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WOW! Is that ever different!Did your brother have issues with the LL? If the same guy owned it in 97, 98, 99 range, he was no end of problems for me. His son tried, but never got much done. I had to fight them for my deposit.
You'd have been a good friend to have at the time! It all worked out well, we had friends that were about to lose their house and my brother moving in allowed them to be able to afford to keep it. Help me get my arms around this renting idea. All of us have had it drilled into our heads all these years that renting is throwing money away. Well, so is paying double transaction fees obviously. How would I setup that spreadsheet to analyze if I should rent something instead of buy it. I don't know know what transaction fees will cost.Luckily I ran the Indianapolis Athletic Club with 112 Hotel rooms at the time. Uncle Mike would have had Maid service. I am sorry to hear your brother was in there at the time.
No clue about your local area in WA? No way I would know.However, I love Duplexes, and upgrade and create them often.Assume you somehow get grandfathered in and don't need to break everything out:Around here, the one fuse box isn't an issue if YOU pay the electric entirely, and should you EVER want to upgrade the service, even just a new fuse box, it might need to be split out (Not the case here, but understand it could be required). Around here, as long as I pay every bit of the electric, I can run with one house meter. Electric is not one of the issues they go crazy over, not a big deal. However, No LL in their right mind would want to pay electric for a tenant. I have ONE single place left where I pay the electric (I have split out say 10 properties in the last few years). My last electric bill for the ONE 2 bedroom each unit Duplex that I still pay for was $173.11 due to 2 A/C units in one unit, and an A/C unit in the other. That bill is maybe $60.00 in the winter.If it is a Shared Fuse box that I am paying for, Both Units MUST have complete access to it. This is another one of those things in my area you don't want to be caught on. Been there, got the Tee-shirt, not going back.The water heater isn't an issue here as long as I completely pay for it. Off the top of my head, I have two places like this left. I did get caught on a Unit where honestly I didn't think about it, one Tenant was paying for the Hot water for both units. It wasn't pretty. I've probably split out about 6 Hot water supplies in the last couple of years. One was forced, and not pretty, but it wasn't intentional. Just my lack of attention to detail.Water shut off wouldn't be an issue here, assuming that I pay all the water. You would only want one cut off if you didn't have two Curb stops anyway. That would be terrible.If you are going to get burned in my area, it is on Air Supply/Heating source. The two units CANNOT share the same air supply for disease purposes. A functioning Duplex is grandfathered in, but you CANNOT upgrade the furnace in any way without giving each side their own heating source and blocking air flow between the units.You have a 40 year old furnace, you CANNOT just replace it with a new one. It's because of this that many of my units a few years ago had 40+ year old furnaces where I was carrying unbelievable gas bills. I couldn't afford to carry the Gas bill, but I couldn't afford to buy two furnaces. There were a couple of touch and go winters back then where I wasn't sure how the next month would be paid for at times. It's also the reason that I LOVE electric baseboard heaters. I've upgraded say 15 units to baseboards in the last few years.However, you will get completely soaked on the other side if you pay the electric.That's how it would be in my area. No clue in WA?End of the day, if it is not Zoned R-2 or whatever they call it in your area, you will have to go through the appeal process, and once those guys are in your pocket rummaging around, it won't end up being worth it.
His name is Jim. My bro thought he was cool, but my brother, a grad student was the ideal tenant. My brother mentioned that maintenance was not fast, and not available on the weekend, but no major problems. You are probably right about that insurance money though. He just moved 6/26 so the deposit is not due him yet. I hope there are no problems.
Oops, I didn't mean you weren't a fine tenant. I'm just saying that it was kind of obvious Jim catered to my brother a little bit. Many of the people living there now leave something to be desired, from a landlord's perspective. He's also got quite a few vacancies.
If you are honestly 2 years away, I would do everything in my power to make the current house work. If it is more like 5 years, then I would look to move. Only you have the facts and numbers you need to consider here. Hopefully you can follow and plug into the framework I put in here.You'd have been a good friend to have at the time! It all worked out well, we had friends that were about to lose their house and my brother moving in allowed them to be able to afford to keep it. Help me get my arms around this renting idea. All of us have had it drilled into our heads all these years that renting is throwing money away. Well, so is paying double transaction fees obviously. How would I setup that spreadsheet to analyze if I should rent something instead of buy it. I don't know know what transaction fees will cost.Luckily I ran the Indianapolis Athletic Club with 112 Hotel rooms at the time. Uncle Mike would have had Maid service. I am sorry to hear your brother was in there at the time.
Throwing out your Down payment that you would hope to recoup. Lets say discount closing costs of a Grand each side. (Hopefully someone in the business will post a better number, but with some phone work you can track this down). So a Grand each way (Which I think? is good), that $2K. Now, lets say even 6% for a selling Agent on $130K is over $9K. So we are at $11K. So goto any on-line Mortgage calculator and figure out your Mortgage with whatever terms you can get (More phone work)BE SURE to add your monthly Taxes and Insurance (Even if you don't escrow, they need to be added monthly), then you will come up with a figure. Now, what is the monthly rent out of the paper or by going to showings on a place you would take?
