Just purchased my 3rd House!

[timbrh2001]

RFL: rent for life

I'll probably end up renting for the rest of my life, I'm just not too sure how stoked I am on the idea of not really owning the house until I'm too old to really give a shit. That, and if my toilet breaks, I don't have to pay a damn thing to have it fixed.

Or you could pay $1000 a month for your landlord to fix your (sorry, I mean "their") $100 toilet.

Home equity and tax write-offs ensure that youre not necessarily losing out on having to pay for a toilet to get fixed.

[timbrh2001]

I realize this wasn't directed at me but it's a little broad. You asking about a downpayment, furnishings, a financial safety net, or everything?

 

What size house do you see yourself buying? Furnish everything at once or buy bare essentials and build up incrementally? You going to buy new or craigslist?

 

Or are you asking about rental properties?

First home is always gonna cost a little more to get started. Once you have the things required to fill up a home, youre able to build/replace incrementally.

[thebiglebowski]

Or you could pay $1000 a month for your landlord to fix your (sorry, I mean "their") $100 toilet.

Home equity and tax write-offs ensure that youre not necessarily losing out on having to pay for a toilet to get fixed.

 

Hard to say exactly because things like home appreciation can only be estimated but general rule of thumb -- buy if you are going to stay in one place for 5+ years, rent otherwise..

 

At least, that's what makes sense financially.

[timbrh2001]

Hard to say exactly because things like home appreciation can only be estimated but general rule of thumb -- buy if you are going to stay in one place for 5+ years, rent otherwise..

At least, that's what makes sense financially.

Well yes, Id never buy any property unless I knew it was for a longterm investment. Im also completely against owning Condos but thats just for personal reasons like that I dont like living under association rules and having to pay monthly assessments, though if you value convenience I can understand your reasoning.

[Dashhax]

3.5% to 5% of 305k on an FHA loan. Dont remember what I put down exactly but that's what you would need. Im sure I was somewhere close to that range.

FYI, my name isnt really important here but its not Tim. Confusing handle, I know.

 

 

I figured the handle was timber and thought it was a nickname for tim. I want to get into duplexes 2-3 family houses. Most of them in Rhode Island sell anywhere from $80,00-$180,000. I'd be putting the least amount down and it wouldn't be owner occupy Id like to be taking as much in as possible, ideally having the first tenant pay the mortgage and all the rest of the money saving away for either extra principal down payments or any needed repairs. Then slowly building from that first duplex into more units.

[mattalica17]

One more house to go and then I'll start to be able to look at really getting my high-end audio setup going!

no dummy one more house then you can put a hotel on Chicago 

[hipsterasfolk]

I got some Florida condos if you wanna buy one I wanted to move there after graduation but the job I have set up from this internship is too good to pass up :/

[thebiglebowski]

How do the taxes work on a 3 unit home if you live there. Can you claim the whole thing as your principle excemption, part of it, or none?

[timbrh2001]

How do the taxes work on a 3 unit home if you live there. Can you claim the whole thing as your principle excemption, part of it, or none?

That would be a question for my wife, haha. Honestly I dont know but my taxes are around $5000 each which isnt too bad. One of them is currently owner occupied as Im living in one of the units until my home is ready to move in, in June. All my monthly mortgage to rent ratios are based on a mortgage with taxes added in. Each income property brings me between $1750-2000 profit each month when its all said and done. I only pay for water as far as utilities are concerned for the entire building.

[timbrh2001]

no dummy one more house then you can put a hotel on Chicago

Im currently building a hotel in downtown Chicago and see how much money it costs the developers, no thanks.

[timbrh2001]

I figured the handle was timber and thought it was a nickname for tim. I want to get into duplexes 2-3 family houses. Most of them in Rhode Island sell anywhere from $80,00-$180,000. I'd be putting the least amount down and it wouldn't be owner occupy Id like to be taking as much in as possible, ideally having the first tenant pay the mortgage and all the rest of the money saving away for either extra principal down payments or any needed repairs. Then slowly building from that first duplex into more units.

