Mike Anderson
Footballguy
There is no way I would consider this.
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- Thread starter jeff_eaglz
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BassNBrew
Footballguy
Ramdon...how much hard cash / capital do you have into this property? Usually people work these numbers based on a 30 yr mortgage, so your return is probably better.I tend to think options are the cleanest route rather than lease-purchase. Basically you collect a non-refundable option fee which gives here the right to purchase the property for x amount during the next y months. Then you write a lease agreement which stands on it's own accord. Be aware, if you have to evict her, she'll still have the option available until it expires. Be sure to check if you have to record the option for it to be legal in your state.Random said:
Mike Anderson
Footballguy
No Agent is going to bother answering any of that, they honestly won't know the answers. Seller won't be there for the showing either, you are wasting your time.I can only think of a couple of things more foolish than not using an Agent when the seller has already listed. One of those couple of things is using the Selling agent as your Agent.Completely the wrong move here in every way.
Mike Anderson
Footballguy
Mike Anderson
Footballguy
I have experienced great difficulty getting a Loan on undeveloped land. I have always had to buy land outright Easier to buy with a garbage tear down on them. I would recommend that you get more info before making an offer.I posted this in another thread, but someone pmd me and told me to come here:
I’m currently looking to buy some vacant land to sit on for awhile (3-5 years) and then eventually build a house on. This land should cost ~ $100k. What I’m doing is looking for the most advantageous way for me to obtain this financially. Worst case scenario is that I finance 100% of this through a fixed loan, which I can currently afford; but I am looking for some other options.
Here is what I’m currently working with:
Equity in primary residence - $38K
Liquid Cash (this does not include emergency cash) - $31K
Stock I can turn into cash - $6K
Rollover IRA - $30KSo I’m sure there are plenty of options:
0 down, 100% financed
Traditional 20% down, 80% financed
Take a loan out against my equity in my primary residence
Take a loan out against my Rollover IRA (not sure if this is even possible)
Anything elseSo I’m looking for some guidance on some ways to approach this that will help me out via taxes, etc….
Mike Anderson
Footballguy
Small Multis are the money makers in my Market.
Mike Anderson
Footballguy
I have established LLCs, and RE has been my sole income for some 5 years.That said, it is damn near impossible to build up your D&B enough to get credit to the LLC. The only way I know to get started is to own the property outright, quick claim it to your LLC, and then take out a < 50% equity line. Understand that you will only get a comersial line, it will NOT be a fixed rate.
There is no way under the sun that you are going to start an LLC, and then buy a property with a Mortgage with it. If you could figure out that step, you would be a Multi-Millionare just selling your course.
(The Anderson Family has had great Computer difficulty over the past few days, I don't have a Spell Check working right now. Please refer to my Sig.)
Mike Anderson
Footballguy
I think that Bass and I rent out more than sell. With that in mind, I do want to try and put myself in to the most profitable spot where I can be the only game in town, or a big player.I am one of the top 4 players in my Market Niche for a City of a Quarter Million population. I Own a product that does well, and is NOT prevailent in the market. I would be a very small fish with tons of competition to drive down my profits if I worked with SFHs.
Mike Anderson
Footballguy
Tenants are you clientel, the reason you make money, your customer. Is St.L REALLY a strong enough market that you are good with expecting to come out of the gate in a Break even or even losing possition?????? Can you REALLY win on appreciation in St.L??????I can't think of any sound Business plan where you throw in $20K, and HOPE to break even at best while you learn. I would be happy to take a MEAR $10K and teach you more than you are going to learn on a wing and a prayer.
Mike Anderson
Footballguy
Correct, you would upset an agent more by demanding they fill out paperwork.Once you make your offer, you make it conditional on an Inspection, Disclosure, the works. Go back into this thread looking for "Weasle Clauses"I have zero Idea how it works in the Socialist Republic of MA, but here in my Fly-over area, the Disclosure is worthless anyway. Any time it has been tested in court, the answer was always it's the Buyers duty to hire a Home Inspector. When I went through my RE Classes, we were told that the Disclosure is worthless in Indiana, it won't hold up in court.
Mike Anderson
Footballguy
Mike Anderson
Footballguy
Again, there is no way under the sun you are going to start a fresh LLC and get a Fresh loan under the LLC. If you somehow get a Loan under the LLC, it may very well be a Product you are not happy with, and you will absolutely need to personally back the Loan.If you can even get a lender to loan to your LLC with a personal gaurentee, you could make millions selling that info. It is a Holy Grail.
BassNBrew
Footballguy
Mike...I've seen your product and think it's more comparable to SFH than condo's. Everyone of your properites has a unique floorplan and yard...not to mention different trimmings and ammenities.
Mike Anderson
Footballguy
There is no way a Fresh LLC gets a Loan. Even after a few years you will need to personally guarantee the loan, defeating a lot of the protection you are trying to acheive.Get your D&B up and running as fast as you can.
Mike Anderson
Footballguy
I agree that I am light years away from Condos. Condos are an extremely small part of the make up of Fort Wayne. Basically one structure downtown, and then then a ton of them around lakes at prices that exceed most homes that are geared to retirees.I want an unusual product, I want to be the place you go to when you want that product.
I'm most likely not posting this correctly. I wanted to respond to Jeff above who asked why Bass would want anything outside of a Cookie Cutter structure/property.