Lets say you rent for 3 Years, just picking a number, you pick yours. Is the difference between your PITI (Principal, Interest, Taxes, and Insurance) compared to rent-$11K over 3 years a good move or a bad move.
Simple math has me seeing that PITI needs to be $306.00 less than rent over 3 years to be worth buying a home you will move out of in just three years.
So, with everything escrowed, you could have a mortgage of say $1,000.00 a month, or rent of $1,306 a month and break even not counting appreciation.
Living just outside Greenwood for a couple of years, I have to believe that appreciation is what it is in Indiana. It isn't there. Only you can produce these numbers, but I would encourage you to follow up on them.
Owning isn't always the answer, run the numbers. Mine are all COMPLETELY speculation.
So speculating, lets say it is two years. a $1,000.00 mortgage equals a $1,458.00 rent to break even. I would think that is a whole freaking lot of house you could rent.
Go the other way using my SPECULATIVE numbers: Say you rent 5 years, $1,000.00 in Mortgage equals $1,183.00 in rent, most likely NOT the answer???
I just don't know what you are looking at, but that is how the math works.
I've learned to be very detailed in this thread as you never know in what area someone can offer advice. This doesn't fit with the general theme of real estate investing, but I'll bet there's lots of footballguys making this decision. Here are some asumptions.
1. I own a 1200 square foot 3 BR ranch valued around $115K. I owe $101K. I bought it when I was 18, put $1,000 down, I'm 7.5 years in to a 30 year mortgage. Mortgage payment of $895 includes Taxes, Insurance, and PMI. I was thinking of renting it for $995 rather than selling it.
A hundred bucks isn't a strong enough margin. EXPECT that every year you will have a month of down time. Not always the case, as some tenants stay a life time, but lets just expect that every tenant leaves after a year, they ALL leave the place in great shape, and you show it for a few weeks and get a renter. This would be a decent scenario. Sure some tenants stay 5 years, some tenants do $6K in damage and disappear into the night after 4 months. So, to average it, assume you have a down month every year. In that case you made a WHOPPING $305 for the entire year. You have two months down in any given year and you just netted -590.00 for the year. Are you willing to carry a negative balance for the appreciation? I know the appreciation in Indiana, and I wouldn't be ready to do that. The margin is TOO tight.
2. I work almost exclusively from home, and my wife (massage therapist) works from home part time. Currently, one bedroom is my office, one bedroom is her massage studio, and one bedroom is ours. Obviously people raise kids in 3 bedroom homes all the time, but we both generate income from our extra rooms, and so I pretty much insist on moving to a 4 bedroom -or- a 3 bedroom that also has an office, den, or basement where I can work from.
Do you have/Can you finish out a Basement office and just stay? That is Obviously the best financial position.
3. There are plenty of houses around here that are around $130-$150 that we'd be very comfortable in. I think I'd have to spend about $1200 to rent a house I'd be comfortable in. That being said, I've been working very hard to put us on a path to be able to buy a very nice house in 2-5 years. God willing, we'll get there, and I'll want to ditch this next house in a hurry.
Any more advice? TIA
I was a Tenant that was still waiting 18 months later for move in promises. It was Jim, now that you say it, it absolutely rings a bell. All I wanted was the things done the guy promised would be done some two years ago.So in that respect, I was kind of an ###.
Understand that I Took out the down payment which I think you should get back, I used 6% (7% is standard in my market) , and I used a $130K house, you might be looking to sell at $160K??? Granted, then there is appreciation to work in as well.Surely you can see that these numbers are all over the place. You could make that $11K a MUCH higher or a MUCH lower number depending on how you decide to work the numbers.If you are honestly 2 years away, I would do everything in my power to make the current house work. If it is more like 5 years, then I would look to move. Only you have the facts and numbers you need to consider here. Hopefully you can follow and plug into the framework I put in here.You'd have been a good friend to have at the time! It all worked out well, we had friends that were about to lose their house and my brother moving in allowed them to be able to afford to keep it. Help me get my arms around this renting idea. All of us have had it drilled into our heads all these years that renting is throwing money away. Well, so is paying double transaction fees obviously. How would I setup that spreadsheet to analyze if I should rent something instead of buy it. I don't know know what transaction fees will cost.Luckily I ran the Indianapolis Athletic Club with 112 Hotel rooms at the time. Uncle Mike would have had Maid service. I am sorry to hear your brother was in there at the time.
Throwing out your Down payment that you would hope to recoup. Lets say discount closing costs of a Grand each side. (Hopefully someone in the business will post a better number, but with some phone work you can track this down). So a Grand each way (Which I think? is good), that $2K. Now, lets say even 6% for a selling Agent on $130K is over $9K. So we are at $11K. So goto any on-line Mortgage calculator and figure out your Mortgage with whatever terms you can get (More phone work)BE SURE to add your monthly Taxes and Insurance (Even if you don't escrow, they need to be added monthly), then you will come up with a figure. Now, what is the monthly rent out of the paper or by going to showings on a place you would take?
Lets say you rent for 3 Years, just picking a number, you pick yours. Is the difference between your PITI (Principal, Interest, Taxes, and Insurance) compared to rent-$11K over 3 years a good move or a bad move.
