| Author | Message | ||
| Adam R (Arymarcz)
New member Username: Arymarcz Post Number: 25 Registered: 8-2002 |
So, I figured I'd buy a new house and rent out the current one. I found a new one I really, really liked, put a bid in on it (using a realestate agent) and then the sh!t hit the fan. The sellers and I were going back and forth, trying to settle on a price, and they finally came back with "final low price and we're not moving". The agent asked what was the absolute top amount I would pay for the house. I told her _maybe_ _possibly_ $x (still under the sellers' lowest offer) but kill the contract 'cause there's no way in hell I'm meeting their offer. So, she calls the sellers the next day to cancel the deal AND TELLS them $x. In a 'mysterious' turn of events, the sellers decide to meet my 'maybe' offer. Meanwhile, back in reality... the agent calls me and gives me the 'great' news about offer $x. I proceed to inform her that the number was 'a maybe' and I never ever told her to go back to the sellers with it - in every other case she would say "I'm going to give them this number okay?". I was sooooo pissed. I told her I was still no longer interested. I'm not really sure if she f'd this up by assuming my 'theoretical information' was in fact, real, OR I did by not making my intentions clear. Maybe a little of both; I probably should've been more careful. What do you think? Anybody got any ideas? | ||
| Jim Schad (Jim_schad)
Member Username: Jim_schad Post Number: 474 Registered: 7-2002 |
My best friend has 2 duplexes and 2 houses he rents out. Bought them all for a song about 3 or 4 years ago. He was making $12/hr at the time and used his credit card to get in to them. by doing the houses he got in to being a mortgage broker. Last year he made $178K doing mortgages, still has the rental props and just added a second story to his current home bringing its value up to near $500K. So my point is that if he can go from $12/hr to where he is now then there is no reason you couldn't do the same. | ||
| Adam R (Arymarcz)
New member Username: Arymarcz Post Number: 14 Registered: 8-2002 |
Chris, Yes, I was thinking about the better zip code method. But as you've pointed out it would take longer to build the residual income. I like Ernie's idea about buying one (or two), pay it off, get another, using the money from those two to pay off the second, etc... I'll probably just stay in my little 'cottage' and bear it out for a few more years while this thing gets going. Besides, I'm way too lazy to pack up and move (unless its going to be to the much nicer zip code  ). If I felt more comfortable about other investments, I'd probably follow Ernesto's advice and use the cash for other things (rather than paying off the homes), but I'm not to that point. | ||
| Chris Tanner (Ctanner)
New member Username: Ctanner Post Number: 43 Registered: 5-2001 |
Adam, If you want to be a landlord, mortgage the first house to 80% loan to value. Then rent it. With the 80% cash you receive, buy 4 houses, one at a time, at 20% down. Buy it, rent it, buy, etc. Sure you'll be leveraged, but with the risk could come big payoff. However, if it was my money, I would sell the house and invest it into a more expensive house with a mortgage in a better zip code. Once I reached the final more desirable zip code, then I would take the landlord approach. This approach is slower in building equity than the first approach, but it is less risky. | ||
| Ernie Bonilla (Ernie)
Member Username: Ernie Post Number: 430 Registered: 11-2001 |
Ata boy Adam. Don't feal guilty, you will be providing them with a place to live. But what ever you do, DO NOT SELL or REFINANCE your house that is yours free and clear. While you are looking for the new house start looking for tenants for the current one. Have the house rented out first before you get the next one. This way you already have the revinue coming in and have the upper hand. Just make sure you do a background check on the tenants first, this way you don't get caught with your pants down. Well go get'em, and keep us posted. | ||
| Adam R (Arymarcz)
New member Username: Arymarcz Post Number: 13 Registered: 8-2002 |
Okay, you guys convinced me; I just called my realtor and we're going to start looking at investment properties. Gosh I'm gonna feel awful having all those folks paying for my F car | ||
| Red (Redhead)
Junior Member Username: Redhead Post Number: 77 Registered: 12-2001 |
My 2 cts....Follow Ernies advice. I am 25 and live in the Silicon Valley. Between 2 friends, that got lucky on their first houses, they now own 10 in the Valley alone between them, and they are both under 27. Considering one works in the shoe industry(Al Bundy) and the other is in construction. These guys did not come from money at all, and yet, they don't need to work to support their houses. They are paying for each other just on rent, as well as the profit from the rent. So, as one friends moves away to Sacramento into the custom built house with a 7 car garage, I would defitnely rent out a house that I own outright in the future. Just my 2 cts. | ||
| Ernesto (T88power)
Member Username: T88power Post Number: 897 Registered: 2-2001 |
Adam, personally, I would have them both mortgaged and use the cheap cash for other investments. But, since having the house paid off seems very important to you, I would finance your current home and take the proceeds of the mortgage and buy your next house cash. The new mortgage should be calculated so that the tenants of your current home pay enough rent to cover the loan payments, insurance, and taxes. So, yes, the tenants of your current home would be making the payments of your new house. Of course it is important to remember to have enough cash reserves (6 months to a year) of payments, or generate enough income, to cover the mortgage payments in case you cannot rent it right away. Ernesto | ||
