The strange way we bought our dream home — and overcame the housing market’s affordability crisis

My husband has a habit of pausing TV shows in the middle of an event to point out background things. “See those built-in closets? That’s what I want someday,” he’ll say. Meanwhile, I have a “dream home” Pinterest board full of furniture and design inspiration.

As renters living in San Francisco, we had been planning and saving for years to buy a house in the city where we met and fell in love as teenagers (an out-of-town suburb). We also knew that this area was becoming nearly impossible to break into for first-time homebuyers and seasoned real estate investors alike.

In 2020, we heard that an old family friend in the area was looking to sell his 1927 English Tudor storybook.

Although we loved the house and its location, we weren’t quite ready to move in. However, while many buyers in this scenario might have decided to pass up this opportunity, we swooped in and spared no expense to renovate the property to our tastes.

Once all the modifications were completed, we did something that shocked our family and friends: we turned the keys over to the tenants.

Although this decision may seem surprising, we had good reason to let strangers be the first official tenants to prepare meals in our newly updated kitchen, lounge in our family room, and sleep in our bedroom.

In fact, I dare say doing so is the only way we will be able to buy a home in this area at all.

We didn’t want to miss our window

Since 2012, California’s housing market has been one of the hottest in the country. Average list prices rose 77%, outpacing domestic income growth by three times. Bidding wars, record-breaking home prices, and all-cash offers have become commonplace, and we don’t expect this new norm to subside anytime soon.

We realized that the cost of real estate here would continue to rise if we waited. We also recognized that there was a strong possibility that 2020’s historically low mortgage interest rates would not continue. (Spoiler: We were right!)

Additionally, since this was a pocket listing — not yet featured on real estate listing sites — it eliminated the competition that would surely have come from other eager buyers and local developers who knew the potential value of a fixer-upper flip in this segment of the market state.

Renters cover the mortgage – and help us build home equity

Even as a pocket listing, the house wasn’t cheap, costing us $2.15 million. Believe it or not, that’s a bargain in this area, where the average listing price hovers at $2.7 million.

While doing research to see if the calculations added up, we learned that the current rent range for the area would cover the cost of the mortgage, home insurance, and maintenance. This allowed us to break even and, over time, build equity while we waited our turn.

I’m not ready to trade city life for the suburbs yet

In addition to finances, where we live as a family played a big role in our decision to give up living in our dream home for a few years. Our son isn’t even school age yet, and with baby number 2 on the way, we know that welcoming a new little one into the world isn’t an ideal moment to make a big move.

The plan is for them to officially become residents before they enter kindergarten. When we thought about what it would cost to put two kids in private school if we stayed in San Francisco — about $600,000, according to our calculations — we decided instead to invest that money in this property where the highest-rated local (and free) public school in the area was located.

We also love city life and the cozy Marina-style home in San Francisco that we’ve made memories in over the past 10 years. We intend to really take advantage of all the perks of urban living now that things are reopening and before we move the family to the suburbs.

Why didn’t we stop our renewal?

We went ahead with personal design decisions that were not typical for a rental. Most owners lean towards cheaper, replaceable items due to expected wear and tear. But this will ultimately be our forever home.

We also felt strongly that if we didn’t do these projects now, they would never get done before we moved on. The cost of materials was increasing due to inflation and supply chain disruption (our marble slabs were stuck in the great Suez area). Channel backup for 2021), so postponement will only hit our wallet harder.

It was a bit risky to stray from the neutrality that tends to attract temporary renters, but as a couple, we’ve always embraced the “expand or go home” mentality, so we didn’t back down.

Among my must-haves are refinishing the hardwood floors in a herringbone pattern, covering the stairs in a unique antelope-print rug, and wallpapering the guest bathroom in the same iconic banana leaf design as the Beverly Hills Hotel. For my husband, it was a collection of fancy kitchen appliances and — you guessed it — those custom built-in cabinets.

Our real estate agent, Jennifer Gilson From Golden Gate Sotheby’s International Realty, confirms that the rental home buying journey is not a typical one.

“I rarely see people in this market spending money on their permanent home, spending money to renovate, and waiting to move in,” she says. But for our story, it works.

For the record, we were actually the first to enjoy the renovated space, as our family threw a pizza party and slumber party before the tenants took over. I even made a point to shower in both tubs before we left. And when I think about the fact that just 3 miles from our future address is the high school gymnasium where my then-boyfriend, now-husband, and I attended the Homecoming dances together as dates, it’s extra special to know that we have another Homecoming coming our way – a place that We finally moved in.