Simple math has me seeing that PITI needs to be $306.00 less than rent over 3 years to be worth buying a home you will move out of in just three years.
So, with everything escrowed, you could have a mortgage of say $1,000.00 a month, or rent of $1,306 a month and break even not counting appreciation.
Living just outside Greenwood for a couple of years, I have to believe that appreciation is what it is in Indiana. It isn't there. Only you can produce these numbers, but I would encourage you to follow up on them.
Owning isn't always the answer, run the numbers. Mine are all COMPLETELY speculation.
So speculating, lets say it is two years. a $1,000.00 mortgage equals a $1,458.00 rent to break even. I would think that is a whole freaking lot of house you could rent.
Go the other way using my SPECULATIVE numbers: Say you rent 5 years, $1,000.00 in Mortgage equals $1,183.00 in rent, most likely NOT the answer???
I just don't know what you are looking at, but that is how the math works.
I've learned to be very detailed in this thread as you never know in what area someone can offer advice. This doesn't fit with the general theme of real estate investing, but I'll bet there's lots of footballguys making this decision. Here are some asumptions.
1. I own a 1200 square foot 3 BR ranch valued around $115K. I owe $101K. I bought it when I was 18, put $1,000 down, I'm 7.5 years in to a 30 year mortgage. Mortgage payment of $895 includes Taxes, Insurance, and PMI. I was thinking of renting it for $995 rather than selling it.
A hundred bucks isn't a strong enough margin. EXPECT that every year you will have a month of down time. Not always the case, as some tenants stay a life time, but lets just expect that every tenant leaves after a year, they ALL leave the place in great shape, and you show it for a few weeks and get a renter. This would be a decent scenario. Sure some tenants stay 5 years, some tenants do $6K in damage and disappear into the night after 4 months. So, to average it, assume you have a down month every year. In that case you made a WHOPPING $305 for the entire year. You have two months down in any given year and you just netted -590.00 for the year. Are you willing to carry a negative balance for the appreciation? I know the appreciation in Indiana, and I wouldn't be ready to do that. The margin is TOO tight.
2. I work almost exclusively from home, and my wife (massage therapist) works from home part time. Currently, one bedroom is my office, one bedroom is her massage studio, and one bedroom is ours. Obviously people raise kids in 3 bedroom homes all the time, but we both generate income from our extra rooms, and so I pretty much insist on moving to a 4 bedroom -or- a 3 bedroom that also has an office, den, or basement where I can work from.
Do you have/Can you finish out a Basement office and just stay? That is Obviously the best financial position.
3. There are plenty of houses around here that are around $130-$150 that we'd be very comfortable in. I think I'd have to spend about $1200 to rent a house I'd be comfortable in. That being said, I've been working very hard to put us on a path to be able to buy a very nice house in 2-5 years. God willing, we'll get there, and I'll want to ditch this next house in a hurry.
Any more advice? TIA
I can follow that, and you are right about the appreciation here. I was interested to know what you thought about renting my house out. If I use a realtor to sell it for 115K, I'll get 107K, right? I'll walk with about 6K. In addition to the $100 monthly profit when it is rented, should I give any weight to:1.) The 8K I'll need to pay a realtor to sell it?If you are honestly 2 years away, I would do everything in my power to make the current house work. If it is more like 5 years, then I would look to move. Only you have the facts and numbers you need to consider here. Hopefully you can follow and plug into the framework I put in here.You'd have been a good friend to have at the time! It all worked out well, we had friends that were about to lose their house and my brother moving in allowed them to be able to afford to keep it. Help me get my arms around this renting idea. All of us have had it drilled into our heads all these years that renting is throwing money away. Well, so is paying double transaction fees obviously. How would I setup that spreadsheet to analyze if I should rent something instead of buy it. I don't know know what transaction fees will cost.Luckily I ran the Indianapolis Athletic Club with 112 Hotel rooms at the time. Uncle Mike would have had Maid service. I am sorry to hear your brother was in there at the time.
Throwing out your Down payment that you would hope to recoup. Lets say discount closing costs of a Grand each side. (Hopefully someone in the business will post a better number, but with some phone work you can track this down). So a Grand each way (Which I think? is good), that $2K. Now, lets say even 6% on $130K is over $9K. So we are at $11K. So goto any on-line Mortgage calculator and figure out your Mortgage with whatever terms you can get (More phone work)BE SURE to add your monthly Taxes and Insurance (Even if you don't escrow, they need to be added monthly), then you will come up with a figure. Now, what is the monthly rent out of the paper or by going to showings on a place you would take?
Lets say you rent for 3 Years, just picking a number, you pick yours. Is the difference between your PITI (Principal, Interest, Taxes, and Insurance) compared to rent-$11K over 3 years a good move or a bad move.
Simple math has me seeing that PITI needs to be $306.00 less than rent over 3 years to be worth buying a home you will move out of in just three years.
So, with everything escrowed, you could have a mortgage of say $1,000.00 a month, or rent of $1,306 a month and break even not counting appreciation.
