Any Suggestions? - Posted by Chris

Posted by Randy on September 06, 2003 at 12:17:22:

Most lenders will give you 75% of your positive cash flow from your rentals as income when applying for a new mortgage, as long as you have a signed lease agreement. If you?re credit is strong enough and total debt to income meets their guidelines, you should have no problem.

Separating business and personal assets in this situation is of little value because you are personally responsible for the existing mortgage, even if title was held in some ?Other Name? or legal entity.

Any Suggestions? - Posted by Chris

Posted by Chris on September 06, 2003 at 11:57:33:

I bought my first home 5 years ago for $79,000 and have made several
improvements. A smaller comparable house down the street sold for
$130,000. My mortgage and insurance each month is about $750 on a
15 year note at 5.5% and I still owe about 55,000. I am thinking about
renting this house because I can make about $500 a month over the
mortgage and insurance. My concern is that we live in this house and I
am not sure if anyone will loan me enough money to buy the size house
we want to live in having the other mortgage. Does anyone have any
suggestions on perhaps a way to seperate business and personal assets?
Or any thoughts or comments on things I should consider? I am new to
this.

Re: Any Suggestions? - Posted by js-Indianapolis

Posted by js-Indianapolis on September 06, 2003 at 15:02:00:

Buy your next house Subject to. Higher end homes don’t cashflow as well as the little “bread and butter homes”, therefore you will have less competition when you go to buy. Also, being that everyone and their dog has refi?d in the last 3 years, you should be able to pick up a great interest rate. While you’re at it, tell the seller that your buying criteria is 90% LTV at the extreme top end. If they want to sell that 200K house with a $190K loan to you subject to, they need to pay YOU $10K for you to take it. Then, after 2 years appreciation, sell it for $220K, and pocket $30K tax free.

Let’s review, shall we? You just got yourself an upgraded house, no qualifying and no money down. Not only $0 down, but $10K in pocket up front. Low payments. No name on a mortgage. A $30K back end figuring simple 5% appreciation (I’m not going to compound it, $30K is close). Live in an area with 10% or more appreciation? Think of the possibilities.

Oh yeah, the old house. The IRS rules to avoid cap gains that you need to be in the house for 2 out of the last five years. You could rent it for 3 years, of course gaining another 3 years appreciation, then sell tax free. OR, if you are still making $500 a month (or more in 3 years) and still getting appreciation, and tax benefits, and depreciation (on paper), keep it forever. If you have to sell in 4 instead of 5 years, you can always roll the profit into a 1031 exchange, deferring all taxes.

By the way, if I had any house that would cashflow $500 a month, I’d rent it forever. If that house was flowing at $500 a month with a 15 YEAR LOAN??? ::slobber, slobber, drool, slobber:: You think $500 a month for doing nothing is special, wait 10 or 15 years for when it’s paid off, and you’re making $1500 a month. You’d be making $18K a year on a passive investment, just for waiting around. Don’t want to be a landlord? Hire a property management company, and make 10% less. Thinking about that, yeah, do that anyway. I’d take $16,200 a year and not take phone calls. Heck, I’m getting excited to go find me as many houses with 15 year loans as I can to take over.

You like the way I planned your future? Now you just need to convince the wife that she’s going to like the sub to house. Best of luck.