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Started By
Message
Buying A Rental House?
Posted on 9/14/14 at 1:11 pm
Posted on 9/14/14 at 1:11 pm
My parents have been renting a house for the past few years and the owner just informed them he is wanting to sell the property. The house was built in 2005 and is 1700 sq ft, 3 bed and 2 bath. It is probably worth around $145,000. - $150,000 and the owner said he would sell it for what it appraises for. My parents are looking to purchase a larger house and will be moving in the near future. Since my parents have lived in the house they know it is in great shape and only needs new carpet, some paint, and the fence on the sides of the house needs to be replaced. They currently pay $1,350 a month in rent and have not had a rent increase in about 3 years.
I am considering purchasing the house and letting my parents live there and pay the same rent until they purchase a house. My parents do pretty well and they are cool so there would not be any issues of them not paying or trashing the place. The longer they stayed the better and they would probably do some upgrades out of their own pockets.
The questions I have is what would the best way of financing the property? I would rather not have to put down 20% but I don't know if that is possible. A 30 year mortgage would give me more cushion for maintenance and repairs then a 15 year. Do I need to form a company such as an LLC or just do personally? Do I need to have an umbrella insurance policy in case a tenant sues me? I was planning on hiring a property management to handle everything related to renting the house because I don't really have the time or experience to do it properly.
I am considering purchasing the house and letting my parents live there and pay the same rent until they purchase a house. My parents do pretty well and they are cool so there would not be any issues of them not paying or trashing the place. The longer they stayed the better and they would probably do some upgrades out of their own pockets.
The questions I have is what would the best way of financing the property? I would rather not have to put down 20% but I don't know if that is possible. A 30 year mortgage would give me more cushion for maintenance and repairs then a 15 year. Do I need to form a company such as an LLC or just do personally? Do I need to have an umbrella insurance policy in case a tenant sues me? I was planning on hiring a property management to handle everything related to renting the house because I don't really have the time or experience to do it properly.
4
Posted on 9/14/14 at 3:58 pm to bogart
quote:
I would rather not have to put down 20% but I don't know if that is possible. A 30 year mortgage would give me more cushion for maintenance and repairs then a 15 year.
20% will be minimum maybe more and 15 years is all my bank offers on a rental investment.
quote:
Do I need to form a company such as an LLC or just do personally?
No
quote:
Do I need to have an umbrella insurance policy in case a tenant sues me?
I would
quote:
I was planning on hiring a property management to handle everything related to renting the house because I don't really have the time or experience to do it properly.
You were already gonna have negative cash flow if you manage it yourself. This deal will cost you a lot of money.
Posted on 9/14/14 at 5:12 pm to bogart
quote:
I was planning on hiring a property management to handle everything related to renting the house because I don't really have the time or experience to do it properly.
if your parents are the tenants (should make collecting rent easy)and the house was only built in 2005, you shouldn't need a management company. if you don't have the time to manage one property you probably shouldn't consider rental property.
Posted on 9/14/14 at 9:46 pm to yellowfin
quote:
You were already gonna have negative cash flow if you manage it yourself.
Huh?
Posted on 9/14/14 at 11:01 pm to bogart
Why would you hire a management company if your parents are the renters? You shouldnt need more than a home insurance policy that covers renters. Screw a LLC if you rent it to your parents. I would have them pay rent in cash too. The mortgage company is probably going to charge you an extra 2% on top of the going rate if it is for rental property.
Posted on 9/15/14 at 6:10 am to Mr.Perfect
150k purchase price with 20% down payment and he's financing 120k
120k @ 6% for 15 years is about $1,000
Now you pay tax(no homestead) and insurance(also higher on rental) and you'd be very lucky to stay under $1,350
Any maintenance at all you'd be negative.
120k @ 6% for 15 years is about $1,000
Now you pay tax(no homestead) and insurance(also higher on rental) and you'd be very lucky to stay under $1,350
Any maintenance at all you'd be negative.
Posted on 9/15/14 at 6:54 am to yellowfin
I have rentals in BR. I finance with 25% down over 30 years at less than 6%. Last one closed this past June at 4.75%. Bought one a year ago at 4.25%. I pay them off over 15 years bc I pay extra, but have the option to go 30 if they were unrented for a long period of time and cash was tight.
Posted on 9/15/14 at 7:49 am to BullredsRus
What is your investment criteria when buying?
Op- this isn't a good deal for you. The numbers don't work.
Op- this isn't a good deal for you. The numbers don't work.
Posted on 9/15/14 at 8:41 am to I Love Bama
except that he'd be getting 6% on his money for 15 years...and then once its paid off he's in good shape no?
Posted on 9/15/14 at 8:45 am to 19thHole
He isn't accounting for vacancy or capex.
I wouldn't touch that deal.
I wouldn't touch that deal.
Posted on 9/15/14 at 8:48 am to I Love Bama
right. i understand, i was just presenting a piece of the formula that i hadn't seen mentioned here yet
Posted on 9/15/14 at 8:50 am to 19thHole
Not trying to be an asset but what did you present?
He isn't getting 6%.
He isn't getting 6%.
Posted on 9/15/14 at 10:45 am to yellowfin
Gotcha... I missed the 15year possibility.
Posted on 9/16/14 at 10:33 am to Mr.Perfect
the problem with this deal is that he wants to rent it to his parents for $1350. the $1350 is a 3 year old price (rents have not been increased).
he needs to see what this house should rent for and if he wants house then he has to rent it for a higher amount whether its to his parents or not.
he needs to see what this house should rent for and if he wants house then he has to rent it for a higher amount whether its to his parents or not.
Posted on 9/16/14 at 10:51 am to bogart
you will have to put down 20%. you can get a 30yr mortgage on it with rate around 5% fixed if your credit is strong enough..
yellowfin what bank do you work for?
yellowfin what bank do you work for?
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