Mike Anderson
Footballguy
As we've had this conversation every 20 pages or so of this thread, the issue with the quit claim is that the Bank could call in the Due on Sale.I have NEVER heard of it happening, EVAH! However, Interest rates have been great forever. Should we get back to a Jimmy Carter inflation, don't be shocked in the slightest when Banks start going after those Fixed 6% loans sold to individuals that are now quick claimed to LLCs.I all but Gaurentee this will happen when the next cycle of 15%+ interest rates finally comes around. No clue when it will happen, but it will. You can take it to the Bank.We will miss Greenspan.proninja said:
Mike Anderson
Footballguy
If I had only read down before I posted.....Bass is saying this much better than I did. His comments above are my Exact thoughts.What I will add is that I do small Mulities in mostly Historic Neighborhoods. In my market, there is a Glut of SFHs. As an Example, in one of the Area codes I operate in 46807, there are so many similar 3 bedroom homes that you get beat down on price. I might get $525.00 on a SFH here (And that is a GOOD rent). The same exact home in a different area code would be $675.00.
Same concept, only Bass said it much better.
Mike Anderson
Footballguy
I can't see it being Loan Fruad. It's such common place, everyone does it.However, 10 years from now, if the Interest rates are in the Mid teens, you can absolutely expect that Lenders will start going after these loans that are sitting at a fixed 6%. Lots of people are going to get caught with thier pants down.
Mike Anderson
Footballguy
If I understand, you are into the place for $95K, and want to rent it for $900.00?I wouldn't touch that in our area of the country as a fresh rental. However, right now you are bleeding money, and that changes things.Sounds to me that you are going to collect say $5K up front and then have a tenant who can never close the deal. Either you keep her as a Tenant forever, or you kick her out and keep the $5K.I would want YEARS of back taxes to show that she even has Income. Say the last 5 years tax returns.I will tell you what really scares me here: She makes good money as a Baby sitter. Your home will be a Day care center. Now, lets not even think of the wear and tear of 20 kids running around there all day long, the red cool-ade spilt everywhere, and so on.....Let's think about your Liability. If one of those kids dies under her care, the thing about America is that the Family sues everyone they can, and the deepest pockets get hit. As you would still own the house, and she is buying, you still have an interest in the property, if not the majority interest.I am not sure you can sign away your liability in a Contract. The Parents of the dead child aren't getting much from the Babysitter who can't afford to even buy the home. The deepest pockets here are your Families.I can't begin to explain how much extra you might have to pay for an insurance rider to cover a Day care.Can you imagine the Nightmare as Dateline is knocking on your door with cameras in tow?
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The Indestructible
Footballguy
Mike Anderson
Footballguy
If she knew she couldn't afford $1100, but now will agree to $1100??? Currently pays $600, but Double is just fine??? Ready to sign the lease ASAP?? Her LL is moving back in after 6 years??? More than willing to agree to a higher purchase price where she couldn't pull off the lower price??? Neogioated for lower rent??? Baby Sitter, Self Employed at $3K a Month????Holy Spidey Sense Batman. You need a High school color guard to carry all these red flags....Random, Maybe all of these NUMEROUS WEIRD things are true, but nobody has this many circulmstances and is legit. I can't tell you how shocked I will be.First, you can't have her run a Day care out of your home for so many reasons it's not funny. The most important being the possible destruction of every bit of your families wealth and possition. I'm not risking my Daughters future so some gal can run a Day care in my Home. Secondly, you have a Beautiful home now, how about after it is a Day care for a Year, if she can make it that long?You need 5 years of back taxes. You need to go into this background check with the mindset that you know something is wrong, you just have to find it.I'm willing to bet a good steak dinner that her LL moving back in is not the reason she is moving out. Loser drives to the others State and buys Dinner. Let me know, I am confident you will be visiting the Fort if you take this bet.Seriously, Take a step back and run this through your head. Not what your heart wants, lord knows your heart wants to be done worrying about this place. Logically think about the info you posted here, then think about the Red Flags you didn't post her that she's shared with you.Random said:
stevegamer
Footballguy
For the person who wants to buy a home with no agent: Don't.
I'm not in the real estate industry (although I live in a house I used to rent) and I can't imagine wanting to buy without an agent.
3 main reasons:
1. You don't pay the agent that is helping you, the seller does.
2. They have seen all kinds of homes for sale and can often smell things out that are fishy. Those of us who are inexperienced can't do that easily, and avoiding problem homes is very important.
3. They have contacts for all sorts of services, and access to the MLS. Also, they get info on houses before they show up on the MLS sometimes.
Are there incompetent agents? Yup, I had one my ex-wife loved when I bought the biggest house we lived in - was going to move my mom in, etc. Unfortunately, my wife saw the house, fell in love with it, and that was it. It wasn't the house I wanted, I wanted the one that was 20K cheaper and needed a bit of work, but was much bigger & better located & laid out. The agent misrepresented the amount of work at the one place, and she & (more importantly) the inspector flat out missed a couple of major things that were spottable to a trained eye - a freind of mine was over and noticed it casually.
Interview a few, and pick one who seems to understand what you want.
I'm not in the real estate industry (although I live in a house I used to rent) and I can't imagine wanting to buy without an agent.
3 main reasons:
1. You don't pay the agent that is helping you, the seller does.
2. They have seen all kinds of homes for sale and can often smell things out that are fishy. Those of us who are inexperienced can't do that easily, and avoiding problem homes is very important.
3. They have contacts for all sorts of services, and access to the MLS. Also, they get info on houses before they show up on the MLS sometimes.
Are there incompetent agents? Yup, I had one my ex-wife loved when I bought the biggest house we lived in - was going to move my mom in, etc. Unfortunately, my wife saw the house, fell in love with it, and that was it. It wasn't the house I wanted, I wanted the one that was 20K cheaper and needed a bit of work, but was much bigger & better located & laid out. The agent misrepresented the amount of work at the one place, and she & (more importantly) the inspector flat out missed a couple of major things that were spottable to a trained eye - a freind of mine was over and noticed it casually.
Interview a few, and pick one who seems to understand what you want.
Mike Anderson
Footballguy
I've been meaning to throw this into this thread.
