Should I buy my rental house?
Okay, here is the long story. I am renting a house moving in next friday. It is a 5 bedroom house and I have 4 roomates. The house is in a good part of town close to the college and the bars. We pay a total of $1450 per month. ($290 each) I was searching yesterday to see what zip code we were in so I typed in our street name and my house came up as a for sale listing. It is for sale listed at $149,000. We have signed a 1 year lease starting Aug 1 with the current owners of the house, and we don't have our copy of the lease to know if we are locked in in the case of a transfer of ownership or if we may be booted in 30 days when the house sells.
My thought is that I could purchase the house and make payments with the rent money from my roomates, while in turn building equity with the house itself.
So, what would be the pros and cons about this, and what am I overlooking?
Well, I bought my house when I was 21 and I think I can help you out here. Basically, having four roommates is kind of a big deal. A $150,000 house is going to cost you about $1200 a month in mortgage alone. Utilities with 5 people are going to cost you about $500-$600 and that is just your water, electric, cable, internet, gas (assuming you have oil heat,) phone and something else that I can't think of right now.
As a homeowner, you are going to be responsible for the general upkeep of the house, like landscaping, and you are going to be liable for any injury or trouble you get in while in your house. If your roommates get busted while underage drinking or if anything else happens, it's your ass. Also, you are going to be responsible for all the quarterly bills like trash pickup, sewer maintenance and all that bullshit that you can't really be charging your roommates for. However, if they were planning on the rent being $1450, that is more than your mortgage is going to be, so you can rightfully pocket that extra $250 a month, assuming you will still make the rent $1450 divided five ways.
It's definitely a lot of responsibility. You are going to want to have some bank saved up because house repairs aren't cheap. If you can do it yourself, you'll save costs there, but shit IS going to break. I mean, I have a pretty decent house and everything is in good shape, but in the last two years I've torn a hole in a wall and made an all wood bar eating area, redid floors, painted every room, fixed the central air, redid all the light fixtures, redid my entire front lawn with mulch and the works, fixed the dishwasher, fixed the rotted bathroom window casing, and all this other shit.
If you own the house, this is shit you're going to want to do for your own benefit, despite right now probably saying that you aren't worried about most of that. But again, shit is going to break and you're going to need money to fix it.
Also, you need to know about your down payment. I don't know what kind of roll you've got saved up now, but the days of 0% down are all but over. I'm pretty sure I was the last wave to be able to pull that shit off. 100% financing is going to be hard to find. If you could come up with 10,000 down, it's going to lower your monthly payment as well.
The main thing is though, if you own the house, you better be goddamn sure that your roommates are trustworthy, punctual people. They need to have their rent in ON TIME because if they don't pay you, you don't pay the bank and shit hits the fan. You also want people who are going to maintain a minimal level of cleanliness and be willing to not utterly destroy the place. It's hard to do with kids our age cuz we're all assholes, but when it's your house, the motivation becomes a little different. You need to look at your roommates not as friends, but also as business partners because they are going to be the key to your livelihood.
If they are quality people and you can handle the responsibility, then doing this is a smart idea, but if they are going to leave in a few months, not pay the rent, do all this other bullshit, then you may want to hold off.
I hope that helped, let me know if there's anything else I can help you with.
The problem I see, is roommates move on. Also if you guys are party people, things get ruined or broken and it's going to be on your shoulders to replace/repair.
Not only will you be responsible for all the upkeep, you will be responsible for taxes and insurance. Maintenance alone is not cheap, let alone if you need to update/repair/replace anything!
I would think long and hard about buying a place. Get yourself a notebook and write down the benefits of renting (you're not financially responsible for upkeep) and the benefits or owning. Way the pros and cons. If the pros outweigh the cons, I would seriously consider it. If the cons outweigh the pros, you would probably be better off renting.
5 bedroom house for $149,000? Maybe I need to move to Kansas.
no joke, I just looked at a $629K 2 bed condo, and thought it was a great deal.
holy hell haha.
how big is that joint? My house is 1200sf with 4 bedrooms and we can't give this away at $145 haha. It's no dump either shrug
I bought mine for $157 4 years ago. My neightbour just sold his for $214. Exact same house but I have way more upgrades. HW floors, finished basement, central air, fenced in... I should sell it now...
tjwor, home ownership can be rewarding, and it can also be a major hassle. Others have touched on the potential pitfalls. Also with the mortgage crisis going on now, expect to find it hard to be approved for a mortgage without very strong credit, substantial income, and a down payment -- I'm not sure a student could (or should) swing it. On the flipside, one of the great benefits of home ownership, especially for the first 10 years or so, is the great tax benefit of writing off your points, mortgage interest, and property taxes. I owed income taxes nearly every year of my adult life until we built our house -- the first full year we were in it, we got back like $8K in tax refunds.
