Welcome to the site! One lot with two homes may offer you some opportunities. Always, always, analyze the numbers to be sure it works for you. Hire whom-ever you need to avoid problems.
Consider each of 4 benefits of owning an income producing property; Cash Flow, Principle reduction, Tax Savings, and Appreciation.
First, if the numbers are right, the rental property certainly could provide cash flow. But the entire mortgage for one lot/two homes? Check into that, the income may not sufficient to cover the the mortgage and expensee for both houses, but it will certainly help.
Second, Principle reduction. In essence, through their rent payments, your tenants will be helping you pay your mortgage, which slowly but surely reduces the amount you owe.
Third, there will be tax savings (depreciation and business expenses) generated ONLY by that portion of the property which is rented.
Fourth, appreciation. Your property will probably increase in value over time. Although the tenants pay a chunk of the mortgage, you will receive the entire benefit of apprection, which increases your equity in the property, boosting your net worth.
My advice? Go for the two homes/one lot deal. In my opinion, the cost and hassel of splitting the property would be prohibitive. The final products may be less than optimal. Keep the lot intact, live in one house, rent the other. After awhile, move on, keeping the property as a duplex, one lot with two rentals - that should generate a cash flow. If you buy another lot with two homes, you’ll have 3 rental homes and your own home! Then 5 rental homes, then 7, then 9, etc., etc.
buying land with two homes… one for personal, one for rent??? - Posted by Andria
Posted by Andria on February 09, 2000 at 22:23:55:
Aloha.
I worked in real estate years ago, but am not very up to date so pardon any ignorant statements/questions.
I am currently renting and would like to own. I just recently read Robert Kiyosaki’s book, The Cashflow Quadrant. He has some interesting thoughts on real estate as well as other things. Through reading his book, I decided I didn’t want to take on a mortgage unless someone else was paying for it. Here are the options I have thought about.
IDEA #1 – I find property with two homes on it (very common here, actually) and I rent out the larger one as i don’t personally need much room and the larger one will bring in more money. I rent out the larger one for far more than the mortgage.
IDEA #2 – I find property with two homes on it. I fix up the larger one (cosmetically, landscaping etc.) and then turn around and sell it with some of the land to a buyer for the same price I originally bought both the homes and land. (i sell it using the low down, easy monthly payment technique). i keep my house and land free and clear. this way i become the bank. they pay me directly. if they default, then i jst sell it to the next person. This is suggested in roberts book.
it is a good suggestion, but how easy is it to actually divide property like this? my understanding was that it wasn’t that easy. (perhaps ignorance).
does anybody have any ideas about how this would really work? thanks for your time and comments!!!
Posted by TRandle on February 10, 2000 at 17:41:06:
I haven’t done this, but I know there is a way to keep the land, even if you do sell the extra house. The buyers would buy improvements only and have a ground lease for a certain period of time (similar to commercial, condos, and mobile homes). Their loan amount is lower to get in and they pay you for the dirt. After the lease expires, improvements revert to you. It’s a very interesting concept if you can find someone to explain the details. I’ve read that in a book somewhere and have also heard that it’s mentioned in A.D. Kessler’s book. Good luck…
Posted by richk (OR) on February 10, 2000 at 14:02:55:
Splitting the land into two tax lots usually called a “minor subdivision”. Don’t know about Hawaii, but in Oregon and Colorado, these are trivial activities, IF the zoning allows for it. You get a surveyer to draw a map of the new lots and file it with the county for a couple of hundred dollars. Couple of months later, presto, you have two lots. I saw these done all the time in Colorado.
Now, if the zoning doesn’t allow for it, you have a major time and expense headache on your hands. (Zoning here means both unit density, building setbacks, and any local CC&R’s.) You still have the survey, but you also have a lot of hearings, filings, and paperwork added. Each of which costs (non-refundable) money. Don’t count on getting permission unless there are already a lot of exceptions in the immediate area. Tried to do this once in Oregon. No where near worth the cost and frustration.
I don’t know if subsivision is the way you want to go, but it can be an easy proceses. Check for details at your county Planning or Zoning office.
Idea #1 is much more plausable. There are two problems with Idea #2, firstly it is difficult, at best, to subdivide land (unless we are talking acreage). secondly, a lender would be unlikely to allow such a subdivision without a large reduction in the loan balance.
At the end of idea #2, you say that “This is suggested in roberts book.”. I have not read RK’s 2nd book. Which is he recommending; ‘subdividing land’? or ‘becoming the bank’?