The Fort has decided it wants to be a Big city, with a Big city feel, and become a Regional player. To that, a NUMBER of new Downtown improvements have recently happened, with something new getting announced every few weeks.
Our Convention Center was increased 3 fold, the Library was doubled in size, New Outdoor space is being created, the addition of two more Downtown Hotels, and most importantly....
Harrison Square
Construction of a Downtown Ballpark, Shopping, 100 new Condos, the works in every way.
If you look at the Maps, the City had to buy all that land, and as it turned out, we were sitting on some of it. Two lots cost a total of $600.00 just two years ago. The Commericial lot went for $50.00 a sqft, and the Residential lot was $10.00 a sqare foot.
We've been actively buying up any unbuilt land in Downtown now.
City just announced the Next HUGE building project just Blocks north of Downtown within the last few days.
North River Downtown Project
And $60 Million for Infastructure in 2007 for Downtown in sewers, water supply, and other non sexy things that are usually overlooked.
AND THE BEST THING OF ALL! It looks like the Indiana State Congress is going to push through the bill taking School Spending out of Property Taxes, and pay for it with Income Taxes!!!! Currently 60% of our Property taxes go to School spending. It would be unreal to see all my Property taxes cut in half.
The Fort has decided it wants to be a Big city, with a Big city feel, and become a Regional player. To that, a NUMBER of new Downtown improvements have recently happened, with something new getting announced every few weeks.
Our Convention Center was increased 3 fold, the Library was doubled in size, New Outdoor space is being created, the addition of two more Downtown Hotels, and most importantly....
Harrison Square
Construction of a Downtown Ballpark, Shopping, 100 new Condos, the works in every way.
If you look at the Maps, the City had to buy all that land, and as it turned out, we were sitting on some of it. Two lots cost a total of $600.00 just two years ago. The Commericial lot went for $50.00 a sqft, and the Residential lot was $10.00 a sqare foot.
We've been actively buying up any unbuilt land in Downtown now.
City just announced the Next HUGE building project just Blocks north of Downtown within the last few days.
North River Downtown Project
And $60 Million for Infastructure in 2007 for Downtown in sewers, water supply, and other non sexy things that are usually overlooked.
AND THE BEST THING OF ALL! It looks like the Indiana State Congress is going to push through the bill taking School Spending out of Property Taxes, and pay for it with Income Taxes!!!! Currently 60% of our Property taxes go to School spending. It would be unreal to see all my Property taxes cut in half.
Random
Footballguy
Wish I had posted yesterday because everything you say above hit me over the weekend and I called her and told her it wasn't going to work. I used the excuse that its under contract with the realtor so I cant rent it out. I'm obviously a n00b at this.
Also, Saturday I got an offer (a real one from my realtor). The offer was 128k less 6k for windows. We countered with 129900 and 2500 back at closing and we can install the windows the buyer purchases. Haven't heard anything back. The deal is contingent on the sale of their house. I hate that, but understand that it would be hard to buy without having their own house sold. I got the address of their house and asking price, and they seem to be overpriced by about 5-10 percent. So even if they do accept my counter I'm not getting too excited.Hi all,
At some point I will definitely read this entire thread from start to finish -- but the parts I've read so far are great -- so I thought I'd go ahead and post my situation now and see if I get any feedback...
Basic information:
Location: Northern Virginia (DC suburbs) -- moving away from this area is not an option
Income: ~$93,000/year (my income -- wife is stay-at-home mom)
Current residence: Townhouse that was purchased 15 years ago before kids and is too small for us
Credit: Very Good (my score is ~725... Wife's score is ~750)
Liquid cash/savings: Virtually none -- I have a lot in 401K plan for retirement, but don't want to touch it
Debt: Virtually none -- financing one car, but the other is paid off -- $0 credit card balances monthly
My family and I will be moving sometime next year (probably April - August). We will walk away from closing with ~$160,000..
We can afford to pay up to $2,000/ month and be okay -- anything in the 2500 range and we would be stretching it, but could make it... Closer to 3000 and we'd be cooked..
Here's the deal -- in 15 years I will be retiring and will be set financially -- my retirement at my job will pay me close to 40k/year plus I am projecting ~1.1 million in my 401K which will give me some options..
At this point -- I am just trying to get to retirement. I want my family to be able to live in the nicest house possible (sick of the small townhouse with virtually no yard) and don't care how much equity I have in 15 years because with the money I will have then, I will have plenty of options on the table (the kids will all be moved out by then)..
I know my wife, and looking at the houses in this area -- she will not be happy with anything less than $600k -- 650-700k would be even nicer --- but anything in the 500s and she is not going to be thrilled -- we almost might as well stay in the cramped townhouse that we currently own...
So, I am looking at all kinds of interest-only loans and 5-year ARMS to see what gets me the most house for the smallest payment, and the best I see for a 600,000 house (with 135,000 down) is ~1,400 payment for the 1st 4 or 5 years and then it jumps to 3,000+
So, we basically can't afford the monthly payment on the cheapest house we want to live in, but we have some money up front and we have great credit.
Sure we could find something closer to 500k and struggle to make a 22 or 23 hundred dollar a month mortgage, but then I thought about renting...
I've found some really nice homes (looks like they would sell for 700-750K) in the area that rent for ~2,500.. With this, we would only need to put <10k down instead of most or all of the 165K that we will get at closing next year and we can put the remaining in CDs or whatever to help us with the payments over the next 15 years.. I think I can get ~1,000/month for 15 years out of the 135K that I am not putting down on a house to make the actual rent payment ~1,500 (very nice
)
Some obvious downfalls to this idea are:
160K we get at closing does not get rolled into a new home purchase, so we get to pay Cap Gains Taxes on it (right?)
