could i get a house cheap by doing this

[Lao Tzu]

Plan:

I plan to move around alot in my life, so i will be renting. i want a home just in case i need it in my retirement years though.

What if i took out a mortgage on a house (in areas like the one i live in, a house usually goes for about $90k if it is moderately sized). I either do minor construction to convert it to a duplex or it already is one when i buy it. Then i rent out both sides (earning me roughly $800-$1k a month) which would be about enough to pay the mortgage payments on a 25 year loan at about 8% APR.

1. am i required under law to perform handyman acts, or can an agreement be obtained where teh landlord doesn't have to 'upkeep' the property, if he rents it lower than a landlord who does repair work.

The only problem i see with this so far is making sure someone wants to rent it. My brothers friend is doing this. He has a mortgage on a duplex townhouse and currently rents out 1/2 of it. when he moves to NYC he will rent out his half too & be making money on a townhouse that he will eventually own (the rent will be more than the mortgage).

What other flaws are there in this plan, and what should i do to overcome them?

 

[ZenMachine]

Allowing a tenant to do "handyman" work won't generally equate to making them responsible for replacing major things that go wrong. Water Heater, Furnace, etc.

Don't forget to include insurance, and property taxes into your equation.

Keep you eye of Vacancy rates.

When you move, you will need to have someone watch your place. Find new tenants when needed etc.

You will have a sizable mortgage loan in existance. It may make it more difficult to get another loan, while you are still paying on that one.

Just a few things off the top of my head. It certainly could work. And many people have made money doing almost what you are talking about.

Zen

 

[Doktor Bollix]

You can buy a house where you live for $90k? Holy shit.

 

[big4life]

1) Buying a house and remodeling it into a duplex is a lot more than minor construction. If you want to go this route just buy a duplex from the start.

2) You can always hire a management company to over see your property. They will collect your rent, show the apartment, etc.. They can save you a lot of headaches in dealing with renters.

 

[MattTheSkywalker]

Creating a duplex is not just banging some hammers. Most municipalities require certain permits for a home to a duplex or "two-family". Obtaining a permit requires that servaldifferent things be done- it varies from locality to locality.

Better off buying a duplex or just a regualr home.

Your plan makes sense. But, being an absentee landlord is tough, as tenants can be difficult or worse.

There are property management companies that handle typicla "landlord" duties, generally for a percentage of the rent revenue. Ask your local real estate agent, they will know some.

 

[Code]

Knowing your job history, you'd probably have to get an FHA loan. Which doesn't allow you to rent out the property.


I rent out one of my houses and am not local to it. It sucks. I have to travel there 4-5 times a year to do yard maintenance.

I'm always calling friends and family to go look in on the place.

And if one of the tenants moves out I have to get it rented from two states away.

 

[Lao Tzu]

You can buy a house where you live for $90k? Holy shit.

Yes. Looking over the real estate guide, some duplexes go for $50-70k, which would give me a mortgage payment of roughly $400-500 a month. I don't know what condition the houses are in though. Property tax would only go to about $600 a year, assuming a median 1% annual rate.

Anyway, i live in a small town. The nearest medium sized towns (50k people) are 20 miles away. The nearest large towns (100k+ people) are 80 miles away. So real estate is cheap.

Im new to this issue, so i don't know what a FHA is. I don't plan to do this anytime soon, it is just an idea for now. My goal is to either live in the house when i am old & retired, or to sell it to buy (or at least get the down payment) on another house.

If i did it around here, i could pester my family to take care of it. my brother, his wife, my family & her family will probably live here for the next 30 years.

 

[Code]

Yes. Looking over the real estate guide, some duplexes go for $50-70k, which would give me a mortgage payment of roughly $400-500 a month. I don't know what condition the houses are in though.

Anyway, i live in a small town. The nearest medium sized towns (50k people) are 20 miles away. The nearest large towns (100k+ people) are 80 miles away. So real estate is cheap.

Im new to this issue, so i don't know what a FHA is. I don't plan to do this anytime soon, it is just an idea for now. My goal is to either live in the house when i am old & retired, or to sell it to buy (or at least get the down payment) on another house.

If i did it around here, i could pester my family to take care of it. my brother, his wife, my family & her family will probably live here for the next 30 years.

Owning a rental property, especially if you don't live local to it is hard.

You wind up relying on friends/family ALOT or wind up hiring a property manager.

 

[Testosterone boy]

It can help keep renters if you charge less than the going rate. I have rented out my house to the same family for 12 years now. Looks better than when they moved in to. My life is loaded with extraordinary good luck and mind boggling bad luck.

 

[Pink Space Biscuit]

My mom owned our apartment building my entire childhood, what a pain in the ass.

Luckily my uncles are electricians, do refridgeration & a/c and they would plow the driveways and mow the lawns. We'd paint and repair it everytime people moved out, no one really stays in rental properties for long periods of time, but they sure make a mess. One person left a couch with a half eaten hot dog on it. I can't imagine doing all that from out of state.

 

[vinylgroover]

There is no point buying a duplex already. If you want to make money out of this venture, buy a property which lends itself to being converted to a duplex as you said, get the necessary permits from the local municipality and do it. You will need to ascertain whether there is a viable market for duplex's in your area when it comes to seeling the property down the track in order to make a capital gain on it. Check this out with the local real estate agents.