Living just outside Greenwood for a couple of years, I have to believe that appreciation is what it is in Indiana. It isn't there. Only you can produce these numbers, but I would encourage you to follow up on them.
Owning isn't always the answer, run the numbers. Mine are all COMPLETELY speculation.
So speculating, lets say it is two years. a $1,000.00 mortgage equals a $1,458.00 rent to break even. I would think that is a whole freaking lot of house you could rent.
Go the other way using my SPECULATIVE numbers: Say you rent 5 years, $1,000.00 in Mortgage equals $1,183.00 in rent, most likely NOT the answer???
I just don't know what you are looking at, but that is how the math works.
I've learned to be very detailed in this thread as you never know in what area someone can offer advice. This doesn't fit with the general theme of real estate investing, but I'll bet there's lots of footballguys making this decision. Here are some asumptions.
1. I own a 1200 square foot 3 BR ranch valued around $115K. I owe $101K. I bought it when I was 18, put $1,000 down, I'm 7.5 years in to a 30 year mortgage. Mortgage payment of $895 includes Taxes, Insurance, and PMI. I was thinking of renting it for $995 rather than selling it.
A hundred bucks isn't a strong enough margin. EXPECT that every year you will have a month of down time. Not always the case, as some tenants stay a life time, but lets just expect that every tenant leaves after a year, they ALL leave the place in great shape, and you show it for a few weeks and get a renter. This would be a decent scenario. Sure some tenants stay 5 years, some tenants do $6K in damage and disappear into the night after 4 months. So, to average it, assume you have a down month every year. In that case you made a WHOPPING $305 for the entire year. You have two months down in any given year and you just netted -590.00 for the year. Are you willing to carry a negative balance for the appreciation? I know the appreciation in Indiana, and I wouldn't be ready to do that. The margin is TOO tight.
2. I work almost exclusively from home, and my wife (massage therapist) works from home part time. Currently, one bedroom is my office, one bedroom is her massage studio, and one bedroom is ours. Obviously people raise kids in 3 bedroom homes all the time, but we both generate income from our extra rooms, and so I pretty much insist on moving to a 4 bedroom -or- a 3 bedroom that also has an office, den, or basement where I can work from.
Do you have/Can you finish out a Basement office and just stay? That is Obviously the best financial position.
3. There are plenty of houses around here that are around $130-$150 that we'd be very comfortable in. I think I'd have to spend about $1200 to rent a house I'd be comfortable in. That being said, I've been working very hard to put us on a path to be able to buy a very nice house in 2-5 years. God willing, we'll get there, and I'll want to ditch this next house in a hurry.
Any more advice? TIA
My fear is that you hit a 3 Month dry spell and you are out close to $1,500.00 in the bat of an eye, with no way to ever make that back up.I think you have the right path, thinking about the cost to sell, and only you can run those numbers, but you have the framework, just run them.I can follow that, and you are right about the appreciation here. I was interested to know what you thought about renting my house out. If I use a realtor to sell it for 115K, I'll get 107K, right? I'll walk with about 6K. In addition to the $100 monthly profit when it is rented, should I give any weight to:1.) The 8K I'll need to pay a realtor to sell it?If you are honestly 2 years away, I would do everything in my power to make the current house work. If it is more like 5 years, then I would look to move. Only you have the facts and numbers you need to consider here. Hopefully you can follow and plug into the framework I put in here.You'd have been a good friend to have at the time! It all worked out well, we had friends that were about to lose their house and my brother moving in allowed them to be able to afford to keep it. Help me get my arms around this renting idea. All of us have had it drilled into our heads all these years that renting is throwing money away. Well, so is paying double transaction fees obviously. How would I setup that spreadsheet to analyze if I should rent something instead of buy it. I don't know know what transaction fees will cost.Luckily I ran the Indianapolis Athletic Club with 112 Hotel rooms at the time. Uncle Mike would have had Maid service. I am sorry to hear your brother was in there at the time.
Throwing out your Down payment that you would hope to recoup. Lets say discount closing costs of a Grand each side. (Hopefully someone in the business will post a better number, but with some phone work you can track this down). So a Grand each way (Which I think? is good), that $2K. Now, lets say even 6% on $130K is over $9K. So we are at $11K. So goto any on-line Mortgage calculator and figure out your Mortgage with whatever terms you can get (More phone work)BE SURE to add your monthly Taxes and Insurance (Even if you don't escrow, they need to be added monthly), then you will come up with a figure. Now, what is the monthly rent out of the paper or by going to showings on a place you would take?
Lets say you rent for 3 Years, just picking a number, you pick yours. Is the difference between your PITI (Principal, Interest, Taxes, and Insurance) compared to rent-$11K over 3 years a good move or a bad move.
Simple math has me seeing that PITI needs to be $306.00 less than rent over 3 years to be worth buying a home you will move out of in just three years.
So, with everything escrowed, you could have a mortgage of say $1,000.00 a month, or rent of $1,306 a month and break even not counting appreciation.
Living just outside Greenwood for a couple of years, I have to believe that appreciation is what it is in Indiana. It isn't there. Only you can produce these numbers, but I would encourage you to follow up on them.
Owning isn't always the answer, run the numbers. Mine are all COMPLETELY speculation.