May be forced to move at some point if the owner wants their house back.. We'd have to do some upfront research on this -- find several we are interested in and contact the owners to get an idea of why they are renting and if they think they might be interested in renting very long term
No interest deduction at tax time (I don't think this is as big a deal as many make it out to be in the big picture for our situation)The pros are:
Much more affordable monthly payments
Able to live in a much nicer house than otherwise would be able to affordOne thing that can be a pro or a con depending on how you look at it is the fact that with renting there is less flexibility with what you can do with the house.. If I want to paint the living room purple, I can't do it -- I have to check with the owner first. But the plus side is that if I did want to do something with the house (put granite counters in the kitchen let's say) -- while I would have to coordinate with the owner on the selection of the counter tops -- he/she would likely go in on the cost with me at least part way since it is an improvement to his house...
So, I guess what I'm asking first and foremost is: Is there anything major that I'm missing? Is my idea just not going to work for any reason?
If my idea seems feasible, then I would think that we would be "ideal renters" -- Very good credit -- likely to take care of the home -- etc...
Is it unrealistic to think that anyone would be willing to rent a house for 15 years (or even 10)? Do landlords typically only keep rental properties for a shorter period of time before trying to sell or move back in themselves?
TIA for any comments/suggestions/ideas...
And sorry for such a long post...
At some point I will definitely read this entire thread from start to finish -- but the parts I've read so far are great -- so I thought I'd go ahead and post my situation now and see if I get any feedback...
Basic information:
Location: Northern Virginia (DC suburbs) -- moving away from this area is not an option
Income: ~$93,000/year (my income -- wife is stay-at-home mom)
Current residence: Townhouse that was purchased 15 years ago before kids and is too small for us
Credit: Very Good (my score is ~725... Wife's score is ~750)
Liquid cash/savings: Virtually none -- I have a lot in 401K plan for retirement, but don't want to touch it
Debt: Virtually none -- financing one car, but the other is paid off -- $0 credit card balances monthly
My family and I will be moving sometime next year (probably April - August). We will walk away from closing with ~$160,000..
We can afford to pay up to $2,000/ month and be okay -- anything in the 2500 range and we would be stretching it, but could make it... Closer to 3000 and we'd be cooked..
Here's the deal -- in 15 years I will be retiring and will be set financially -- my retirement at my job will pay me close to 40k/year plus I am projecting ~1.1 million in my 401K which will give me some options..
At this point -- I am just trying to get to retirement. I want my family to be able to live in the nicest house possible (sick of the small townhouse with virtually no yard) and don't care how much equity I have in 15 years because with the money I will have then, I will have plenty of options on the table (the kids will all be moved out by then)..
I know my wife, and looking at the houses in this area -- she will not be happy with anything less than $600k -- 650-700k would be even nicer --- but anything in the 500s and she is not going to be thrilled -- we almost might as well stay in the cramped townhouse that we currently own...
So, I am looking at all kinds of interest-only loans and 5-year ARMS to see what gets me the most house for the smallest payment, and the best I see for a 600,000 house (with 135,000 down) is ~1,400 payment for the 1st 4 or 5 years and then it jumps to 3,000+
So, we basically can't afford the monthly payment on the cheapest house we want to live in, but we have some money up front and we have great credit.
Sure we could find something closer to 500k and struggle to make a 22 or 23 hundred dollar a month mortgage, but then I thought about renting...
I've found some really nice homes (looks like they would sell for 700-750K) in the area that rent for ~2,500.. With this, we would only need to put <10k down instead of most or all of the 165K that we will get at closing next year and we can put the remaining in CDs or whatever to help us with the payments over the next 15 years.. I think I can get ~1,000/month for 15 years out of the 135K that I am not putting down on a house to make the actual rent payment ~1,500 (very nice
)Some obvious downfalls to this idea are:
160K we get at closing does not get rolled into a new home purchase, so we get to pay Cap Gains Taxes on it (right?)
May be forced to move at some point if the owner wants their house back.. We'd have to do some upfront research on this -- find several we are interested in and contact the owners to get an idea of why they are renting and if they think they might be interested in renting very long term
No interest deduction at tax time (I don't think this is as big a deal as many make it out to be in the big picture for our situation)The pros are:
Much more affordable monthly payments
Able to live in a much nicer house than otherwise would be able to affordOne thing that can be a pro or a con depending on how you look at it is the fact that with renting there is less flexibility with what you can do with the house.. If I want to paint the living room purple, I can't do it -- I have to check with the owner first. But the plus side is that if I did want to do something with the house (put granite counters in the kitchen let's say) -- while I would have to coordinate with the owner on the selection of the counter tops -- he/she would likely go in on the cost with me at least part way since it is an improvement to his house...
So, I guess what I'm asking first and foremost is: Is there anything major that I'm missing? Is my idea just not going to work for any reason?
If my idea seems feasible, then I would think that we would be "ideal renters" -- Very good credit -- likely to take care of the home -- etc...
Is it unrealistic to think that anyone would be willing to rent a house for 15 years (or even 10)? Do landlords typically only keep rental properties for a shorter period of time before trying to sell or move back in themselves?
TIA for any comments/suggestions/ideas...
And sorry for such a long post...
BassNBrew
Footballguy
I'll add my comments above....I've found some really nice homes (looks like they would sell for 700-750K) in the area that rent for ~2,500.. With this, we would only need to put <10k down instead of most or all of the 165K that we will get at closing next year and we can put the remaining in CDs or whatever to help us with the payments over the next 15 years.. I think I can get ~1,000/month for 15 years out of the 135K that I am not putting down on a house to make the actual rent payment ~1,500 (very nice)
Some obvious downfalls to this idea are:
160K we get at closing does not get rolled into a new home purchase, so we get to pay Cap Gains Taxes on it (right?)Wrong...old law. If you've lived there two years and two of the last five you're OK. Disclaimer, I'm not a tax account, check with yours.
