Deleted
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Mar 29, 2011 15:28:44 GMT -5
Post by Deleted on Mar 29, 2011 15:28:44 GMT -5
Would you keep a duplex that earns $500/month for each 1/2 with a mortgage of $253, property tax of $2600/year and insurance of $500/year?
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Plain Old Petunia
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bloom where you are planted
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Mar 29, 2011 15:37:03 GMT -5
Post by Plain Old Petunia on Mar 29, 2011 15:37:03 GMT -5
If all goes well, you net $8647 per year (ignoring taxes). What is it worth? If you could sell for a million, that's a terrible return. If you could sell for 100k, that's a pretty nice return.
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Deleted
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Mar 29, 2011 16:01:15 GMT -5
Post by Deleted on Mar 29, 2011 16:01:15 GMT -5
Bought it for $60000, and got the $3000 first time home buyer credit for it too (only half qualified because we are renting out the other half for $500/month). I just wonder because we would have to travel to check on the house but we do plan to get a PM before we move. We spent $12,000 on it because we had the seller pay closing.
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Plain Old Petunia
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bloom where you are planted
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Mar 29, 2011 16:50:24 GMT -5
Post by Plain Old Petunia on Mar 29, 2011 16:50:24 GMT -5
Is it worth 60k now? How much will the PM cost?
Are you in an area where home prices have fallen substantially or an area where they haven't fallen much at all?
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Deleted
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Mar 29, 2011 16:55:36 GMT -5
Post by Deleted on Mar 29, 2011 16:55:36 GMT -5
Is it worth 60k now? How much will the PM cost? Are you in an area where home prices have fallen substantially or an area where they haven't fallen much at all? I'm in cheektowga, NY, a subburb of buffalo, NY where prices are about the same now as they were in 1994. I assume it is worth about $60,000 now, zillow has gone up a little bit from then so maybe $1000 more or so. The PM will cost 10-12% of the rent and I would have to travel to buffalo once a year to check on the place. But by the time we move I will have made back the DP, probably more than it.
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Plain Old Petunia
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bloom where you are planted
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Mar 29, 2011 17:19:32 GMT -5
Post by Plain Old Petunia on Mar 29, 2011 17:19:32 GMT -5
Assuming you don't mind being a landlord, keep it. Even if you had no mortgage, if you sold it and had 60k in your pocket, what could you do with 60k to generate $7447 per year?
If prices take off in the future, then you can reevaluate if you want to hold or sell.
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2kids10horses
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Mar 29, 2011 17:27:47 GMT -5
Post by 2kids10horses on Mar 29, 2011 17:27:47 GMT -5
That's a 12.4% return on your value of the property.
If you only put $12,000 down to purchase the place, that's a 62% return on your dollars invested.
The REAL question you should be asking, "How can I aquire more rentals like this?"
LOL!!!
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Mar 29, 2011 17:29:53 GMT -5
Post by commentator on Mar 29, 2011 17:29:53 GMT -5
In deciding whether to keep or sell the duplex, as others have hinted, the acquisition cost is irrelevant. The disposal value is relevant.
That said, it appears many of the "costs" the OP has are not measured in dollars. Therefore the OP will likely have to decide for herself whether it is worth the effort.
Keep in mind, gin, that as it stands now, if you sell the duplex for a gain, up to $250,000 ($500,000 on a joint return) of gain attributed to the personal residence side can be excluded from taxation (if you meet the other requirements). That will not be the case if you rent for three years, then sell.
Keep in mind, also, that the home buyer's credit will be recaptured (that is, paid back to Uncle Sam) if your half isn't your primary residence long enough.
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Deleted
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Mar 29, 2011 17:32:38 GMT -5
Post by Deleted on Mar 29, 2011 17:32:38 GMT -5
That's a 12.4% return on your value of the property. If you only put $12,000 down to purchase the place, that's a 62% return on your dollars invested. The REAL question you should be asking, "How can I aquire more rentals like this?" LOL!!! I'm trying to but we can't afford (according to the bank) another rental. They won't count my part-time job (I'm in school), and won't count the rental income. With that we can't afford another $60,000 house, only a $30,000 and that would not work. I do have to pay for repairs so I get more like a 40% return if we rent all year, 33% if we rent 10 month out of the year (like I did last year).
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2kids10horses
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Mar 29, 2011 17:49:28 GMT -5
Post by 2kids10horses on Mar 29, 2011 17:49:28 GMT -5
I don't know how long you have owned the place, but if you show the rental income on your tax return, they (the bank) should count it as income.
You might want to shop for another banker, too, or at least a mortgage lender who is more receptive to investment real estate.
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Mar 29, 2011 18:14:34 GMT -5
Post by commentator on Mar 29, 2011 18:14:34 GMT -5
2kids, have you tried lately to borrow money to buy commercial or residential rental property with basically nothing but that property and it's earning potential as collateral?
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Deleted
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Mar 29, 2011 19:04:31 GMT -5
Post by Deleted on Mar 29, 2011 19:04:31 GMT -5
I don't know how long you have owned the place, but if you show the rental income on your tax return, they (the bank) should count it as income. You might want to shop for another banker, too, or at least a mortgage lender who is more receptive to investment real estate. They want two years income to be able to count it according to freddie mac requirements.
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Mar 29, 2011 19:09:20 GMT -5
Post by debtheaven on Mar 29, 2011 19:09:20 GMT -5
Gin, I would definitely hold onto that property.
