Real Estate lessons my Dad taught me
Dad was a son of a Swedish
immigrant who decided to start a dairy farm in northern Wisconsin. My dad grew
up milk’ cows every day and not having much fun. Back then dropping out of
school was a common practice and you were not looked down upon when you stopped
going to school. My dad lacked an education since he never finished high
school; he’d say “don’t need a high school diploma to milk cows”. “You
were going to milk those damn cows”, as he called them, “for the rest of your
life and who needs to go to college or finish high school to milk cows? The
cows don’t care; you just need to know how to work and work hard every
day”. Also back then you milked those damn cows by hand. No milking
machines. One would sit on a stool, milk one cow and then another until
you were done with all thirty cows. “It wasn't until my late twenties
that I realized that you had to milk those damn cows twice a day”. That’s
right; you milked them every 12 hours. So if you did it at 4:00 PM you
better be up early at 4:00 AM to do it again. And no days off, no
holidays, vacations, sick days, every day 365 days a year you were going to
milk the cows. You even had to milk them on Christmas. I believed, based
on the stories I wanted to hear, dad got up at 4:00 AM, milked those damn cows
for three hours, walked three miles to school though five feet of snow and back
home and you were done; no time to watch TV, raid the refrigerator and play
video games. How hard of a life can that be? Based on what I know, my dad quit
school because of shear exhaustion, he ran out of energy. Plus the lack of
electricity, central heat, in-door plumbing, and no refrigerators were also
good reasons.
But dad’s best accomplishment
ever was just around the corner; he stopped milking those damn cows. As soon
as my dad’s father passed away, he sold those damn cows, the house and moved
grandma into town. (I saw the farmhouse; it was a good idea to sell it). Later
after marriage and four children, with $500 in his pocket he packed up the old
1957 Mercury, put the three kids in the back seat with me and mom in the front
seat and took off to California towing a popup camp trailer. Fortunately during
the time he stopped milk’ those damn cows and having 4 kids, he learned a new
trade, fix-in TV’s.
I’m glad we moved out of
Wisconsin and did not learn to milk those damn cows. Dad said “if we stay
in Wisconsin we’ll either freeze to death or starve to death, if we move to
California at least we won’t freeze to death”. Dad would often say this
as a joke, but deep down inside he knew with four kids, living in northern
Wisconsin, and very little job prospects, he knew it was a possibility.
Dad’s first home he purchased in
California was in Monrovia on Pamela Rd, which he purchased in 1960 for some
ridicules low amount and to long ago to remember, but he sold it in 1972 for
$11,000. Dad should have kept it and rented it out. Payments on the
house were $29/month. Rents would generate around $100/month; a positive
cash flow of $71. But for some reason he thought he could not do it. It
just did not make sense to dad. He probably never thought of the idea and never
looked at the possibilities.
Dad started fixing those damn
TV’s for Sears and he was good at it; he became an expert at it. So good
that Sears wanted him to teach to others the skill of fixing those damns
TVs. As a result, he received a promotion and more money, but there was
one major problem coming back to haunt him – no high school diploma. Mom
and Dad would talk about it at night in whispers; they would say “do you think
Sears will find out, will you lose the job?” I heard a new word for the
first time – Night School. I was too young at the time to know what it
meant. We did not discuss it and I did not know until to later in life
that dad went back to school and done did get educated and graduate from high
school. Fortunately, he keeps the job and continues to make more money
and he is now able to purchase a second property.
This second home, a vacation
property was up in the mountains in Frazier Park, about 70 miles north of Los
Angeles at the time the middle of nowhere. It was nice cabin with two
small bedrooms, a much bigger house than the house on Pamela road. Two
homes at the same time, a nice leap in finical prosperity.
The interim home, between the
house on Pamela Rd and the Cabin, was a house on Ridgeside Drive in the upper
class part of town of Monrovia. This was a great purchase for him.
Cost was $29,000 in 1972 in a great location up in the San Gabriel Foothills of
Monrovia; purchased at the right time and the right finance terms of a fixed 6%
note. A bigger house, with views of the city lights, where all the rich
people from church lived. When the cabin was finished, he rented this
property to move to the mountains. Good idea to rent the house. A very
good positive cash flow and the homes in the area were appreciating. The
mistake here was making the mountain home his permanent residence. Mom
always said “it was a mistake moving here” and will tell dad often. However
he got the cash fever and did not want to rent it out any more, dad sold the
house for $110,000 in 1979. A great investment he netted around $90,000
and quickly put it in the bank and then began to spend it on depreciable assets
(cars).
Fortunately when he had to make
the move to the fourth house due to mom’s illness the house in the mountains
appreciated in value. He realized his mistake of moving to the middle of
nowhere, no jobs, no income and no medical facilities. The nearest
hospital was 90 miles away down Interstate 5 – the “grapevine”. Dad desperately
needed to move again. His final purchase was another mistake, a double wide in
Castaic CA. He netted around $100,000 for the mountain house, but again
started to spend it on depreciable assets (cars) for himself and my sister.
I can’t blame my dad on doing the
moves. To him owning a second home was just not right. To this very day
when I try to explain real estate to some of my relatives; they just give the
deer-in-the-headlight-stare. My relative once said this about owing two
homes; “oh that can’t be legal”.
It’s just that we were not taught
this in school. We were told to get a good education, good job, a house
and get a mortgage. Hopefully in say 30 years you can have your home paid
for and you can retire on social security. This financial plan is still
what two of my siblings live by.
In fact it took me to the age of
50 before I realized the number 1 rule.
If my dad were to keep the homes,
finically he would be ok. The first house appreciated from $12,000 to
around $550,000. The second house from $45,000 to $250,000 (cabin) and
the jewel in the upper class part of town changed from $29,000 to sell over
$950,000.
Of course looking back is always
easy to see the mistakes. There were down turns in the market where
nothing was selling.
Rule 1 Don’t Sell real
estate – accumulate it.
Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Tel: (623) 582-4444
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