May be forced to move at some point if the owner wants their house back.. We'd have to do some upfront research on this -- find several we are interested in and contact the owners to get an idea of why they are renting and if they think they might be interested in renting very long termResearch helps, but #### happens. Maybe sign a longer term lease. In this state anything longer then 3 years has to be recorded to be valid. Problem is that ties you in if you get offered a CEO position in Richmond. I would also expect the rent to increase over time.
No interest deduction at tax time (I don't think this is as big a deal as many make it out to be in the big picture for our situation)The pros are:
Much more affordable monthly payments
Able to live in a much nicer house than otherwise would be able to affordTwo very good reasons to rent in expensive markets.
One thing that can be a pro or a con depending on how you look at it is the fact that with renting there is less flexibility with what you can do with the house.. If I want to paint the living room purple, I can't do it -- I have to check with the owner first. But the plus side is that if I did want to do something with the house (put granite counters in the kitchen let's say) -- while I would have to coordinate with the owner on the selection of the counter tops -- he/she would likely go in on the cost with me at least part way since it is an improvement to his house...
I wouldn't expect the owner to pay for upgrades. He's already losing his ### on this deal in the first place.
So, I guess what I'm asking first and foremost is: Is there anything major that I'm missing? Is my idea just not going to work for any reason?
If you're prepared to move every 2-3 years, your plan should work out fine.
If my idea seems feasible, then I would think that we would be "ideal renters" -- Very good credit -- likely to take care of the home -- etc...
Is it unrealistic to think that anyone would be willing to rent a house for 15 years (or even 10)? Do landlords typically only keep rental properties for a shorter period of time before trying to sell or move back in themselves?
You've already run the numbers, this is a losing proposition for the landlord. Assuming the landlord is sitting on a paid for $700K home, that would equate to $35000 a year in a 5% CD or $2900 a month. Why would anyone let you use their $700K and pay you $1400 a month for the honor, not too mention covering your repairs and property taxes. There are only two good reasons, one they can't move the house at the moment or they expect it to appreciate near term which further whacks out the financials down the road. So I guess you know my answer regarding how realistic this might be longer term.
TIA for any comments/suggestions/ideas...
Don't pre-pay rent (year in advance). My experience says 1 in 30 homes goes to foreclosure. Don't trust the owner not to take your money and run...you'll have no recourse.
And sorry for such a long post...
I think you misunderstood my original post with the comment I highlighted, but your point is well taken...Technically these are 650K houses I am looking at and the rent is $2,600 (not 1500), so the LLs are basically breaking even (minus the couple hundred a month they are probably paying a PM). The reason I said I would effectively be paying 1,500/month is because if I rent, I save the $135K up front I would put down on a home purchase... The $135K I could put in CDs and pay myself ~1,000/month for the 15 years -- making my rent payment around $1,600... If I bought, I would pay the $135K down and have a ~$2,600/month mortgage payment for not quite as nice of a house...I'll add my comments above....I've found some really nice homes (looks like they would sell for 700-750K) in the area that rent for ~2,500.. With this, we would only need to put <10k down instead of most or all of the 165K that we will get at closing next year and we can put the remaining in CDs or whatever to help us with the payments over the next 15 years.. I think I can get ~1,000/month for 15 years out of the 135K that I am not putting down on a house to make the actual rent payment ~1,500 (very nice)
Some obvious downfalls to this idea are:
160K we get at closing does not get rolled into a new home purchase, so we get to pay Cap Gains Taxes on it (right?)Wrong...old law. If you've lived there two years and two of the last five you're OK. Disclaimer, I'm not a tax account, check with yours.
May be forced to move at some point if the owner wants their house back.. We'd have to do some upfront research on this -- find several we are interested in and contact the owners to get an idea of why they are renting and if they think they might be interested in renting very long termResearch helps, but #### happens. Maybe sign a longer term lease. In this state anything longer then 3 years has to be recorded to be valid. Problem is that ties you in if you get offered a CEO position in Richmond. I would also expect the rent to increase over time.
No interest deduction at tax time (I don't think this is as big a deal as many make it out to be in the big picture for our situation)The pros are:
Much more affordable monthly payments
Able to live in a much nicer house than otherwise would be able to affordTwo very good reasons to rent in expensive markets.
One thing that can be a pro or a con depending on how you look at it is the fact that with renting there is less flexibility with what you can do with the house.. If I want to paint the living room purple, I can't do it -- I have to check with the owner first. But the plus side is that if I did want to do something with the house (put granite counters in the kitchen let's say) -- while I would have to coordinate with the owner on the selection of the counter tops -- he/she would likely go in on the cost with me at least part way since it is an improvement to his house...
I wouldn't expect the owner to pay for upgrades. He's already losing his ### on this deal in the first place.
So, I guess what I'm asking first and foremost is: Is there anything major that I'm missing? Is my idea just not going to work for any reason?
If you're prepared to move every 2-3 years, your plan should work out fine.
If my idea seems feasible, then I would think that we would be "ideal renters" -- Very good credit -- likely to take care of the home -- etc...
Is it unrealistic to think that anyone would be willing to rent a house for 15 years (or even 10)? Do landlords typically only keep rental properties for a shorter period of time before trying to sell or move back in themselves?
You've already run the numbers, this is a losing proposition for the landlord. Assuming the landlord is sitting on a paid for $700K home, that would equate to $35000 a year in a 5% CD or $2900 a month. Why would anyone let you use their $700K and pay you $1400 a month for the honor, not too mention covering your repairs and property taxes. There are only two good reasons, one they can't move the house at the moment or they expect it to appreciate near term which further whacks out the financials down the road. So I guess you know my answer regarding how realistic this might be longer term.
TIA for any comments/suggestions/ideas...
