in fact, we hired an attorney, because they actually did do some things that were not legal with the contract in the way they sold the condominium unit. So we thought, okay, we can hire an attorney, maybe that will help them like bring them to the table to talk to us.

That didn't really work either. But we did file a complaint with the attorney general's office to also just see what we can do what was our out in this scenario. And with that, one of the things that some of the people had in their contracts, including us was that we had a walkaway date. So the walkaway date was that if they did not complete the condominium by a certain date, then you can walk away and get your money back. Right. And so the way things were looking at this, we signed the contract in June 2008. We were looking at ways to work with a developer looking at ways to like, figure out what we're going to do and so we're in 2009 at this point, this is months and months of back and forth, wondering what's gonna happen Because if you didn't do the math already put 10% down on a $444,000 unit, which meant we put down $44,000 $44,000 is a lot of money, it's a lot of money, then it's a lot of money now. And for two young people in their 20s, it was a lot of money. And we were contemplating having to walk away from that, it was either closing on a unit that was not worth what we were in contract for, and spending more money and waiting for the market one day to rebound, or like cutting our losses and walking away from 44,000. So that is the kind of decision and thoughts that were We were like thinking throughout this whole time, so there was a walkaway date, they could not finish it by the end of December 2009, we could walk away. And we were pretty confident that they were not going to be able to finish the unit or the building. So remember, this was new construction, the building was still in construction, one of the things that the developers were able to do, they were able to get certificates of occupancy for the floors, for the people who had these walkaway dates, the building wasn't complete, it wasn't like you couldn't live there. But they were able to get the CEOs so that they were able to basically skirt by on this walkaway date where we couldn't walk away anymore. So we were just like, Oh my gosh, we're gonna be stuck with this. It's either we close or we don't.

Then, you know, ultimately, still going back and forth with the developers, we finally got them to at least start the conversation. Because we were really willing to walk away from our 10% if it meant that we had to continue to like put money into this apartment and closing and you know, living in an area that at that moment, you know, after the time has passed, we just thought you know what, it didn't even make sense to move into the area anymore. Like we needed to get back on our feet and save our money again, because we literally both of us, like wiped out our savings to be able to do this. And so the good news is that they were willing to negotiate and talk to us because so many of the other purchasers were in this situation, they didn't want to close either. And so they didn't want to risk everyone walking away. So they came to us or came back to us and said they would offer us a 5% discount. And we're like no, like the property if we need more than that to be able to close. And so I believe we countered and eventually got them to get this we got them to agree to giving us another unit. So same floor plan one bedroom, eight floors higher a discount on that unit, and that they would cover the closing cost. So our main objective was to come to if we had to close on this property, we wanted to close and not have to bring any more money to the table, because we were already out 44,000. And so we were really adamant that we were going to come to this closing and not put any more money down. And they agreed the developers agreed and it was better for us because the unit was eight floors higher, which means the resale value, you know, would be better because it's higher unit then we went to contract with a apartment that was actually like they discounted that apartment. And they were covering closing costs. So eventually, we did close in May 2011. On that unit, we got tenants. So the big thing about this is, when we initially planned to like buy this condominium, we were going to live there for a couple years. Then as everything started, we were like, No, we can't, we can't live there. And so we knew that we needed a tenant, and doing the math and understanding the market. So at this point, I was like beginning kind of like my real estate career. So I was working at my company, but I had transitioned into the real estate department. So for me, I am getting more aware and in tune with real estate investing and how things work. And so understanding that, you know, did the math on Okay, what can we get a tenant for can at least cover the mortgage. And we did have to make that decision. That was one of the thought processes before we even closed was if we have to keep this unit can we at least cover the mortgage with the rent. And at the time the market was still recovering. It was a renters market. There was so many units available, you know, the renters had their pick of the litter. And luckily, you know, the rent at the time, I think it was covering we might have been, you know, had to throw a couple $100 a month towards the, the, like the mortgage on top of what the rent was, but it wasn't you know, it wasn't devastating, where, you know, we couldn't handle it. Because the idea was okay, we keep this we hold on, hold on for the market to recover. Because this is downtown Brooklyn, they still had lots of plans for it. You know, ultimately I knew the market would bounce back and we were in a solid location. But we knew that we wanted to sell it like as soon as we had enough juice on the market had enough juice we were going to sell it. So we closed in May 2011. When we got our first tenant in June of 2011, and, you know, we were just like writing it out until we could sell it. And let me tell you something, even the experience of just managing the renters were different than the Dumbo experience. Because when I finally did move out, once we know my husband, I got engaged, we moved out into his mom's basement, and I was renting the Dumbo unit out and the tenants that I had in that DUMBO unit, Oh, my gosh, I remember, you know, that my first tenant was there for eight years. I think he never bothered me for anything, even when something was broken. I remember combing to re sign his lease. And he was like, Oh, yeah, by the way, the microwave is broken. And I was like, oh, when you know, my gosh, like when did it break, and he was like, oh, months ago, like, that's how low maintenance he was. Whereas with this unit in downtown Brooklyn, you know, we had a few tenants in, and like, it was like the tenants that like, as soon as anything happened, not only did they call once, but they call like multiple times as we're trying to get them help. And so it was more stressful, and just more like, okay, I actually do not want to be a landlord with like, something with this building something with this unit, like, I would like to exit exit as soon as possible. But in any event, we know we held on and we did try to sell it, we tried to sell it in 2013. And we almost we had a buyer but it fell through. And then we tried to sell it again in 2014. And we did, we sold it and we did sell it above for what we closed on. And I will tell you this, you know the whole experience. Sometimes it seems just like a blur someone like my experiences, because at the moment at the time, they were obviously so important, and took up most of my life, especially the money part of it, there were times where I was thinking to myself, are we really going to lose before we close on the apartment. Are we really going to lose $44,000? If we don't close on this, it seems surreal. At the moment, it still seems surreal now, and we ended up selling. And I would say this dropped that whole time, but strengthened our relationship, it helped me understand the possibilities of real estate, that yes, it can go really well. And it can go really, really bad. And so we did use the proceeds. So we did actually pull this up the actual numbers, we sold it at $585,000. So we did make money off of the sale eventually. And you know, I think back sometimes and I say you know, maybe we should have kept it, you know, we should have kept it because the market did rebound. Um, there is a lot of development downtown Brooklyn now, but we definitely would be able to sell it for more money today. But we sold it because one we needed to sell it. We wanted to buy a home, a home that we could like, move into and grow a family. And we couldn't do that in a one bedroom unit. And we needed money to do that we needed money for the new house. And so we didn't use a majority of the money we made from that to buy our new home to renovate our new home. And so it didn't end up working out. But man oh man, let me tell you, it was an experience.

