Posted by RichV(FL) on September 26, 2003 at 09:46:25:
Terri,
HELOC= home equity line of credit.
Regards,
RichV(FL)
Renting property with a pool - Posted by Terri
Posted by Terri on September 25, 2003 at 12:23:41:
I’m just getting into REI and it’s nice to meet you all!
Here’s my situation:
I’m currently living in a home that I purchased over 2 years ago. I’m considering renting it out when I move into a new home, however, this one has an inground pool and spa. Is it worth the hassle to hold onto this house when it has amenities like this? Or, should I just buy one that is less ‘high maintenance’?
Another question: My new house should be finished in May. If I do sell this one, do you see any reason why I should wait until I’m settled into the new house to begin investing in real estate? i.e. buy another house and rent it, or flip it…I haven’t decided which is best for me yet. Would my mortgage rate be higher if I bought another property before getting into my new house? I have excellent credit. Plus, the longer I wait, the more prices are increasing. (I’m in Las Vegas)
I have the CS program: CDs, book and videos that was given to me by a friend who hasn’t even looked at it. I’m listening to that and learning everyday. Plus, this message board is an awesome find!
Renting Vs. Selling - Posted by John Smith, IV
Posted by John Smith, IV on September 30, 2003 at 23:55:55:
If it was me (you will have to weigh in tax situation, cash flow needs, and other variables) I would sell and finance it myself rather than renting.
Why?
Well, if you sell and collect the mortgage payments, the occupant will behave as an owner rather than a renter.
Tenants tend to destroy properties much more than owners.
You will be receiving monthly payments regardless, but in one situation you will be resposible for the property, and in the other situation you won’t.
You could also make a pretty penny on the mortgage depending how you structure it.
Re: Renting property with a pool - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on September 25, 2003 at 22:31:04:
Terri–(NV)---------------
Ususally it is not a good idea to rent out your old house. The reason is not obvious to property owners: you probably live in too good of a neighbhorhood to get good cash flow on the property. The ratio of the monthly rent to the value of the property goes down for higher-priced properties. Thus, lower-end properties make the better cash flow properties.
I’d say with the pool, I’d be even less inclined to rent it out. However, you might want to talk to property management companies in the area about that issue.
Also, if you sell your own home probably all of the gain will be exempt from federal capital gains tax. Then you can invest at your leisure, when you feel comfortable about making a buying decision.
Good InvestingRon Starr
Re: Renting property with a pool - Posted by Tony
Posted by Tony on September 25, 2003 at 22:02:05:
You need to figure out if the going rent for that type of property will give you a positive cashflow. Are you using any equity in this property for the new home? I have a similar situation where I took out a HELOC for a down payment on a new home and rented out the old home to a Section 8 tenant (don’t be afraid of taking section 8. As long as you screen and interview your tenants section 8 can be very profitable - it’s guaranteed money from the government.) Mortgage rates would normally be slightly higher when the property purchased is for investment; however, I just attended a Coldwell Banker RE seminar and their mortgage company can give you the same rate on an investment property as a primary residence up to 10 properties as long as they are single family homes. I would use your current home for rental if the market could support it instead of going through the selling process and searching for another property. If you had somewhere else to stay for a few months before the new house is complete, I would rent it out as soon as possible to get some cashflow and get accustom to being a landlord.
Re: Renting Vs. Selling - Posted by Terri
Posted by Terri on October 01, 2003 at 24:00:18:
Could you please share your ideas on how I could structure a lucrative mortgage?
Re: property with a pool–Ron & Tony - Posted by Terri
Posted by Terri on September 25, 2003 at 22:44:19:
Thanks for your advice. What exactly is a HELOC? Also, you mentioned a down payment. Do you use any of the techniques to reduce or obliterate any down payments on property?
I have the cash flow analysis from the CS course and it works out to about $100/month income.
As a real estate investor, do you cover the sewer, garbage and water costs?
And here’s a little info on the property: comps show 150k (maybe more), 2B/2B, 2-car garage, inground pool/spa, .19 acres.
Ron, you mentioned the ratio of the monthly rent to value of the property will go down… wouldn’t that be ok if I lock in my mortgage rate and pay the same amount every month? or am I missing something?
Re: property with a pool–Ron & Tony - Posted by Tony
Posted by Tony on September 27, 2003 at 23:53:01:
If you use a HELOC to help with a down payment, the rental income should be enough where it covers that debt. For example, before I moved out of my place I took out a HELOC for my down payment on another property. When I did my cash flow analysis, I factored in the monthly payment for the HELOC along with the first mortgage, interest, etc. I still have a positive cash flow of $250. You have to determine if $100/month of cashflow is acceptable to you or not. My first rental had only $70 monthly cash flow, but it was a start. It was a condo and those are appreciating twice as fast as single family homes now. It has $30,000 equity now so I can live with the $70 cash flow for now until my next rent increase. I have my tenants always pay all the utilities all the time. They are living there so they should pay all those expenses.
Re: property with a pool–Ron & Tony - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on September 27, 2003 at 10:12:33:
Terri---------------
Sorry about being unclear.
I don’t mean that they change over time, although that might happen. What I mean is that properties with higher prices have lower ratios. High priced rentals are almost always poor in the cash flow department. They will NOT appreciate more than lower-priced properties in the area, at least over the long term, say 10 years or more–in spite of what real estate salespeople may say. So they make poorer rental properties. Some people do not like to work with lower-income renters. However, my advice is to invest in rentals in the lowest-price neighborhoods you can stomach.
Good Investing**********Ron Starr***********