Don't pre-pay rent (year in advance). My experience says 1 in 30 homes goes to foreclosure. Don't trust the owner not to take your money and run...you'll have no recourse.
And sorry for such a long post...
I still get what you are saying though -- why would anyone want to pay me a couple hundred $$ / month to live in their house???
I hear you about "pre-screening" prospective LLs trying to find the one that is most likely to want to rent longer term... That's great and all, but the only thing that's guaranteed is what's in the lease term that I sign..
Sounds like the plan is fine, but I need to be prepared to move every 2-3 years and be prepared for the rents to go up maybe a hundred or two each time... Not ideal for a family
It's a sacrifice I'd be willing to make to live in a nicer house but I'm not sure the wife will go for it...
Let me ask you this -- in my situation, if I were going to buy, is there any type of loan out there that I am maybe missing? Any way, with my 135-150K up front and ability to pay 2,500/month (and really good credit) that I can swing a 650K house (if I don't care how much equity I have after 15 years)???
If I do interest only on the whole 650K, that works out to ~3,200/month (that's the full interest -- nothing deferred)... With the money I could pay myself from the 135K I don't put down, I could bring that down to the 2,200 range -- very doable... Is there such a thing as an interest-only loan where you don't have to start paying principle plus interest for 15 years (all I've seen require you to start paying principle after 5 years or so)? If there is, can you get it with 100% financing?
Thanks again!!
Random
Footballguy
I have a contract.127,000. Only contingency is the sale of their house, which I guess is getting alot of showings. Maybe this will happen.Wish I had posted yesterday because everything you say above hit me over the weekend and I called her and told her it wasn't going to work. I used the excuse that its under contract with the realtor so I cant rent it out. I'm obviously a n00b at this.Also, Saturday I got an offer (a real one from my realtor). The offer was 128k less 6k for windows. We countered with 129900 and 2500 back at closing and we can install the windows the buyer purchases. Haven't heard anything back. The deal is contingent on the sale of their house. I hate that, but understand that it would be hard to buy without having their own house sold. I got the address of their house and asking price, and they seem to be overpriced by about 5-10 percent. So even if they do accept my counter I'm not getting too excited.
Dont know if I posted this yet but here's the flip
Eta: fourth one down on the left for more pics
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BassNBrew
Footballguy
Did miss some of your math, but as you say the point is the same to some extent. If you decide to go the nomad route, be sure to factor in moving expenses every 2-3 years. I'm a PM and my average turn over on property is about 2.5 to 3 years in the Charlotte market for reference. Landlords run into unexpected issues like health, divorce, job loss, etc, that they aren't thinking about when they first turn a property into an investment property. Others see the $ sign a few years down the road and just want to cash out.I have a couple of I/O loans that convert to 20 yr loans after 10 years and the rate remains fixed. You should have no promblem finding one and personally I believe it's one of the best loans out there. After 10 years your salaries should have increased or you could always re-fi. 100% financing isn't an issue with good credit on a primary home. Given your timeframe, buying is probably your best bet longer term. Shorter term you'll get more house for your money renting.Technically these are 650K houses I am looking at and the rent is $2,600 (not 1500), so the LLs are basically breaking even (minus the couple hundred a month they are probably paying a PM). The reason I said I would effectively be paying 1,500/month is because if I rent, I save the $135K up front I would put down on a home purchase... The $135K I could put in CDs and pay myself ~1,000/month for the 15 years -- making my rent payment around $1,600... If I bought, I would pay the $135K down and have a ~$2,600/month mortgage payment for not quite as nice of a house...I still get what you are saying though -- why would anyone want to pay me a couple hundred $$ / month to live in their house???I hear you about "pre-screening" prospective LLs trying to find the one that is most likely to want to rent longer term... That's great and all, but the only thing that's guaranteed is what's in the lease term that I sign..Sounds like the plan is fine, but I need to be prepared to move every 2-3 years and be prepared for the rents to go up maybe a hundred or two each time... Not ideal for a family
JAA
Footballguy
I wont get on my soapbox about agents either, but I dont trust them and I can do their job. Buyers agents dont do much except push state standard forms and talk to the listing agent.
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JAA
Footballguy
help me understand why I should trust an agent that I dont know at all whom only makes money when I spend lots of money?
BassNBrew
Footballguy
That really depends on your interview skills, but the fact of the matter is that referrels drive this business. I don't even advertise any more. Almost most every phone call I get from a potential client starts off with...so and so recommended you, you've been handling their property and they're very happy.... The money I make off of you is really inconsequential, the real money comes from the 3-4 four people that you rave about my service to and then the 3-4 to four they people each of them recommend me too. You don't last long in this business with a take the money and run approach.
JAA
Footballguy
What does that have to do with my point? I am willing to do the work outlined above instead of taking a chance I dont get a good agent. What is so wrong with that? Have I made incorrect statements in the level of effort? Have I trivialized collecting the state developed disclosure form? Did I trivilize the the state developed offer form?I am still getting a lawyer. He will still review all of my work and help me along the way. But someone please corect me if I am wrong in sasying that a Buyers Agent (not sellers agent) does not do a whole lot of work. They dont negotiate on your behalf. They dont rersearch on your behalf. They give you information they have, drive you around, and help you understand what your getting into.Look, if my best friend was an agent, I would use them in a second. For the most part, it isnt about any money I may be able to negotiate out of the selling price of the home. To me it is about not having to double-check someone elses work, their figures, their reasons for recommendations, etc. When I bought my last house, I was the one who called the county to see how much was owed on the water/sewer. I was the one who found out my sellers were in chapter 13. I was the one who called the county for a proper plat. I was the one who called for the HOA setbacks, critical water areas, etc.Look, I am not trying to demean a buyers agent. If Im wrong, and I REALLY do need one, please convince me as why. The worst thing I can hear right now is that I should have one just because the seller is paying for them.