So speculating, lets say it is two years. a $1,000.00 mortgage equals a $1,458.00 rent to break even. I would think that is a whole freaking lot of house you could rent.
Go the other way using my SPECULATIVE numbers: Say you rent 5 years, $1,000.00 in Mortgage equals $1,183.00 in rent, most likely NOT the answer???
I just don't know what you are looking at, but that is how the math works.
I've learned to be very detailed in this thread as you never know in what area someone can offer advice. This doesn't fit with the general theme of real estate investing, but I'll bet there's lots of footballguys making this decision. Here are some asumptions.
1. I own a 1200 square foot 3 BR ranch valued around $115K. I owe $101K. I bought it when I was 18, put $1,000 down, I'm 7.5 years in to a 30 year mortgage. Mortgage payment of $895 includes Taxes, Insurance, and PMI. I was thinking of renting it for $995 rather than selling it.
A hundred bucks isn't a strong enough margin. EXPECT that every year you will have a month of down time. Not always the case, as some tenants stay a life time, but lets just expect that every tenant leaves after a year, they ALL leave the place in great shape, and you show it for a few weeks and get a renter. This would be a decent scenario. Sure some tenants stay 5 years, some tenants do $6K in damage and disappear into the night after 4 months. So, to average it, assume you have a down month every year. In that case you made a WHOPPING $305 for the entire year. You have two months down in any given year and you just netted -590.00 for the year. Are you willing to carry a negative balance for the appreciation? I know the appreciation in Indiana, and I wouldn't be ready to do that. The margin is TOO tight.
2. I work almost exclusively from home, and my wife (massage therapist) works from home part time. Currently, one bedroom is my office, one bedroom is her massage studio, and one bedroom is ours. Obviously people raise kids in 3 bedroom homes all the time, but we both generate income from our extra rooms, and so I pretty much insist on moving to a 4 bedroom -or- a 3 bedroom that also has an office, den, or basement where I can work from.
Do you have/Can you finish out a Basement office and just stay? That is Obviously the best financial position.
3. There are plenty of houses around here that are around $130-$150 that we'd be very comfortable in. I think I'd have to spend about $1200 to rent a house I'd be comfortable in. That being said, I've been working very hard to put us on a path to be able to buy a very nice house in 2-5 years. God willing, we'll get there, and I'll want to ditch this next house in a hurry.
Any more advice? TIA
2.) The $125 each month I'm reducing the principal?
3.) The tax advantages? There are some, right? Or do those go away when you rent it?
4.) Mild appreciation of even 1% is $1200 annually.
Kind of seems to me the real cost of keeping the house is lower than $895. Obviously this isn't a house you'd buy for investment purposes (not like getting double the mortgage in the Fort!) , but now that I already own it, isn't the threshold lower? It's not my living. I know you'll correct me if I'm way off, go ahead. Thanks again. I'll check back tomorrow.
In A PERFECT world, where you have it rented perfectly for every single month making $1,200.00 a year. All is perfect with the world. You have hit every stride, everything is perfect. Say you all the sudden hit a 3 month dry spell you are out $2685.00So real world, you hit a three month dry spell, it takes you 2 years and 2 months to get back to break even.My fear is that you hit a 3 Month dry spell and you are out close to $1,500.00 in the bat of an eye, with no way to ever make that back up.I think you have the right path, thinking about the cost to sell, and only you can run those numbers, but you have the framework, just run them.I can follow that, and you are right about the appreciation here. I was interested to know what you thought about renting my house out. If I use a realtor to sell it for 115K, I'll get 107K, right? I'll walk with about 6K. In addition to the $100 monthly profit when it is rented, should I give any weight to:1.) The 8K I'll need to pay a realtor to sell it?If you are honestly 2 years away, I would do everything in my power to make the current house work. If it is more like 5 years, then I would look to move. Only you have the facts and numbers you need to consider here. Hopefully you can follow and plug into the framework I put in here.You'd have been a good friend to have at the time! It all worked out well, we had friends that were about to lose their house and my brother moving in allowed them to be able to afford to keep it. Help me get my arms around this renting idea. All of us have had it drilled into our heads all these years that renting is throwing money away. Well, so is paying double transaction fees obviously. How would I setup that spreadsheet to analyze if I should rent something instead of buy it. I don't know know what transaction fees will cost.Luckily I ran the Indianapolis Athletic Club with 112 Hotel rooms at the time. Uncle Mike would have had Maid service. I am sorry to hear your brother was in there at the time.
Throwing out your Down payment that you would hope to recoup. Lets say discount closing costs of a Grand each side. (Hopefully someone in the business will post a better number, but with some phone work you can track this down). So a Grand each way (Which I think? is good), that $2K. Now, lets say even 6% on $130K is over $9K. So we are at $11K. So goto any on-line Mortgage calculator and figure out your Mortgage with whatever terms you can get (More phone work)BE SURE to add your monthly Taxes and Insurance (Even if you don't escrow, they need to be added monthly), then you will come up with a figure. Now, what is the monthly rent out of the paper or by going to showings on a place you would take?