So I did want to talk about some lessons learned that I hope that you can apply to your own experience your own life again, I know these are like totally different times. For us, these are the things that like I learned the process. Okay, so one, there is a cause and effect to everything is a cause and effect to everything. So the same system, and practices that allowed me to purchase my first condo in Dumbo was the reason that the market imploded with the purchase of the second condo. So at the time that I went into contract for my unit in Dumbo the market was in a frenzy. That's why I went to Dumbo because I couldn't afford anything and the other places like the multi families that I wanted to buy the prices were at the time, you know, just ridiculous. And because the market was you know, booming and people were kind of overvalue overvaluing things, I was able to find this opportunity in Dumbo the studio, and the cheapest one was able to kind of barely afford it. And what that did for me was I had to put down the 10% save the apartment, but then it gave me two years to save up the additional money to close on this unit. But again, when I closed on this unit, we were still in at the height of this bubble. And so most people who you know, were given loans that they couldn't afford predatory lending, you know, the subprime mortgages, like I was kind of one of those people, I was able to close on my dumbo property without showing any documentation, like any documentation in terms of validating my income, because I did a no loan doc close. And that's what got a lot of people in trouble. They were able to, you know, buy properties they couldn't afford, they were over leveraged and then when the market imploded, they were left with payments. They couldn't afford. Now luckily for me, I did pick a solid location to the location held through, you know, it really was I say, the stars aligned for that Dumbo purchase. But I should not technically have been able to close on that property if they would have checked my income. Because my income at the time was really just like barely covering and or I would have needed a cosigner. So I was able to close on that unit without a cosigner. And this is the same thing that then caused the market to implode. So the cause being Yes, I was able to, you know, thank God be able to do what I did in Dumbo that has created such a momentum of wealth for myself for my family, because the property is worth so much more than what I went to contract for it for. But on the other end, the same, like the reason I was able to do that was the reason why the second one didn't work. Everything exploded at that moment, like after we signed the contract. And so it just taught me there's a cause and effect to everything. And we know you at one point, will benefit from something, whether maybe it's a law, or just a caveat and whatever is going on, right. And that's good. But also know that if that reason that you're benefiting is not based on like a solid reason or good thing that potentially can swing back the other way, and it swung back the other way on us. And so it's very interesting how that happened. But it just taught me again, there's a cause and effect for everything.

The other thing is determining your BATNA ba TNA actually did a kind of like a paper on this whole experience for my real estate degree. So I have my Master's in real estate from NYU. And one of the things we had to do was like a paper on negotiating. And I remember I picked buying this downtown condo, and I talked about negotiating, like how we got to the point where we're able to, you know, negotiate an apartment on a higher floor to get a, you know, a discount on the price and then closing costs. But we had to determine our BATNA. So BATNA is best alternative to a negotiated agreement. All right? I remember having to list this out when I was writing this paper up after the fact. So we had already, you know, close on the downtown property, but I was like recapping it in this paper. And I remember talking about BATNA. And so you have to develop a list of actions you would take if no agreement is reached. So if you come to a table, like a negotiating table, right, there's a party on one side that wants one thing and you want another, you have to think about what will you be willing to do? What are the alternative things that you'll need to do if you don't get what you want in some negotiation? And so we had to figure that out, like, what were our courses of action? If this developer did not want to talk to us? What could we do? Like, let's just say, you know, we offered them this, or they didn't even come to the table, what are options options are to close, or to walk away or to, you know, potentially open up a conversation for negotiation again, and we had to be okay with walking away. So part of the, you know, one of our list of things was walking away from all that money. And it sounds like crazy to like, say, Okay, are you going to walk away from $44,000? Or are you going to like to stick it out. But you also have to understand that this