Duplexes are a nice option, especially if youre living in one of the units and like having extra space. The unit you rent out should cover most if not all of your mortgage. You probably wont profit off the building (if youre living in one of the units) but you can save up the money you would be paying to live somewhere, each month, then once youve got enough for a down payment, buy the next duplex.

The FHA is nice because its only no more than 5% down, but when you start looking at additional purchases, a conventional loan down payment will be around 25% required.

I always have 10k built up sitting in repair reserves just in case, so you might want to make sure you have something to fall back on in case of an emergency.

Its really easy to save up money though when you dont have a monthly mortgage/rent payment to deal with.

[Dashhax]

Duplexes are a nice option, especially if youre living in one of the units and like having extra space. The unit you rent out should cover most if not all of your mortgage. You probably wont profit off the building (if youre living in one of the units) but you can save up the money you would be paying to live somewhere, each month, then once youve got enough for a down payment, buy the next duplex.

The FHA is nice because its only no more than 5% down, but when you start looking at additional purchases, a conventional loan down payment will be around 25% required.

I always have 10k built up sitting in repair reserves just in case, so you might want to make sure you have something to fall back on in case of an emergency.

Its really easy to save up money though when you dont have a monthly mortgage/rent payment to deal with.

Thanks for the advice. I usually save about $75 every week. My goal when the time comes to buy is to have around $7,000 for my down payment of the house and another $3,000 for any needed repairs and to cover closing cost.

[thebiglebowski]

Thanks for the advice. I usually save about $75 every week. My goal when the time comes to buy is to have around $7,000 for my down payment of the house and another $3,000 for any needed repairs and to cover closing cost.

 

Unless you can roll the closing costs into your mortgage $3k likely isn't going to cover it on a $100k house.

[timbrh2001]

Unless you can roll the closing costs into your mortgage $3k likely isn't going to cover it on a $100k house.

Oops, nevermind. Misread.

[timbrh2001]

Thanks for the advice. I usually save about $75 every week. My goal when the time comes to buy is to have around $7,000 for my down payment of the house and another $3,000 for any needed repairs and to cover closing cost.

Now you also need to look at the condition of the house as well as rental comps in the neighborhood. If the house listing shows the monthly rental income (ie the units are currently occupied with tenants) thats a bonus. Also realize that you may need to dump a couple thousand into the house right away depending on any issues your new tenants are having. Some house flippers will ignore their tenants requests and simply use them to collect quick cash knowing they are only temporary landlords. I always give the tenants what they want, within reason of course, because if you make them happy, theyre more likely to re-up their lease.

All that said, the single most important thing you can do as a home buyer is to have a HOME INSPECTION!!! Its usually around $500 but the potential savings and negotiation benefits of knowing whats wrong with the house, drastically out weigh the cost of having one done. You can always negotiate repairs into to final purchase price of the home, but you need to know what needs fixing.

I will never ever ever ever ever ever buy a house without a home inspection.

[Dashhax]

Now you also need to look at the condition of the house as well as rental comps in the neighborhood. If the house listing shows the monthly rental income (ie the units are currently occupied with tenants) thats a bonus. Also realize that you may need to dump a couple thousand into the house right away depending on any issues your new tenants are having. Some house flippers will ignore their tenants requests and simply use them to collect quick cash knowing they are only temporary landlords. I always give the tenants what they want, within reason of course, because if you make them happy, theyre more likely to re-up their lease.

All that said, the single most important thing you can do as a home buyer is to have a HOME INSPECTION!!! Its usually around $500 but the potential savings and negotiation benefits of knowing whats wrong with the house, drastically out weigh the cost of having one done. You can always negotiate repairs into to final purchase price of the home, but you need to know what needs fixing.

I will never ever ever ever ever ever buy a house without a home inspection.

Ideally I would love to buy a piece of property that is already tenant occupied. Saves me from having to pay the mortgage out of pocket. I'd be sure to tell them that I have no intention on kicking them out. A lot of times when a home sells the tenants already there have a tendency to get worried they will be kicked out.