Lets say you rent for 3 Years, just picking a number, you pick yours. Is the difference between your PITI (Principal, Interest, Taxes, and Insurance) compared to rent-$11K over 3 years a good move or a bad move.
Simple math has me seeing that PITI needs to be $306.00 less than rent over 3 years to be worth buying a home you will move out of in just three years.
So, with everything escrowed, you could have a mortgage of say $1,000.00 a month, or rent of $1,306 a month and break even not counting appreciation.
Living just outside Greenwood for a couple of years, I have to believe that appreciation is what it is in Indiana. It isn't there. Only you can produce these numbers, but I would encourage you to follow up on them.
Owning isn't always the answer, run the numbers. Mine are all COMPLETELY speculation.
So speculating, lets say it is two years. a $1,000.00 mortgage equals a $1,458.00 rent to break even. I would think that is a whole freaking lot of house you could rent.
Go the other way using my SPECULATIVE numbers: Say you rent 5 years, $1,000.00 in Mortgage equals $1,183.00 in rent, most likely NOT the answer???
I just don't know what you are looking at, but that is how the math works.
I've learned to be very detailed in this thread as you never know in what area someone can offer advice. This doesn't fit with the general theme of real estate investing, but I'll bet there's lots of footballguys making this decision. Here are some asumptions.
1. I own a 1200 square foot 3 BR ranch valued around $115K. I owe $101K. I bought it when I was 18, put $1,000 down, I'm 7.5 years in to a 30 year mortgage. Mortgage payment of $895 includes Taxes, Insurance, and PMI. I was thinking of renting it for $995 rather than selling it.
A hundred bucks isn't a strong enough margin. EXPECT that every year you will have a month of down time. Not always the case, as some tenants stay a life time, but lets just expect that every tenant leaves after a year, they ALL leave the place in great shape, and you show it for a few weeks and get a renter. This would be a decent scenario. Sure some tenants stay 5 years, some tenants do $6K in damage and disappear into the night after 4 months. So, to average it, assume you have a down month every year. In that case you made a WHOPPING $305 for the entire year. You have two months down in any given year and you just netted -590.00 for the year. Are you willing to carry a negative balance for the appreciation? I know the appreciation in Indiana, and I wouldn't be ready to do that. The margin is TOO tight.
2. I work almost exclusively from home, and my wife (massage therapist) works from home part time. Currently, one bedroom is my office, one bedroom is her massage studio, and one bedroom is ours. Obviously people raise kids in 3 bedroom homes all the time, but we both generate income from our extra rooms, and so I pretty much insist on moving to a 4 bedroom -or- a 3 bedroom that also has an office, den, or basement where I can work from.
Do you have/Can you finish out a Basement office and just stay? That is Obviously the best financial position.
3. There are plenty of houses around here that are around $130-$150 that we'd be very comfortable in. I think I'd have to spend about $1200 to rent a house I'd be comfortable in. That being said, I've been working very hard to put us on a path to be able to buy a very nice house in 2-5 years. God willing, we'll get there, and I'll want to ditch this next house in a hurry.
Any more advice? TIA
2.) The $125 each month I'm reducing the principal?
3.) The tax advantages? There are some, right? Or do those go away when you rent it?
4.) Mild appreciation of even 1% is $1200 annually.
Kind of seems to me the real cost of keeping the house is lower than $895. Obviously this isn't a house you'd buy for investment purposes (not like getting double the mortgage in the Fort!) , but now that I already own it, isn't the threshold lower? It's not my living. I know you'll correct me if I'm way off, go ahead. Thanks again. I'll check back tomorrow.
Sometimes I drag even up to 8 units a month, and say 4 for 2-3 months depending on the time of the year. Most of the time, stuff stays rented. I would think your drop dead would be $1,500.00 every number of years, with some years making $1,200.00 a year. The average year you gain around $900.00 a year, but that average could easily be $300.00 a year in gains depending on your management. Do understand one single mistake in a renter on your part and the cost could be in the thousands. You have to screen like crazy, and be willing to understand that an empty unit is better than a bad tenant, and be willing to carry the shortage.
I really, strongly believe this is too tight, although I suspect that year in and year out you will make very small positive financial gains. Very Small.
Well, you can't take the tax exemption, but you do have long term capital gains.I'm not an accountant (I need to but a big-### disclaimer in the first post, covering all the regulars), but you should be at 15% at a year and a day.
Translation for those of us who speak English?AE?It may be a lender thing.... I'm an AE with a subprime wholesaler. We don't lend on properties listed w/in the first 90 days and still need 6m seller seasoning on title. We need a full 12m for a FSBO. That may be a little tight, but subprime lenders have funkier rules. Plus, for flip properties where you're looking at either FTHB or low/mid income with credit issues as buyers then these issues will certainly affect you.I paid cash. Maybe my realtor was
NEVER pay more than 20% unless you have ot close SUPER-fast, and then refinance it out anyway.Why tie up all that cash in one property?
Yes it does depend on your situation.Figure out how long you are likely to live there (or own it, or both).
Mmmmm..... late night math. Sounds like fun.
So you owe $101K and can rent it for $995. Payments are $895, so you get $100 a month in your pocket - AND you get the tax benefits.Only issue would be a bad tenant, and who's going to manage the place for you.