is like, another lesson I just learned is the sunk cost, the sunk cost understanding that like, our brains will tell us that we rather hold on to something that sinking like a sinking ship, or you know, there's money already lost, you know, that person that's losing money on a bet, but they're like, you know what, I can just make it back, I can make it back, but they end up losing more money. And because it feels so bad to walk away from, you know, the little bit that you lost, because you think you can make it back up. And we, you know, decided that if we had to if we ultimately if they did not want to talk to us at the market at that time, was just doesn't make sense. And we personally just couldn't afford because that was part of it. Like, could we actually afford to close on this, like, we have to take out, you know, we have to get closing costs, take out more loans, like, we just didn't want to do that. So we were actually Okay, with walking away. I mean, we didn't want to, but when we were able to come to terms with that, it allowed us to have a more position of power in negotiating, right. So once you know that you are okay, with the scenario of walking away, that does put you in a better positioning power of just negotiating at the table. And luckily, you know, they wanted to work with us too, because they also the developers at the end of the day wanted their units to be closed upon. They didn't want everyone walking away. And so you know, it ultimately ended up working out for us.

But again, talk about a wild roller coaster, and then it's leveraging and using a strategy, whatever that is at that moment for something else for something better. sticking through a plan, now we did end up selling at a profit. But that money is what we use to purchase our current home. That money is what we use to create a, you know, a home that we love, we were able to renovate our home with the money. And, you know, again, we could have held on to the apartment more, you know, we could have like, sold it later on for more money. But realizing where we were in our lives at that moment, we wanted to get our own place, I was like pregnant, like I knew wanted more kids like it was more important for us to have a home our own. And that's what we did. So we leveraged this moment, or these moments, this kind of real estate almost, that went bad into a better opportunity for us, it put us at another you know, level where we actually had to move deeper into Brooklyn. So you know, one of the things that I loved, loved loved about the locations of where we were, like the Dumbo area and a downtown area was the proximity to the city. Now, there's obviously good and bad with that, you know, the closer you are to Manhattan, less parking, it's more congested, but I just love the you know, access to the different modes of transportation, how quickly can you get to the city, I was working, you know, in corporate America at this time. So for me to be able to, you know, get through, and I was driving to work. So you know, get on the bridge to the Holland Tunnel, it was quick, you know, also, I love just like the options that you get when you are like more downtown Brooklyn with the terms of options to eat, and things you can do. It's just just, it's more diverse. And so realizing that and realizing we could not afford a, you know, multiple bedroom house downtown, we had to go deeper in Brooklyn. But with that, we're able to buy something bigger, something that could fit us. And that's what we're able to do with the money that we got from when we sold the unit. So lots of lessons here to unpack, but I wanted to share kind of like the other side, the other tail to my real estate journey. Because yes, it did work out. But for a while, it didn't seem like it was going to. And I think it's a perfect example of how Yes, real estate can work really well for you. You know, at the time, you also remember this was like years ago, so you know, I wouldn't be able to at this moment for to buy something downtown right now, or in Dumbo right now. So I can, you know, feel for especially the younger generation coming up, you know, they are going up with maybe their grandparents who possibly own something, and then they can't even own anything in the area that they grew up in. Right, a lot of gentrification happening and all that. But with that said, it's important to look for other opportunities. You know, at one point I was willing to go elsewhere, Jersey, even to buy something, or even other states, you know, I was actually looking in other states to invest at one point when I was really into real estate and so even if, if you're a New Yorker, I'm you know, or someone that's living in an area where you're, you're out priced like you can't even buy near you who you grew up. That one, real estate is a great investment, but not all the time and not for everyone, you really have to understand the

market, the timing and buy something that you can afford and look at it as a true investment. So even if you're planning to move into like a property, like you're going to own it, it has to be solid, a solid value that if you plan to move out, it can be rented out or if you plan to sell, you can sell it because it has appreciated in value. So that is my second tale. In my second real estate story tale. I hope you got some more insight. I hope you learned some lessons. Let me know what you thought and share with me I'm on social media at journey to launch and I love to hear your takeaways and ahas

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In my second real estate venture, my husband and I almost lost $44,000. After buying my first condo, I was very interested in real estate and I was excited to reap the same benefits with my partner.

This experience was vastly different, and we came extremely close to walking away and losing our 10% down payment. In this week’s episode, I share the lessons I learned when buying a property did not go as planned and how you can avoid the same mistakes.

In this episode you’ll learn:

  • How my husband and I almost lost $44,000
  • Why this real estate investment almost fell through
  • The lessons I learned from this experience
  • What BATNA is
  • The importance of sunk cost and having a strategy plus much more…

I'm listening to Episode 196 of the #journeytolaunch podcast, Our Real Estate Journey Part Two and How We Almost Lost $44,000 Share on X

Other related blog posts/links mentioned in this episode:

  • I mention my first real estate investment at 22, which went very well and I talk about it more in depth in Episode 193 of the podcast.
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