stevegamer
Footballguy
Okay, let's assume you've got years of experience in RE and can spot things most people can't. Now that we agree on that, you have already shown you can do the legwork needed.Now let me ask you how you feel about doing all that work for free. Sound like a good deal? Because whether you use a buyers agent or not - the home price isn't going to drop unless you buy a FSBO. The listing agent has a commission - they will split that with another agent. Your state maybe different, but I know when I looked without an agent it didn't matter one bit on price for non-FSBO's.Good ones do negotiate on your behalf, and advise you. What you might want to try doing is checking out a couple local ones that are accreditted and itnerview them. If you're already on the hook for doing the whole job yourself - maybe you can find someone who can help you for free, sicne you're not paying them.JAA said:
BassNBrew
Footballguy
All I can say is that I'm a licensed agent and used a buyer's agent for a property in another county even though I could have done this myself and collected a commission. She hooked me up on a property that has me $75K to the good on a $225K initial investment...wouldn't have happened with out her and would be in someone elses pocket. A good agent should do those things you are looking for. It's a matter of finding the right one and making your expectations clear. I suspect that interview process would be a lot quicker than doing the work yourself. Now my opinion may be warped since I'm self-employed, but time=money to me. I don't change my oil even though I know how because I can make more doing other things.
Random
Footballguy
Anyone want to comment on this property?
multi family
This (shelby co.) website says it rents for 950/mo. Also says "MOTIVATED SELLER WANTS OFFER!!! POSSIBLE SHORT SALE OPORTUNITY CONTINGENT UPON BANK ACCEPTANCE" so I could maybe get it for low 50's.
multi family
This (shelby co.) website says it rents for 950/mo. Also says "MOTIVATED SELLER WANTS OFFER!!! POSSIBLE SHORT SALE OPORTUNITY CONTINGENT UPON BANK ACCEPTANCE" so I could maybe get it for low 50's.
BassNBrew
Footballguy
Why haven't you made an offer already...as in yesterday...biggest no-brainer in the history of earth.Random said:
Man I wish I was in your market. That's a $150K home here in the worst case, more likely in the $200s. Looks great from the outside...surely the inside can't be that bad in the grass and exterior look that nice. Like the corner lot for rental exposure. Check and make sure the utitilies have been split, especially that gas heat.My perministic side says why would anyone have to "short sale" something that pays itself off in 8 years. If it's the real deal, I would try to get cute on the offer and lose it.
RascalKing
Footballguy
Currently looking at a house that buts up to a greenbelt. Any downside I should be looking at with this?
I love the idea of basically having the open area just outisde my back gate.
I love the idea of basically having the open area just outisde my back gate.
BassNBrew
Footballguy
1) Snakes and rodents.2) Tempting and tasty critters teasing you in your backyard if you don't own a bow.3) Possibly mosquitos.
stevegamer
Footballguy
I'm no pro on rental, but that looks really nice. It's a ncie price for the $ coming in, and it looks like would make a sweet single home for someone to move into.
Mike Anderson
Footballguy
I couldn't be Happier for you! So much better than all the mess you have been thinking about.I have a contract.127,000. Only contingency is the sale of their house, which I guess is getting alot of showings. Maybe this will happen.Wish I had posted yesterday because everything you say above hit me over the weekend and I called her and told her it wasn't going to work. I used the excuse that its under contract with the realtor so I cant rent it out. I'm obviously a n00b at this.Also, Saturday I got an offer (a real one from my realtor). The offer was 128k less 6k for windows. We countered with 129900 and 2500 back at closing and we can install the windows the buyer purchases. Haven't heard anything back. The deal is contingent on the sale of their house. I hate that, but understand that it would be hard to buy without having their own house sold. I got the address of their house and asking price, and they seem to be overpriced by about 5-10 percent. So even if they do accept my counter I'm not getting too excited.
Dont know if I posted this yet but here's the flip
Eta: fourth one down on the left for more pics
Mike Anderson
Footballguy
JAA, First, I hold a RE Leicence, and my Wife is a Practicing agent.That said, Agents are mostly worthless, and get paid way too much for what they do.95% of the time, you won't need an agent in the slightest. Of the 5% where that Agent would save your ###, and keep you out of trouble, about 50% of those Agents you might be using at the time don't know what to watch for or how to save you. So at best, you could need an agent, and that agent could actually help you, say... under 3% of the time, and I am likely being generous here.Average FBG home buyer who might buy 3-4 homes in a lifetime will most likely never come close to needing an Agents help. The odds that they would need help are nothing compared to the odds that the agent they use is basically incompetent.OK, can you tell that I have basically the same philosphy on Agents as you do?That said, you had a Bad Agent last time. I have used Buyers Agents, and they have been research machines. I tell them what I need to know, and they go and get the info. At the end of the Day, it's your deal, put your Agent to Work.Here is why you shouldn't deal with the Selling Agent directly:Even if the Selling agent has you sign the Dual Agent Paperwork, Understand that the agent isn't working for you. They are working for the seller. It does them no good to drive the price down for you. If you ever find yourself sitting in one of the various Realtor Meetings, one of the concepts that is taught is that More referals are driven through the seller side. Sellers generally have the same demographic, and are established in the community.Doing right by a Seller drives more listings. A Seller will tell their friends who are more likely getting close to a seller possition as well. Sellers are Out of town transfers where they refer others in their company, which creates a Listing stream. Young upwardly moble couples who tell other young upwardly moble couples (This works out great as you normally get part of two deals). Older people, who refer you to their older friends.The chance for good working referals from Buyers are much more of a Longshot.Add that you need listings to survive. An Agent who never lists will most likely be let go by the Agency they work for. Listings drive offices. No listings, and the office dies.If an Agent is working for both of you, he is working for the seller in every way.*******************Now, if you must proceed in this poor direction....What you want to be is the path of MOST resistance. You want to be a royal pain in the rear in negiotiation. The Agent knows they are getting a Monster check as they get both sides of the deal, Buyer and seller. This is a Huge paycheck for them.You need to be a Ball buster, to the point that the Agent believes the deal won't happen if you don't get what you want. Seriously, I can't be more straight with you here. The Agent has to know that you will kill the deal, but that you are a very strong buyer who can close with zero issues.At that point, the $7K, $10K, whatever it is to the Realtor, becomes the most important thing in their mind. They can make that money only if the two sides agree. The Agent will do everything to hold on to you because they get both sides of the deal. If another Agent brought the deal, even if it is for more, they will make MUCH less as it is only one side, not "Double-Dipping". Agents brag about "DDing"So, if you are more difficult to deal with, they will likely be able to taste that big payday, and start working over the Seller.This is bad for them long term, but America is full of Instant Satisfaction type people.There is a Reason their are so many part time Realtors. It can be easy money, and you don't really need to know what you are doing.You're best bet is to always take free representation, and put them to work for you.
