You can always come of with good reasons to do a bad deal. Don’t let your emotions get you tangled up in a big mess. My philosophy is never loan money to friends or family, they won’t be friends when you want the money back and you will be the black sheep of the family because you asked your sister for the money she borrowed. If you can’t do the deal on your own then find a place you can afford. You will be much happier. Be smart, or you’ll be on here one day asking how you can gt out of this hellish situation. And all you may here then is I told you so.
Hi, im in a particular situation and i hope someone can give me some good advice on what my next move should be. I am 22 years old and i have a steady full time job that i have had for around 2 years. Three of my highschool friends (that i have known since the first grade) are in a very similiar situation, and we have all decided to rent a 4 bedroom house (not very worried about this situation, as they are all good friends and one of them is my current room mate). What i am worried about is our options. Should we just rent a house like every other American that does not own his own home or should we look for creative ways to use that rent money to make more money? I would love to apply my knowledge of real estate to make money or at least reduce rent liability. What should i focus my attention on? Is the right move to find a house and lease it with the option to buy hoping that it will appreciate in value in the time that we are living in it, so when we move we sell it and keep the profits and in essence get to have lived there for free? or should we buy a home and make house payments instead of rent payments? Or should we look into purchsing a re-hab, living in it while we re-hab it and do mose of the repair ourselves and then either holding it for positive cash flow or selling it for profit? I know we have a few options available so it just kills me to think that we should just pay rent like everyone else. However, i am young and do not have a lot of experience and we only have 3 months before we need a place to live so whatever deal i can conjure up i need to start working on it ASAP. Can anyone please point me in the right direction as to the best option to consider? Thanks in advance for everyone’s help. Regards, John T.
Thanks for everyone’s responses. I understand that 4 roomates has the potential for trouble, however as i mentioned in my first post one of the four is my current roomate. This is the person that has been my roomate since i moved out for the first time right after highschool. Another, different person out of the four has been a roomate before, we had a three bedroom apartment for a year and everything worked out fine. At the end of that lease he chose to move back home and then we got a 2 bedroom. The last person out of the four is probablly the best roomate out of all, he works the night shift so he would never even be seen, this has been my friend for over ten years, although he has never been my roomate before i do trust him, he works at a factory that his father runs so his job is secure and he makes more money then anyone else. The reason for the four roomates is the cash flow that we can generate. By myself i dont have either cash or credit, but together we can come up with several thousand a month to fund whatever deal we decide on, also if we mess up and lose money somehow, the hit would be divided by four instead of one person getting burned by himself. 2 of my freinds, the ones that have been my roomates before, where there from the beggining. Before we even knew anything about real estate, we learned the possibilities and have been on a quest to cash in on them ever since. But we never really had the money to do anything until now, If we buy a property we can actually afford to hold if we are unable to flip it, and we also have the option to rehab the place and sell it retail, because for the first time we all have jobs and we could afford the monthly payments until it got sold. How did everyone else get started? At 22 years of age it seems like i dont have a lot of options.
Have you ever actually lived with these guys before? All together? Being friends and living together are two different things. I’d stay with the rental plan. That gives you the option to move out of a situation you may not like after a while, with only minor financial repercussions.
It’d be better if you began your investment career by buying a small place on your own and rent it out to a non-friend tenant that you could kick out for non-pmt if you had to. Or make it a project that your friends can come over to help you with. Pay them with beer and pizza parties for helping out and reciprocate in turn if they invest too. 4 guys living in a house and also trying to remodel it at the same time has the makings of disaster.
I seriously doubt that the rental situation will last for more than a year - such situations are usually quite volatile and fleeting. Enjoy your youth and time in the sun living with good friends and make some good memories instead of potential problems.
Obviously on a real estate forum like this you are dealing with people who ‘buy’ real estate. Hence the advice you will get will point you in that direction - which I agree with. I suggest you buy a place and rent to your 3 buddies - or partner up with one of them and rent to the other two. I would NOT do a lease option here because there are too many people involved and it can get messy if one or more decide they don’t want to exercise the option, or another decides he doesn’t want to sell his piece of it when the time comes. I also would NOT buy with all 4 people cause what do you do when one of them doesn’t pay his portion of the mortgage? Simple answer - the rest of you have to cough up his share.
Also, if I may say so - you’re being 22 and relying on your ‘great friendship’ with these other three is naive thinking. I had a buddy who’s girlfriend rented a place with 4 other women. They were all great friends and everyone trusted one another. Then one got pregnant, another lost her job through downsizing, and suddenly there was a real problem. Although they trusted each other, a roomate with no job is a roomate who can’t pay her share of the rent. Likewise the pregnant roomate had to start planning for baby expenses so she was always a little short on her rent each month - and the others had to pay the shortfall. Remember, just because you are friends or trust someone doesn’t mean they can pay or hold up their end of the bargain. They may have every intention of pulling their weight but life circumstances could be that they just cannot pay their way at some point.
John,
You should buy a place, and in turn, with a good rental/lease to your three freinds. You will make money, and they will have the opportunity to leave (30 day leases) when they find it necessary. Now, your electric, water, gas, etc. will be four times as much, so you should probably set the lease four 1/4 utilities, in addition to a room rate.