How is it to be married to a massage therapist? Just curious. My SiL is one.Did I miss the question....?
I still don't see a question, sorry.Is this buy vs. rent? If so, you have to weigh $1200 rent vs. a bigger mortgage payment and if that equates. If they are close to equal, home ownership may give more advantages (as hopefully your new asset gains value).
Shocked that the "gamers" rates aren't better. I would take the 30 in a heart beat, and just over pay every month to create a 15 or 20.
Fricken Wimp.....
:finger:Fricken Wimp.....
and 
here, but it happens people. More often than you think.thanks yeah, thats the info ive been getting, plus i would probaly list the house through an agent.in los angeles, how low of a percentage should i be able to get the agent donw to?
You may be better off listing it as high as it can list for and over-commissioning the buyer's agent.
Another possibility, and I know not a popular one, is selling on contract. The trend around here seems to be asking more than the house is worth, but still getting a buyer because of the attractive financing offer. Require a large down payment, and end up with a tenant that is better than a renter because they have a large down payment and a plan to purchase the property. You either end up with a tenant in favorable conditions or a buyer at a price slightly higher than the house's value. So Mike, if you already owned this house, would you accept $3000 down and $995 monthly from a well screened contract buyer? His $3000 plus something like $175 a month would go toward the purchase price of $121,000 if he executes the transaction within 2 years? Would you rather have that or get your 14K in equity out, give 8K to the realtor, and move on? I know you can tell I'm slanting the question in the direction I want to go, but I'm wanting you to play deveil's advocate on this idea.Mmmmm..... late night math. Sounds like fun.So you owe $101K and can rent it for $995. Payments are $895, so you get $100 a month in your pocket - AND you get the tax benefits.Only issue would be a bad tenant, and who's going to manage the place for you.
For $100 a month I still don't want a phone call at 2 AM telling me there's a leak or the toilet is broken. Not my style, sorry.
I'll share a story when I'm done walking thru this thread.
Back to (1) - this is a workable deal, and if you get good tenants for the next 20 years, you'll have a cash cow. Good luck.
(Note - here's an idea. Find a tenant then consider selling this as what is known as a "turnkey rental" to an investor. Many do want cashflow properties and would buy a property that cash flows to break even AFTER PUTTING 20% DOWN. That means these rocket scientists are happy to buy at $125K, put $25K down, and get $995 rent to cover the $100K loan. Not me, but hey - would you want $25K today vs. $100 a month....?)
Another interesting idea. I think it's a very real possibility.
Always consider alternate exit strategies. It is the above scenario that is making me consider selling my rentals ($2500 a month gross rent - but I can sell it for $300K or more I'd bet).
How is it to be married to a massage therapist? Just curious. My SiL is one.
It is great. I don't get a lot of 60 minute massages but about 15 minutes 5 times a week
Did I miss the question....?
I still don't see a question, sorry.It's not a question. I just throw as many details as possible out there, and someone generally comes along and tells me there is a better way of doing it. For example, I never thought of going from owning a home to renting a home in order to save on transaction fees... It was an idea that was born in the details... Just like the one about getting a tenant then selling to an investor. Thanks!
Is this buy vs. rent? If so, you have to weigh $1200 rent vs. a bigger mortgage payment and if that equates. If they are close to equal, home ownership may give more advantages (as hopefully your new asset gains value).
Transaction costs of buying also factor in, of course...
Yeah, I think it is mostly based on the transaction costs that Mike and I have been discussing why to not buy a house that isn't going to appreciate and sell it in just a couple years.
Maybe I should go to sleep.....
Jeff, I understand that you're looking at this from the standpoint I hope to be looking at this in a few years. If a deal comes up, I want to have the means to jump on it. But right now I have a three person crew (me, wife, brother), and my wife is still not 100% on board (being cooperative and supportave, but not seeing the potential here). No way could I buy anything else right now, nomatter the price (I do still have 10k in available HELOC, but I've got to prove to myself and my wife this can work before buying another property). I looked for almost a year to find the ONE property I felt is a slam dunk. I make this work, I might be in the market for another one or two.
Ok, I tried to clean this message up.The question is for Mike, but I'm pretty sure he hates selling on contract.
The point I wanted to make was this:You have to weigh the cost of getting a loan (interest, financing costs) vs. the cost of having all your money stuck in one house.
Why in the hell would you tell a room full of investors about a deal like that?!
Does she have lousy credit?
If I had known that was her plan, she never would have stood up. Seriously.7% yeah, im freaking.i was thinking 5% was high.
3% for your listing agent
4% for your buying agent
However - before you freak at 7% - ask what other realtors are getting from people with listings in your area. Just ask people about their realtors. Recommendations >>> cold calls.
I price it in - and I don't usually do a deal unless ALL of my costs are 70% or less of retail.Hey - you did it - don't sweat it, you probably will be in and out just fine. Just think long and hard about doing it again.