[timbrh2001]

Ideally I would love to buy a piece of property that is already tenant occupied. Saves me from having to pay the mortgage out of pocket. I'd be sure to tell them that I have no intention on kicking them out. A lot of times when a home sells the tenants already there have a tendency to get worried they will be kicked out.

 

You cant legally kick them out until their lease expires.

[Dashhax]

You cant legally kick them out until their lease expires.

 

I would hope I would never have to kick anyone out, but having stable income coming in from two family's monthly would be great. As long as they take good care of their unit. I've been seeing some nice houses for around $115,000 in ready to move in condition, two car garage deck big back yard. Most of those are being rented out at $800-950 a month generating around $21,000 a year in revenue. With the mortgage at 4% the going rate per month with taxes and insurance is around $900.

[afireinside7444]

afi, Looks like a damn fine place. Strikes me as so different from mine. I have a similar quality house, but it was built on a WAY smaller lot. I forget the measurements. But my front yard, back yard, and house sit on less land than just your front.

 

Kinda like being able to cut the grass in 20 minutes. Consider it a plus.

 

Ya the land is amazing. Its 1 hour on my rider zero turn mower and 1.5 hrs when weed whipping every tree/edging the driveway

[thebiglebowski]

Rental properties are great investments. Don't think they are not. But 2 things:

 

1) If you are not willing to put up with shitty tenants, I don't think it is for you. Yes, everyone hopes they can get the nice, quiet family or the little old lady who doesn't mess anything up. The reality is that in general, some people are not going to treat your property like their own. If you do it long enough, they are going to damage something. They are going to fall behind in rent. You are going to have to go after them in court. Some people get lucky and barely have any trouble. Some people have nightmares. I think you need to prepare yourself for having a shitty tenant and be thankful if you don't, rather than the other way around. The hassle is part of the reason you can make good money doing it. If it was as simple as finding a house, signing a piece of paper and someone else pays all your bills, everyone would do it.

 

2) Don't underestimate all the costs. The ones that come to mind offhand are upkeep, property taxes, insurance, mortgage interest, sales tax + agent's commission (you will eventually sell it), closing costs, income taxes (government going to take 30% of that rent money likely) and in general, risk (we all think property values will go up over time but no one saw '08 coming. It's not guaranteed to go up). There's probably more if you are to look deeper. The costs don't outweigh the income (as long as you own long enough to overcome the real estate related costs to buying and selling) but when you factor in the whole picture it's not AS pretty as it otherwise would be.

[Dashhax]

Rental properties are great investments. Don't think they are not. But 2 things:

 

1) If you are not willing to put up with shitty tenants, I don't think it is for you. Yes, everyone hopes they can get the nice, quiet family or the little old lady who doesn't mess anything up. The reality is that in general, some people are not going to treat your property like their own. If you do it long enough, they are going to damage something. They are going to fall behind in rent. You are going to have to go after them in court. Some people get lucky and barely have any trouble. Some people have nightmares. I think you need to prepare yourself for having a shitty tenant and be thankful if you don't, rather than the other way around. The hassle is part of the reason you can make good money doing it. If it was as simple as finding a house, signing a piece of paper and someone else pays all your bills, everyone would do it.

 

2) Don't underestimate all the costs. The ones that come to mind offhand are upkeep, property taxes, insurance, mortgage interest, sales tax + agent's commission (you will eventually sell it), closing costs, income taxes (government going to take 30% of that rent money likely) and in general, risk (we all think property values will go up over time but no one saw '08 coming. It's not guaranteed to go up). There's probably more if you are to look deeper. The costs don't outweigh the income (as long as you own long enough to overcome the real estate related costs to buying and selling) but when you factor in the whole picture it's not AS pretty as it otherwise would be.

 

 

Nice advice man thanks. Do you own any rental properties? 

[thebiglebowski]

Nice advice man thanks. Do you own any rental properties? 

 

My dad has a few. I'd say he is 2/3 as far getting "good" tenants in there. One of them is a section 8 (government assistance), and that is his best tenant. All this lady has to do is to keep the house nice and the government deposits the money in my dad's checking every month.