| Adam R (Arymarcz)
New member Username: Arymarcz Post Number: 12 Registered: 8-2002 |
Doug >why not get a mortgage? I think the other F chatters are saying that having mortgage on your home is not conducive towards the generation of residual income; the extra bucks could be used towards the purchase/payoff of rental properties. ... Just my $.02. Ernesto, Are you saying that one should purchase their next home with cash while renting out their former home whilst the current tenants pay for the mortgage? | ||
| Doug Meredith (Doug308)
Junior Member Username: Doug308 Post Number: 216 Registered: 2-2001 |
If you currently have taxed income, why not get a mortgage. I just locked in for 4.85% on a 5/1 ARM refinance. Writing off against my income taxes, I'm paying about 3%. In 3 years since building the house, I have refinanced 4 times and lowered my rate from 7.5 to the soon to be 4.85% with $0 closing costs. If your loan is large enough, there are plenty of brokers that will do it for no closing cost. They will make up the closing costs from the % that they get for brokering the loan. | ||
| Ernesto (T88power)
Member Username: T88power Post Number: 887 Registered: 2-2001 |
Mortgage your current home to the breakeven rental point (ie so that rent covers mortgage, insurance and property taxes), then buy your next house cash. Ernesto | ||
| Edward Gault (Irfgt)
Intermediate Member Username: Irfgt Post Number: 2273 Registered: 2-2001 |
If you get a Homestead exemption on your taxes you may need to figure this into the matter since you will probably not be able to claim it on your new house. | ||
| Tyler (Bahiaau)
Member Username: Bahiaau Post Number: 393 Registered: 12-2001 |
I agree with Ernie on this one. Rent it. Let someone else pay off your new house. Do this as many times as you can and aquire as many rental properties as you can. Before you know it, you'll be driving a F-car and living in a great home that other people pay for. | ||
| Adam R (Arymarcz)
New member Username: Arymarcz Post Number: 11 Registered: 8-2002 |
Thanks for the info guys! Ernie: Yes, I have thought about the rental path. There are several homes in my area for sale; maybe I could stand to stay in mine a little longer while renting those out. Actually, my reasons for not renting are that I just do not feel like dealing with the hassle, or even having someone else take care of it for a chunk of the change. Although, perhaps as you've pointed out, I may be passing up something really good. | ||
| Ernie Bonilla (Ernie)
Member Username: Ernie Post Number: 429 Registered: 11-2001 |
Adam First off congradulations on paying off your home, fantastic man, absolutly outstanding. You have done what I am planning on doing in the near future. Ok so now, the house you have keep it and DO NOT sell it, DO NOT take out a new loan. I'm sure you know this already but, you have given yourself the biggest financial advantage by owning your home out right. You will never be without a roof over your head. Seems though, you really don't like this home to well. We RENT it out my friend. Use the house to make back the money you spent. Get another house, a bit bigger than the current one, and use the rent from the current one to pay the mortgage on the next one. Then you can pay then next one off even faster than the first. Then do it over again, take both rents combined and pay off the next home twice as fast as the last. Then repeat. Before you know it you are in your very own custom home with a Ferrari in the garage, I saw on your profile that you didn't have you yet, payed cash in full by the rent you are still collecting from your homes. That is just my two cents. | ||
| TomD (Tifosi)
Intermediate Member Username: Tifosi Post Number: 1811 Registered: 9-2001 |
it all comes down to leverage - which is very attractive with low rates and further attractive if you are in a position to deduct the interest on your taxes. Each person has to make his or her own decision | ||
| Fred (I Luv 4REs) (Iluv4res)
Junior Member Username: Iluv4res Post Number: 219 Registered: 8-2002 |
For what it's worth: Paying off your house is a good emotional move. However, with rates at a 40 year low, if you can invest your money at higher rates, it makes sense to not have it paid off. There have been many posts here about paying off an F-car vs. borrowing. Same concept. As far as the appreciation game goes, there's no crystal ball. If you plan on staying in the new home 10 years, you will be able to ride out the fluctuations in the RE market. If this is a quick time horizon deal, I wouldn't do it. Right now, property seems priced high. Remember, a 10% move is a 10% move, up or down. For example, if property goes up 10% and you're in a 900k house, you get 90k increase. If you're only in a 200k house, you only get 20k. However, if values go down by 10% you loose 90k vs only 20k. | ||
| Adam R (Arymarcz)
New member Username: Arymarcz Post Number: 10 Registered: 8-2002 |
Hi F chatters, I was hoping some of you could shed some light on this issue for me... There are probably some other threads which touch on this already (maybe not); if there are, please point them to me and I'll quit my blabbing A few years ago I bought my house with the intent of paying it off. Now it's paid off and for many different reasons I want to move into another. The problem I'm having is that I don't know if it's a wise idea to purchase another house with the intent of 1) Paying it off (purchase price way under my $ comfort level), or 2) Playing the appreciation game (hoping it will increase in value while a majority of my mortgage goes to taxes+interest). How do you guys/gals dealt with this scenario when you've purchased your homes? Thanks for you help! -Adam |