Concerning your escrows, you have a right to know the balance. I fact, I'm surprised that they are not listed on your monthly (or online) statement from Chase. I use CitiMortgage, and each escrow balance is shown on every statement.The trick with being a new home buyer is getting those escrow and tax accounts correct. First, you must prepay Insurance (sometimes this gets overlooked, I don't know how). First time home buyers always get confused here (they think they are paying double as they pay up front and monthly) whereas repeat buyers use their escrow from the previous home on the new home.
Luckily I am an accountant.And actually, you could qaulify for a tax-free event.
as these calculations can be complicated. There is actually a mathematical way to determine what a "primary residence" is. Even if you dont live there now, you may still qualify.One of my favorite advisors is Ric Edelman and he has written a bunch of books, one of which is "Ordinary People, Extraordinary Wealth." In it he details how the most successful and wealthy Americans carry huge mortgages, even though they can pay them off. Why, because your cash can do much better than 6-8% if invested correctly.
Thanks Jeff, I don't get the /tags/
Ill leave you alone if you trade me LaMont Jordan6 User(s) are reading this topic (0 Guests and 0 Anonymous Users)
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Here comes trouble....
I neglected to mention that if the home is bought/sold for investment purposes, then you will be taxed on the gain. Over a year is long-term capital gains, taxed at a flat 15% (thanks to Bush). Be careful though. as the IRS calculated this by the EXACT day. One year is 365 days, not a calender year (meaning July 18th, 2007 may not be 365 days away from today).spoke to the realtor the house is now at the 1.275 down from 1.45 just few months ago.may offer less than list on the new house.
Man, you're fired as my accountant.If the date matches last year's date, it will be AT LEAST 365 days from the previous occurrence. In a leap year, it may be 366.Ill leave you alone if you trade me LaMont Jordan6 User(s) are reading this topic (0 Guests and 0 Anonymous Users)
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and we're left with essentially a 47% cut of the rental revenue to cover our nut which is just mortgage, condo fee and contents insurance. In addition the term of the rental agreement is 3 years with 2 year notice of cancellation. They also pay us quarterly not monthly.
BnB may know more than I on this one, but it sounds like a weekly rental type rate.Call local prop mgmt companies in Orlando.Am looking at condo in Orlando area for investment purposes. New development with access to golf courses, hotel amenities, furnished, etc. Condo units are about 1600 sft with 2-3 BR's.
I don't live in Florida and am not interested in dealing with rentals myself. What surprises me is the rental company agreement and I wanted to see if this was extremely out of the ordinary for this market.
Off the top of the rental income comes 6% fees for maintenance, central services, refurbishment fund and so on. Then the rental company takes 50% of the remaining amount
This is a respectable developer and the rental agent is an arm of a large international hotel chain. The condos are 90% sold at this point (prior to opening) so I'm thinking this is not crazy in relative terms but I wanted to get some perspective from someone who might know this market.
I've owned property in other vacation areas and this is well beyond what I paid in management fees. If I decide to rent own my own I can do so, but because this hotel (management company is owned by hotel) does a fair number of conferences and is affiliated with an internationally renowned golf school, I'm guessing I will miss out on a lot of referral business from the hotel.
My question: Is this a fairly standard contract for this market? If not what is standard for this type of property in this market?
Thanks
Which was my point...So you could sell the home (or stock, or whatever), on Thursday July 19th 2007 and qualify as long-term capital gain (remember, its OVER a year, which means at a minimum, one year and one day, or 366 days)Man, you're fired as my accountant.If the date matches last year's date, it will be AT LEAST 365 days from the previous occurrence. In a leap year, it may be 366.Ill leave you alone if you trade me LaMont Jordan6 User(s) are reading this topic (0 Guests and 0 Anonymous Users)
6 Members: Jeff Pasquino, Red Apples, tomarken, BassNBrew, Random, Adam Sommer
Here comes trouble....
Which was my point...So you could sell the home (or stock, or whatever), on Thursday July 19th 2007 and qualify as long-term capital gain (remember, its OVER a year, which means at a minimum, one year and one day, or 366 days)Man, you're fired as my accountant.If the date matches last year's date, it will be AT LEAST 365 days from the previous occurrence. In a leap year, it may be 366.Ill leave you alone if you trade me LaMont Jordan6 User(s) are reading this topic (0 Guests and 0 Anonymous Users)
6 Members: Jeff Pasquino, Red Apples, tomarken, BassNBrew, Random, Adam Sommer
Here comes trouble....
Make sure you have the correct starting date. (on stocks, bonds, and so on) Use the trade date to determine which year you have gains or losses from sales of stock. When you're closing a short sale, use the settlement date for losses but the trade date for gains. Real Estate use the date the closing documentents were signed and funds exchanged hands.
Also, note that 52 weeks is 364 days, not 365 that the IRS uses. Also a point of confusion.
Also, leap years would have more more day (Im not sure if thats what you were saying or not??), meaning if 2007 where a leap year, you would then qualify for longterm gain on Wednesday July 18th.
(2008 is the next leap year by the way)
Here is a calulator that I like to use:
http://www.convertit.com/Go/ConvertIt/Calc...e_Diff_Calc.ASP
Random, you and I are together on this one.Understand that buying in cash is the BANE of everything investor. This is preached to Investors as a dogma.