 

I have one that I am just in the process of putting up for sale. I lived there and my buddy rented a room. When I moved up to a nicer house, he took over the whole house from me. But he just bought his own place. I could have (and seriously considered) putting ads in the paper / online and trying to get a new tenant. The house is paid off so the $700 I was getting in rent was just profit (after expenses above, like taxes and insurance). I wouldn't have sold if he would have stayed there but I didn't feel like dealing with renting to strangers.

 

My viewpoint is this -- I would probably make more money renting the house, but I'm not a landlord. I'm an engineer and I make decent enough money already. It's just not my thing and I don't need the extra work. I am just going to sell it and put the money into stocks. I am also seriously considering buying a vacation home at least a few hours North of Detroit, but not someplace I would have to drive 6 hours to get to (like in the UP). Probably going to look up in the thumb. Still need to have a serious talk with my family about it, though. I'm a single dude and I would need their help keeping it up.

[mattalica17]

Im currently building a hotel in downtown Chicago and see how much money it costs the developers, no thanks.

it might cost a lot but as soon as someone lands on it you get big money

[Dashhax]

My dad has a few. I'd say he is 2/3 as far getting "good" tenants in there. One of them is a section 8 (government assistance), and that is his best tenant. All this lady has to do is to keep the house nice and the government deposits the money in my dad's checking every month.

 

I have one that I am just in the process of putting up for sale. I lived there and my buddy rented a room. When I moved up to a nicer house, he took over the whole house from me. But he just bought his own place. I could have (and seriously considered) putting ads in the paper / online and trying to get a new tenant. The house is paid off so the $700 I was getting in rent was just profit (after expenses above, like taxes and insurance). I wouldn't have sold if he would have stayed there but I didn't feel like dealing with renting to strangers.

 

My viewpoint is this -- I would probably make more money renting the house, but I'm not a landlord. I'm an engineer and I make decent enough money already. It's just not my thing and I don't need the extra work. I am just going to sell it and put the money into stocks. I am also seriously considering buying a vacation home at least a few hours North of Detroit, but not someplace I would have to drive 6 hours to get to (like in the UP). Probably going to look up in the thumb. Still need to have a serious talk with my family about it, though. I'm a single dude and I would need their help keeping it up.

 

 

That's awesome man. My parents were into real estate for about 20 years and they loved having government assisted tenants because there was always a check there the first of the month. The only problem was they would bring bugs into the apartments and just treat it like shit. Did you do a 15 year mortgage, or did you do 30 years so your payment would be lower and you could just pay it off the principal?

[thebiglebowski]

That's awesome man. My parents were into real estate for about 20 years and they loved having government assisted tenants because there was always a check there the first of the month. The only problem was they would bring bugs into the apartments and just treat it like shit. Did you do a 15 year mortgage, or did you do 30 years so your payment would be lower and you could just pay it off the principal?

 

I paid cash for my first home in '09. Something like 1300 square feet, 3 bed, 1 bath, no garage, just a shed. Lower-middle class neighborhood. Definitely not an "unsafe" area or anything. It wasn't anything amazing but hey, I was 23 and it was a starter home. It was surprisingly nice for $27,500. Just the benefit of living in MI. 

 

I have a badass uncle who lent me $10k no interest to get it done. I essentially had just enough to buy the house and close but he gave me the safety net and the money to furnish it. Paid him back within the year and gave him a nice gift on top of it.

 

MI market has rebounded a little better than average (auto bailout was huge for our area). After closing costs I think I paid a little over $29k. I realistically expect to get $40k for it now. After commission and sales tax, hope to pull $37k. I probably put $2k into it (new furnace, AC, windows). Forgetting the rent that I got for it (just saying...assume I had lived there the whole time), I would have paid about $5k in property taxes.

That's just why I make that point about thinking long term. My housing value went up about 1/3 in the last few years and I am still going to about break even on the whole thing (I did get to live there those years, though). Obviously I am doing what I advised not to do (selling relatively quickly...within a few years of buying) but some people would just look at selling price - buying price and think I made out with $10k. Shit adds up.