[quote967d595468="TravMan162"]how big is that joint? My house is 1200sf with 4 bedrooms and we can't give this away at $145 haha. It's no dump either shrug[/quote967d595468]
Wow, those must be some tiny bedrooms? Our house is 3000sf with 4 bedrooms, and all are too small. Of course our problem is our 3000sf is cut up into way too many rooms, so it doesn't leave enough space for the bedrooms. Aside from the 4BR and 2.5BA, we have a bonus room (billiards room), large great room, formal living room (now a playroom for the grandkids), formal dining room, office, kitchen, dinette off the kitchen, and laundry room. Plus the garage.
We'd like to have the same square footage but fewer overall rooms, to have larger bedrooms and a larger kitchen.
We built it for $202K 10 years ago, it was worth around $300K last I had it appraised. Probably dipped a bit now with the housing market in the shape it's in, but will no doubt rebound here in a year or two. Since our youngest has now left the nest, we'll be looking to downgrade and cash out the equity.
that's also another reason why if he COULD swing it now, he SHOULD.
if he can get a loan and continue to pay all his bills in time, with the low prices of houses now, he could make a killing in time.
holy hell haha.
how big is that joint? My house is 1200sf with 4 bedrooms and we can't give this away at $145 haha. It's no dump either shrug[/quote92ed3161e7]
good lord that house is small... I have a townhouse which is 1300 sqft
What the hell? A 3,000 square foot house where I live is about $650,000+. That's with shitty stuff. Pretty expensive for a suburban town. Keith probably priced one around a city area like Boston, that's why the condo is so high. A 1500 square foot house not too old can be like 300k here.
[quote5118249782="Powerbook"]What the hell? A 3,000 square foot house where I live is about $650,000+. That's with shitty stuff. Pretty expensive for a suburban town. Keith probably priced one around a city area like Boston, that's why the condo is so high. A 1500 square foot house not too old can be like 300k here.[/quote5118249782]
licoughli snobs licoughli
I kidd... I kidd... lol
Bleh, I can't afford shit I'm no snob lol. Between college and stuff, I don't even have a car. I'm going to get one after I finish school lol. Damn this sucks.
Edit Shit, this doctor is almost done building a a 13,000 square foot home, with stucco/brick/stone, 6 garages, brick paved driveway. Damn what a rich mofo, that's going to cost a pretty penny. He just built a new office too lol. He must be doing well scamming people and their insurances. He is just a pediatrician in town lol.
Funny thing is, I read about this same type of situation in a book about two weeks ago. The guy in the book was paying outrageous amount of rent but then he bought another duplex and was paying cheaper because of him renting out the other sides and was also gaining equity.
It all depends on the details, I really don't think any of us here could call any shots without a lot more than of them. Is there an online listing?
It's an interesting investment, you know, investing in a house near a college. It's risky because of maintenance but at least you always know there's a good chance you can rent/sell it as long as the college doesn't decrease in attendance. (Which is low for most since more and more people are going to college these days)
good lord powerbook. you live like four minutes from me, but you must live near the mean streets of greenwich or something. i'm in the ghetto, apparently
Well like 20. I'm like 15-18 minutes away from T-Ville.
Land is so cheap in Indiana. We have 7 acres and ~7000sf and it was like $600k. The house is really old though, like 30 years, so we did a lot of remodeling.
hahaha, dude, 30 years is not 'really old'
[quote549141f178="tylerc"]Land is so cheap in Indiana. We have 7 acres and ~7000sf and it was like $600k. The house is really old though, like 30 years, so we did a lot of remodeling.[/quote549141f178]
Damn that's a pretty good deal. You got yourself a nice little estate there.
We got like 2.5 acres and a pretty big house. I know land here is like 175k-250k for a good 1 acre in the neighborhood. 250k for a nice mountain view, but I call them hills because they aren't huge heh.
[quotea41d506bc6="TravMan162"]hahaha, dude, 30 years is not 'really old'[/quotea41d506bc6]
In this area of town, it's pretty old. This area has grown a lot in the past 5 years and while I've lived out on this end of town for about 15, but even then it wasn't nearly as populated as it is now. The school system out here started drawing a lot of families southwest in the county.