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Old 11-23-2011, 02:00 PM
 
28,383 posts, read 67,919,335 times
Reputation: 18189

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The aims of most real estate agents is to get a sale TODAY, pretty much like anyone that makes their living from commissions...

There certainly are opportunities to buy a place that is priced aggressively HOWEVER in the vast majority of such circumstances the reasons for the agressive pricing are not going to go away...

The home linked to above seems to have a massive cooking range. I suspect, given its size, that it was purchased either "open box" , damaged or used. The rest of kitchen also smacks of "flipper special" and given the age of home you will want to make sure that there is no lead or asbestos, especially if you are gonna be renting it out. Speaking as former landlord, I gotta tell you I would NEVER put a high end cooking range in a unit. Even if it was super reliable the extra care than as to be given when cleaning and such is NOT going to happen with any tenant...

The fact is that neighborhood is west of Green Bay Rd and that will matter to buyers. It is a 3 bedroom house with a detached garage. Not ideal for the area. On paper you could do better with this place: 11 LINDEN Ave, LAKE FOREST, IL 60045 | MLS# 07923841 Now in real estate location does matter, and being right up against 41 ain't ideal, but it worth a $180K premiium to be a few blocks away... Here is a 5 bedroom home that has no signs of being a scary flip job that is a few blocks away: 195 Niles Ave, LAKE FOREST, IL 60045 | MLS# 07820666 The "personalization" of setting up the basement to run somebody's idea of a "custom cupcake bakery" is probably scaring off some buyers, but that could be re-done for peanuts and the place has KILLER backyard setup with hardscape. That one will be snapped up by a smart shopper...

Really what the OP is interested in doing is more about "real estate speculation" that is based off the unique opportunity to get a big helping hand from a generous relative (nothing wrong with that) and some really uncommon work situations. I cannot guarantee that this will work out well, but I have enough experience to know what probably will NOT work...

For acquiring homes to rent out the math is very hard to make work.

For predicting which homes in which areas will appreciate at a higher than average rate there is some science, but a whole lot more "art" and even then the timeline the OP is long enough for things to change pretty dramatically.
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Old 11-24-2011, 09:43 AM
 
53 posts, read 90,533 times
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Yes, I think you stated it perfectly Chet. I guess my real question is given that my housing is taken care of for the forseable future, and given the benefit of a "free" $100,000 what am I better off doing:1) purchasing a home, living in it for a couple years and then renting it out with the option of selling it anywhere down the line, whether that be 2 years or 20+ years, or 2) put the money I would otherwise be spending on housing into an investment account for the next 20 years to put towards the purchase of a home in the future. With the first option there is the potential of home value appreciation, a "free" $100,000 and rental income, but that is seriously offset by the cost of ownership such as property taxes (huge), insurance, maintenance, mortgage interest (at a historical low), the pain of dealing with renters and the risk of major damage, plus at some point a remodel, etc. With the second option I could simply put say $3,500 per month or whatever (the risk being it would be spent elsewhere) and in 20 years without taking into account any investment opportunities (or risks) that would be $840,000, which I could use that to ultimately purchase a retirement home.
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Old 11-25-2011, 09:05 AM
 
28,383 posts, read 67,919,335 times
Reputation: 18189
Ah, the elusive "opportunity cost"... I guess it really is different for every family. If you have the kids college fully funded and there is no chance your "rich uncle / doting grandma" is going to set-up a trust for the kid's education that might tip things toward "taking advantage" of the housing option...

OTOH getting a gift that ends up "costing" you quite a bit over long haul (appreciation rate for higher end real estate is historically lower than most true financial investments, and that assumes that you at pest break even on maintenance / property taxes / interest, which is FAR from a slam dunk...) so this "gift horse" does in fact need to have a pretty thorough "oral exam" if catch my drift...

My experience strongly suggests that even if you were to buy a fairly shiny new place at a good price TODAY the odds of it making economic sense over either a two-year term OR a twenty are slim. While that changes given the thought of $100k from a relative, the "strings" that might be attached are something only you can determine. I mean if you do decide to sell in two years or so and granny gets pissed off at you pocketing the gift might result in you and all the kiddies getting bupkus in the will. That could really hurt...

Yes, I am sort of spitballing, but I have seen enough ugly estate situations when granny passes on her beneficiaries have to agree on how to sell her house / investments...

I keep coming back to the fact that there are ALWAYS some good bargains that need some TLC. If you wanted to get a place like that, and had the skills / temperament to not get in too deep and end up on the wrong end of flipper situation, you could have a much better shot at making money on this kind of deal. If you don't have the time to really look at this for what it is, a secondary income opportunity, it probably is better to stick with stuff that you know. Sounds like your career pays pretty well already, at a detain point complicating one's life can hurt your earning potential...
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Old 11-25-2011, 09:40 AM
 
53 posts, read 90,533 times
Reputation: 33
[SIZE=3]Again, well said Chet. Your input has been much appreciated and very valuable. At first glance a $100k gift seems hard to pass up but it does come with A LOT of strings and it really might not be worth it![/SIZE]
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