Anyone own rental properties?

[heatherdeg]

I seriously can't find a more appropriate forum for this subject than here...?

Dh and I are looking at one. We've owned rental properties before, but we've always put the down payment with equity from our primary residence and frankly, the market in our town tanked (I could've gotten $485k-$525k for our house 2 years ago, but this year would be LUCKY to score $450k) so I don't want to touch the equity left... kwim?

Our future plans account for getting back to owning with the goal to own 2 more in the next 4 years. We're planning on selling our current place and downsizing in order to meet the goals (we truly thought we'd be able to have lots of kids when we bought this 7 years ago). But that will take a year (construction permits to close out and finish work to be done will put us in "not buying" season).

Meanwhile we came across a bank-owned property in town that is listed at $156K. We used to own a 1 bedroom condo here (OLD apt. complex gone condo) and they sell for close to that. It's tiny--2BR/1BA, but seriously we could put $100k into and it would still break even to sell it (if not make more--I ran the comps, and we've rehabbed before so we know it wouldn't even get close to that to overhaul it completely). We've actually considered buying it, rehabbing it and living there (not sure if we would, though).

It's perfect but I'm not sure how to finance it. We can pay it monthly if it's not rented, but coming up with the down payment would mean using some of our other credit to do it--which will show up when they run our info for the mortgage. We are, by far, the more well off of our relatives--so no help there. We're not wealthy, we're just better off than they are.

The reality is, this is not a common opportunity. Most of the properties like this are in areas we would truly be afraid to rent. So I feel like doing whatever to grab it... kwim?

WWYD?

[suburbmom]

We own a 1 BR apt for the past 3 years. I think I would go for it. Since you've had experience in the rental market, I don't think it's a bad idea. We just started with our first one. Not sure if we will do more. It's been great b/c we've been able to get a lot of deductions (ie depreciation of property) for tax purposes. I am hoping that in 20 years the apartment will be fully paid for and we can have some supplemental income. Eventually I would like to buy more apartments.

In terms of how you would try to swing the financing, for me in our area, I would be comfortable in taking some money from the equity of the house. But in our area the housing prices really haven't gone done and in fact it's gone up since last year. If you have a stable job and have enough on your savings I might take the chance if it's a great opportunity. HTH

[heatherdeg]

Originally Posted by suburbmom

I am hoping that in 20 years the apartment will be fully paid for and we can have some supplemental income.

This is exactly why the push to acquire now... that and the market is good to buy.

I'm going to look into an equity line. I did the math and I could take out most of the down payment on this place and leave just enough room to cover selling expenses as long as the market doesn't plummet any further. And my estimates are conservative... so we never really wind up in trouble. We've even HAD a "worst-case" scenario come to life and it was liveable.

Thanks. For a second I thought I might be nuts.

[suburbmom]

I forgot to add that my ILs have owned properties everywhere and they always told us that stocks are so risky but for them buying properties have really paid off. They now own various properties throughout (in Europe, Canada, Asia, and the US). I'm figure when the market is down is when it's a good time to buy. Right now after tax deductions, I think I break even. So it's okay for now. But I'm gaining equity in the house and can always use it as part of our retirement in addition to our 401ks and roth IRAs.

Good luck!

[Sarah W]

We have a rental property in WA. It was purchased as our home and we turned it into a rental when we moved a little over a year ago. We're making accelerated payments, so it will be paid off in about 10yrs.

I think now is a great time to purchase if you are in the position to do so. Maybe if you talk to a property management company, they can give you a good snapshot of the area as far as rentals right now. We almost bought another house in my hometown last year that seemed like a good deal, but the state of the rental market didn't support it.