I'm not sure it matters but why are you moving? I thought your DF was in grad school where you live and you were going to start grad school there too.
Either way, I'd hold onto it as long as I could. Not to the death though LOL. But definitely at least for a while.
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Mar 29, 2011 19:12:12 GMT -5
Post by debtheaven on Mar 29, 2011 19:12:12 GMT -5
2kids, have you tried lately to borrow money to buy commercial or residential rental property with basically nothing but that property and it's earning potential as collateral?
2kids, same here, and we're a couple of years behind here in France LOL. Frankly we had a HECK of a time getting a 41K euro mortgage on a 111K rental despite our paid-off house because I am now a freelancer so only DH is salaried. For sure, cash is king now. We thought a DP of over 60% would be a shoe-in for that 41K loan, believe me, it wasn't.
It works both ways ... our PM will no longer consider freelancers as potential tenants either.
Things always lurch from one extreme to the other.
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Deleted
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Mar 29, 2011 19:12:55 GMT -5
Post by Deleted on Mar 29, 2011 19:12:55 GMT -5
Gin, I would definitely hold onto that property. I'm not sure it matters but why are you moving? I thought your DF was in grad school where you live and you were going to start grad school there too. Either way, I'd hold onto it. We are not moving debt, I was think about the future, when we do move in about three years.
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Mar 29, 2011 19:21:35 GMT -5
Post by debtheaven on Mar 29, 2011 19:21:35 GMT -5
Oh Gin! In that case, maybe you could give yourself 18 months off from the worry, and see where things stand then?! LOL Seriously, property changes all the time. I commend you for seeking info now but it may well be totally different from the info you get in 12 or 18 months, and even more different from the info you get in 24 or 30 months when you really need to decide about selling that place or not. Good luck though, and kudos to you for thinking about your future and having such a great game plan! Not many people your age need to worry about whether to keep or sell their rental.
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2kids10horses
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Mar 29, 2011 22:35:59 GMT -5
Post by 2kids10horses on Mar 29, 2011 22:35:59 GMT -5
Actually, no, I have not tried to get purchase money on any rental houses lately. I buy 'em for cash.
But... my banker comes up to me when I'm at the teller window depositing my rent checks and asks me to take out more loans!
Seriously!
He knows I have a 15 year history as a landlord, and he knows I own 'em free and clear. He wants me to take out mortgages on them.
I have to be honest, back in the day when I used to have to get outside financing, I would try to get temporary financing to get the house fixed up, and a tenant in it. Once I owned it a year, it was "seasoned", and the mortgage lenders would give me a better rate. Also, if it was rented, and I could show them I had a paying tenant it made it easier to get financing.
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2kids10horses
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Mar 29, 2011 22:36:56 GMT -5
Post by 2kids10horses on Mar 29, 2011 22:36:56 GMT -5
Phil finances his. How does he do it?
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Mar 30, 2011 2:14:18 GMT -5
Post by debtheaven on Mar 30, 2011 2:14:18 GMT -5
We don't have Phil's income or assets! This is why I'm eager to own at least one of ours free and clear, I think that would make a difference in the banker's head (if not in reality).
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ronbuck
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Mar 30, 2011 17:00:02 GMT -5
Post by ronbuck on Mar 30, 2011 17:00:02 GMT -5
We don't have Phil's assets! Nonetheless I wouldn't be surprised if he had a harder time than before if he tried financing them now. This is why I'm eager own at least one of ours free and clear, I think that would make a difference in the banker's head (if not in reality). Financing for investment properties has become increasingly difficult the past 2 years, especially if you have more than four mortgages. You will likely be required to have an 80% loan to value ratio and appraisals are a lot more conservative than a few years ago. My banker hit me with a new requirement this week on a loan application. They want me to have six months of mortgage payments (for all mortgages other than my primary residence) available in liquid assets. Basically they want to know I can pay all the mortgages even if I get no income from any of the properties. And the documentation required is about double what it was 3 years ago. Essentially the bank is trying to make the Phil style leveraging a lot more difficult. I can avoid this by using the commercial loan guy at the same bank, but will pay a higher interest rate and have a fixed rate for only 5-6 years.
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mesquite77
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Mar 30, 2011 21:14:37 GMT -5
Post by mesquite77 on Mar 30, 2011 21:14:37 GMT -5
Talk to a local community bank that isn't selling the mortgage to freddie or fannie. We refi'd our personal residence in 2010, looked good from a banker standpoint - but the process was a nightmare because the bank was going to sell the mortgage. We also bought a duplex in 2010 borrowed from a local bank and had a 2nd from the owner and it didn't take much more than the initial phone call.
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runewell
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Mar 30, 2011 21:22:50 GMT -5
Post by runewell on Mar 30, 2011 21:22:50 GMT -5
Keep in mind, gin, that as it stands now, if you sell the duplex for a gain, up to $250,000 ($500,000 on a joint return) of gain attributed to the personal residence side can be excluded from taxation (if you meet the other requirements). That will not be the case if you rent for three years, then sell. AHEM. One of those "other requirements" is that you live in the place as your primary dwelling for two years.
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cheapskate
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Mar 30, 2011 21:58:44 GMT -5
Post by cheapskate on Mar 30, 2011 21:58:44 GMT -5
Talk to a local community bank that isn't selling the mortgage to freddie or fannie. Amen to that. My hubby and I gave up on a Fannie Mae a couple of weeks ago, 30 pages of loan documents. No wonder these programs are in so much trouble.
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