How We Turned a $20k Down Payment into a $1 Million Paid Off Home

posted in: Real Estate 11

We bought our first home back in 1999, a little one-bedroom condo in the Oakland Hills for a modest $190k.

My wife, Allison, and I were still in our late 20s and not married yet, so this was a big step. We had to come up with $19k for our down payment, which at the time, was about two years worth of rent payments.

Little did we know we would end up buying and selling six more properties over the next 18 years, spending a total of about $5.3 million on those purchases.

Of course, our friends and family thought we were crazy for buying and selling so often. They would joke about having to “write our address in pencil.”

Our Real Estate Journey

We may not have even realized it at the time, but there was a method to our madness. Each time we moved, we were trading up for something better -- a better location, a bigger space, newer construction, or more amenities.

We maxed out between 2008 - 2011 when we had two properties (a brand new condo and a 3-unit house) with a total value of about $3 million.

From there we started downsizing, and by 2014 we had sold both of those properties. We took all the equity we had built over the years and bought a less expensive condo in Oakland for CASH. It was the most freeing feeling and ultimately led to us being able to retire early the following year.

We admit that our journey is atypical of the average American home buyer. But you can use some of the same strategies we used to leverage Real Estate to help you achieve financial independence.

First, let’s lay out a few caveats and cautions:

  • Housing Markets: The SF Bay Area housing market is one of the hottest and most expensive in the country. Most markets are easier to afford, but also appreciate at a much lower pace.
  • # of Homes: The majority of Americans will own 3-4 homes in their lifetime (a starter, one or two upgrades, and a downsize). Don’t feel like you have to buy and sell as often as we did to make RE work for you.
  • Interest Rates: Rates have been historically low over the past 20 years, but they could and probably will go up over time.
  • Loan products: Leading up to the housing crash of 2008, lending policies were very lax (thus resulting in many foreclosures). Guidelines are more stringent now, but if you have decent credit, you should have access to a variety of loan options.

So how did we get from that initial $19k down payment to owning a $1 million home free and clear? The easiest way to look at is in phases:

Phase 1: Starter Phase

Starting out, you just want to get your foot in the door (so to speak). To keep the price down, you’ll want to prioritize your housing criteria and and find ways to compromise.

Our first two homes were:

  • Small 1-Bed condo in the Oakland Hills
  • Small 2-Bed house in SF’s Ingleside neighborhood

The condo was great for a first home. It was very affordable, it was relatively new construction, and had nice amenities (parking, pool, gym). The downsides were that it was far from everything (public transit, restaurants, entertainment) and small (only ~800 square feet).

Our first condo tucked back into the Oakland Hills

The small house in Ingleside had a large backyard and a spacious garage, two things hard to find in SF. But it needed a fair amount of work, and it was about as far from the city center as you could get.

When you’re just starting out, price and down payment are typically the biggest obstacles. Here are some ways to get yourself into your starter home:

  • Size doesn't (always) matter -- Look for something smaller like a condo (vs house), 1 bedroom, or 1 bathroom.
  • Look at fixer-uppers -- If you don’t mind doing some work, you can remodel older properties. These fixes don’t have to be extravagant or expensive, sometimes a couple of coats of paint can make a world of difference.
  • Venture out -- It’s usually less expensive further away from the city centers, check out up-and-coming neighborhoods for better prices.
  • Fewer amenities -- Pools, 24-hour security, gyms, etc are great but may not be worth the extra cost to you.

Phase 2: Upgrade Phase

In this phase, you’re going to be making an upgrade from one home to another. It could be a better location, bigger space, more amenities, or newer construction.

Most families will upgrade once or twice in their lifetimes. We happened to upgrade three times. While it worked for us in the end, keep in mind that it costs money (RE fees, moving costs, etc) and can be a real hassle to move.

Here were the three homes we bought during the upgrade phase:

  • 2-Bed condo in SF’s Nob Hill neighborhood
  • Large 2-Bed loft in SF’s Mission neighborhood
  • 3-Unit Victorian in SF’s Castro neighborhood

The condo in Nob Hill was an ideal location -- walking distance to everything and located right on the iconic cable car line. The only downsides were that it was older construction, a little small, and had no amenities.

So we upgraded to a brand new 2000-square foot loft in the Mission area. The loft was pretty amazing -- it had a 20-foot ceiling in the living area, two enclosed bedrooms, two baths, and a very spacious bonus loft space.

Our 2000 square foot loft in the Mission

Its only fault was the location -- it was about a 20-minute walk to the BART train station through blocks of graffiti, a few abandoned buildings, a lot of homeless people, and the occasional prostitute or drug dealer.

We then made our final big upgrade to an even more spectacular 100-year old Victorian house in the Castro neighborhood. We moved into the large 2-bedroom unit at the top and rented out the other two smaller units below us.

All of these properties were pretty awesome, and at times we miss them. But our final goal was to downsize into something much less expensive and eventually completely paid off.

When you’re upgrading, you want to do so strategically and not go overboard. Here are some tips for the upgrade phase:

  • Quantify -- Make sure you’re actually upgrading and not just making a lateral move. Is it a better location, more space, newer construction, or some other quantifiable improvement?
  • Don’t go crazy -- Make sure you don’t overextend yourself and become “house poor”
  • Leverage -- Take advantage of increases in salary, improved credit, and higher equity in your existing home
  • Happiness -- Only upgrade if it’s truly a situation that will make your life better in some way

Phase 3: Downsize Phase

In this final stage, the downsize phase, you’re going to significantly reduce the price of your home. Depending on your situation, you may even be able to fully pay off your mortgage, like we did.