Mike Anderson
Footballguy
How many bedrooms in each unit?
Mike Anderson
Footballguy
My Gut reaction was Gold, probably priced slightly high, but Gold. If I climb up into the $60-70K range, these are all over my Market. I generally operate at a lower buy in.In our type of Market, $47-50K would be about right for a building like that. However, it has great curb apeal, and what looks like a Good roof. I would assume that the Guts are great, and that the inside looks good. $60K is not out of the question if it is fantastic and turn key. $55K if it's great.Why haven't you made an offer already...as in yesterday...biggest no-brainer in the history of earth.Man I wish I was in your market. That's a $150K home here in the worst case, more likely in the $200s. Looks great from the outside...surely the inside can't be that bad in the grass and exterior look that nice. Like the corner lot for rental exposure. Check and make sure the utitilies have been split, especially that gas heat.My perministic side says why would anyone have to "short sale" something that pays itself off in 8 years. If it's the real deal, I would try to get cute on the offer and lose it.
Absolutely need to know about who Pays Utilities. That could beat you up with Owner paid Heat/Tenant in control of Thermostat.
I like it alot. You ought to get inside. As a Short sale, an Investor bought it for way too much, couldn't cover expenses, and it is going to be closer to market value now. OR, they didn't screen tenants, and the place is trashed, and NOT producing money. You need to poke around inside.
Have you driven around the property and looked at it now? That picture is obviously from late Summer of 2006. It's got to be 9 months old. Why wasn't a current picture used???
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Mike Anderson
Footballguy
I dropped the ball getting Cute on a $50K Duplex, making $950 a month, fully rented out with long term great tenents in place about 3 weeks ago.Why haven't you made an offer already...as in yesterday...biggest no-brainer in the history of earth.
BassNBrew
Footballguy
Mike caught it...but that should have said "wouldn't try to get cute" if the first post.I dropped the ball getting Cute on a $50K Duplex, making $950 a month, fully rented out with long term great tenents in place about 3 weeks ago.Why haven't you made an offer already...as in yesterday...biggest no-brainer in the history of earth.Man I wish I was in your market. That's a $150K home here in the worst case, more likely in the $200s. Looks great from the outside...surely the inside can't be that bad in the grass and exterior look that nice. Like the corner lot for rental exposure. Check and make sure the utitilies have been split, especially that gas heat.My perministic side says why would anyone have to "short sale" something that pays itself off in 8 years. If it's the real deal, I would try to get cute on the offer and lose it.
Mike Anderson
Footballguy
A few Places in the Fort as I look around tonight
$60K Triplex, Currently brings in $1155 a Month
$62K Duplex, $900 a month
$62K Duplex, $930 a month
$65k Duplex, $950 a month, two new furnaces
$65K Fourplex, $1400 a Month
$70K Fourplex, $1365 a Month
I LOVE this one! I have been in it Countless times. I wish I had jumped a few years ago when it was on the market for $23K
$72K Duplex, $1150 a month
$60K Triplex, Currently brings in $1155 a Month
$62K Duplex, $900 a month
$62K Duplex, $930 a month
$65k Duplex, $950 a month, two new furnaces
$65K Fourplex, $1400 a Month
$70K Fourplex, $1365 a Month
I LOVE this one! I have been in it Countless times. I wish I had jumped a few years ago when it was on the market for $23K
$72K Duplex, $1150 a month
Random
Footballguy
Thanks Mike. Do me one more favor (on top of the countless ones you've done helping me throughout the flipping process), let me know next time you go to CBus. I would really like to buy you a beer. You could stop through on the way. Anyway, question for you. As a LL, would you have considered this a good rental at $1100/mo. I had more than a few people interested in renting for that amount. Cant help but wonder if I should have held onto the place.Mike Anderson said:I couldn't be Happier for you! So much better than all the mess you have been thinking about.I have a contract.127,000. Only contingency is the sale of their house, which I guess is getting alot of showings. Maybe this will happen.Wish I had posted yesterday because everything you say above hit me over the weekend and I called her and told her it wasn't going to work. I used the excuse that its under contract with the realtor so I cant rent it out. I'm obviously a n00b at this.Also, Saturday I got an offer (a real one from my realtor). The offer was 128k less 6k for windows. We countered with 129900 and 2500 back at closing and we can install the windows the buyer purchases. Haven't heard anything back. The deal is contingent on the sale of their house. I hate that, but understand that it would be hard to buy without having their own house sold. I got the address of their house and asking price, and they seem to be overpriced by about 5-10 percent. So even if they do accept my counter I'm not getting too excited.
Dont know if I posted this yet but here's the flip
Eta: fourth one down on the left for more pics
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