Do you have capital gains tax over there. If yes, you are better off living in one of the duplex's when finished so that you can claim it as your principle place of residence so that you don't pay capital gains tax down the track, and negatively gear the other half of the duplex. That's if you can afford the repayments.

If you pay for the cost of maintenance work yourself you will be able to claim those costs against your tax if you are negatively gearing the property.

 

[Lao Tzu]

Owning a rental property, especially if you don't live local to it is hard.

You wind up relying on friends/family ALOT or wind up hiring a property manager.

property management would probably be the way to go for me. However, i'm sure family would be willing to do minor repairs & minor yardwork if i asked them to. I can't find stats on what the median rent % that is charged for property management services though.

However, can't a rental agreement be reached (or do state laws vary) where the renter assumes responsibility for upkeep, additions & repairs?

 

[vinylgroover]

property management would probably be the way to go for me. However, i'm sure family would be willing to do minor repairs & minor yardwork if i asked them to. I can't find stats on what the median rent % that is charged for property management services though.

However, can't a rental agreement be reached (or do state laws vary) where the renter assumes responsibility for upkeep, additions & repairs?

I'm not familiar with US laws, but a contract is a contract and can be varied accordingly. At the end of the day Nordstrom, it is YOUR investment, and leaving the repairs up to the tenant especially as far as major works is concerned is asking for trouble. You want to be sure that any repairs that are carried out are done so professionally or your own investment will suffer, therefore, it is always imprtant to be responsible for it yourself. Generally, the tenant doesn't give two fucks about your investment.

As far as management rates are concerned, shop around, but usually you can expect to pay anywhere from 5-8% of the gross annual rent.

 

[Lao Tzu]

1. There is no point buying a duplex already. If you want to make money out of this venture, buy a property which lends itself to being converted to a duplex as you said, get the necessary permits from the local municipality and do it. You will need to ascertain whether there is a viable market for duplex's in your area when it comes to seeling the property down the track in order to make a capital gain on it. Check this out with the local real estate agents.

2. Do you have capital gains tax over there. If yes, you are better off living in one of the duplex's when finished so that you can claim it as your principle place of residence so that you don't pay capital gains tax down the track, and negatively gear the other half of the duplex. That's if you can afford the repayments.

3. If you pay for the cost of maintenance work yourself you will be able to claim those costs against your tax if you are negatively gearing the property.

1. Duplexes go for about $40-50k. Actually, there are alot to choose from. 2 unit homes, 3 unit, 4, 6, 11. A 4 unit goes for about $80k.

2. Yes, it is 28%. I don't know if the cap. gains tax is adjusted for inflation (i assume not). That would probably add up to about $30k for a house that is about $60k right now. What is the name of the tax that i would pay for the annual rent? i am new to this stuff, but i enjoy it.

3. wtf are you talking about. I should read up more.

Anyway, this is a long term plan i wouldn't be able to enact until 6 or 7 years from now. I won't be doing it tomorrow. I don't know how R.E. agents would know the selling value of a home in 2045.

 

[saint808]

one of the properties i own is a townhouse and is not local to me... i had my lawyer draw up a lease that basically stated anything under $500 they had to fix and anything over $500 I would have to fix or pay to have fixed whichever is more convenient for me. I am charging rent that is actually cheaper than the standard for those townhouses... and quite significantly cheaper too and they moved in and painted for me and installed ceiling fans and basically made the place even nicer than it was. Granted I don't have a mortgage on that property right now but if i did I could easily pay off the loan in 18 years. If you buy a duplex and rent it out you could always sell it when you wanted to retire and use the money to buy a house for yourself... i think it's a good idea too.

 

[Lao Tzu]

one of the properties i own is a townhouse and is not local to me... i had my lawyer draw up a lease that basically stated anything under $500 they had to fix and anything over $500 I would have to fix or pay to have fixed whichever is more convenient for me. I am charging rent that is actually cheaper than the standard for those townhouses... and quite significantly cheaper too and they moved in and painted for me and installed ceiling fans and basically made the place even nicer than it was. Granted I don't have a mortgage on that property right now but if i did I could easily pay off the loan in 18 years. If you buy a duplex and rent it out you could always sell it when you wanted to retire and use the money to buy a house for yourself... i think it's a good idea too.

thanks man. I like hearing personal stories about property management (like codes, yours or test boys). I'd like to find a 3 unit, rent it below the median going rate, and hope that i make enough to offset my expenses (taxes, mortgage, repairs, property management fees).

Are you required to pay taxes on the rent (i'm sure you are, i just don't know what the taxes are called or what their % is).

 

[saint808]

Are you required to pay taxes on the rent (i'm sure you are, i just don't know what the taxes are called or what their % is).

depends on overall income... it is basically just lumped in with your income for the most part, i have a tax attorney that does mine, but as far as i understand it is just basic income. You will get tax breaks if you have a mortgage and can get house insurance included in your monthly payment as well.

 

[Lao Tzu]

I thought you were poor.

 

[saint808]

I thought you were poor.

i am if you are a woman... heheh. I am by no means wealthy but you can look at me and tell i am not starving.