Similar to the starter phase, we used two properties for our downsize strategy:

  • New construction 2-Bed condo in SF’s Mission Bay neighborhood
  • 2-Bed highrise condo in Oakland’s Jack London Square neighborhood

The first step of our downsize phase involved selling the 3-unit Victorian. We loved the house and the neighborhood, but we got tired of being landlords and the mortgage and property tax bills were pretty exorbitant.

We decided to downsize to a condo in Mission Bay. It was a newly constructed building near the SF Giants AT&T Park with decent amenities and Bay Bridge and stadium views. The best part was that it was a lot less expensive than the Victorian (and less work).

But our ultimate goal was to pay off our mortgage completely and retire early. So for our final move, we decided to take a chance and look back across the Bay to the newly re-emerging city of Oakland.

We found our unit online, loved the look of it, and bought it after one quick open house walk-through. It was a bit of a gamble to leave SF, but we ended up loving our new Jack London Square neighborhood.

Our current home in Jack London Square (not staged like this)

The downsize phase can offer a lot of freedom along with much lower housing expenses. Here are some things to consider when you downsize:

  • Location -- One of the best ways to reduce cost is by moving to a less expensive area.
  • Go small -- Whether you’re an “empty-nester” or just don’t need as much stuff, getting a smaller house can save a lot.
  • Prioritize -- You don’t need every luxury, so figure out what you’re willing to compromise to reduce your cost.
  • Equity -- Move all the equity from your upgrade phase home into your downsize home to significantly reduce (or eliminate) your mortgage.

Additional Tips & Strategies

Buying and selling properties can be challenging and stressful. One key is to get yourself a good Real Estate agent (or in some states a Real Estate attorney). Ask for referrals from friends and family members, and meet with prospective realtors to make sure they understand you, your budget, and your needs.

Review their track record. How many sales do they do a month (buying and selling)? How long do their properties stay on the market? How much over (or under) asking price do their properties usually sell for?

A good agent will work with you to set the right price for your home, stage it properly, and write offers & counter-offers. They should have a very good grasp of the current local market and help you set proper expectations based on comps in the area.

And lastly, a good agent will have a network of helpful and reputable people to help you: mortgage brokers, stagers, contractors, escrow agents, etc.

In addition to getting a good agent and team, here are some additional strategies we’ve used over the years to help us navigate the RE waters:

Buying property:

  • Compromise -- Know what you’re willing to give up to get the home you can afford (size, # of bedrooms, location, views, amenities, etc).
  • Do your research -- Use sites like Redfin, Zillow, the local Multiple Listing Service (MLS) if possible, and go to as many open houses as you can.
  • Up and coming areas -- Look for areas where they’re building new construction and adding things like restaurants, coffee shops, grocery stores, & new office spaces.
  • Location -- Remember the adage Location, Location, Location, and look for good walkability, public transportation, parks, low crime, entertainment, etc.

Mortgages / Financing:

  • Credit -- Establish & maintain good credit so you can get the best loan terms (check out our Early Retirement course to learn how).
  • Shop around -- Research mortgage brokers, direct lenders, your own bank, credit agencies, etc.
  • Refinance -- Keep an eye on interest rates & refinance when they go down.
  • Pay down your loan -- Pay a little extra each month towards your principal (or better yet, just make one extra payment per year).

Selling / Staging:

  • Clean, clean, clean -- Use a pro if you need to (especially if you have pets)
  • No extra stuff -- Get rid of all clutter, personal items, and anything too eclectic.
  • Go neutral -- Wall colors, furnishings, floors, etc. That red dining room looks great to you (we had one!), but it may turn off a potential buyer.
  • Floors -- If your floors or carpets are worn or dated, consider renovating or upgrading them.
  • Light -- Make sure to provide lots of great lighting (natural & electrical).
  • Art -- Hang tasteful artwork or mirrors in each room.


Buying and selling Real Estate can oftentimes be difficult, but it can also be fun! Even to this day, Allison and I enjoy going to open houses in our neighborhood.

Just make sure you’re wading into the RE waters with eyes wide open. Purchasing a home is a big commitment, but if you play your cards right, you can leverage it to your advantage.

Hopefully you can apply these tips to get your starter home, upgrade once or twice, and eventually downsize into something much cheaper.

So what’s next for us? Who knows, maybe in a few years we’ll downsize again to a 1-bed cottage by the ocean in Costa Rica or the countryside in Spain or Italy. But that’s a topic for another blog post!

11 Responses

  1. Andy Hill

    Great overview Dylin! Also, extremely timely for my wife and I. We’re working on paying off our mortgage this year and starting to save up for RE investment properties. Your advice on finding the “up and coming neighborhoods” is top of mind here in metro Detroit where RE is still semi-affordable. Wish us luck!

    • dylinr

      Thanks Andy! Yes, good luck to you both. Do your research on those up and coming areas. If you can get into a great neighborhood early, you can get in low and see some nice appreciation later.

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  5. Kristine

    Great thoughts on moving through all the stages of home ownership! I have been through a lot of the same things now in my upgrade phase, but this is only my second home. The one thing I would add is that if you’re going to be moving around a lot, renting may be the better option for you. A house isn’t guaranteed to always make money, especially if you’re moving and taking a 6% realtor’s cut every time.

    • dylinr

      I agree. In hindsight, we could’ve cut out one or two of those homes (or rented for a bit), and that would definitely have saved on Realtor and moving fees. Ironically, we may actually go back to renting as our next move.

  6. Yellow Brick Freedom

    Awesome post! We are considering buying out first rental property soon and it is really great to get the perspective of others who have done it. Thanks for sharing and congratulations.

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