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Old 03-05-2010, 08:58 AM
 
1,813 posts, read 3,503,156 times
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I'm considering lowering my cost of living by buying a duplex and renting out the larger half (if there is a smaller/larger difference). Now on paper it looks good, I can put some money down, get a nice place and lower my costs by renting out part of the place - saving money so that when I'm between tenants I'll still have not problem making the mortgage.

Has anyone done this? How does reality stack up to how it looks on paper? Can one really get ahead this way?

I'd love to do this for a few years, finish school and then eventually sell when the market comes back and buy outside the area.

Opinions anyone?
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Old 03-05-2010, 12:26 PM
 
1,290 posts, read 2,579,958 times
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yes and no
good idea, all depends on the details
1) have to assume at points in time you will be paying the mortgage with no rent coming in.
this can be due to deadbeat tenants still living there and not paying, or vacancies
2) you have to have a strong stomach to evict someone in general, and consider being put in a situation with a single mother with 2 kids living there, and she stops paying the rent. What do you do? are you ready to evict her?

3) are you ready to see the house used and abused?

4) are you clearing enough extra each month that you feel its worth it? I would consider it this way, if its a 50/50 split in size etc, take the mortgage, divide in half, they should be paying more than than each month by a decent sum, to cover the wear and tear on the property, vacancy periods etc. if that isn't the case, its not a good deal.
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Old 03-05-2010, 01:14 PM
 
Location: Tri-State Area
2,923 posts, read 3,137,526 times
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If you have to get a mortgage, any good bank lender will assume that the apartment will be un-rented for at least 30% of the time. Do you have the ability to shoulder mortgage, taxes and insurance should the tenant fail to pay you? Also, assume tenant resides in apartment, doesn't pay rent and you need to evict - if you hire a lawyer, it will cost you $$$, if you do it yourself, it could take a really, really long time to get them out - it can be a real nightmare. Are you handy? - with a tenant, things break, the tenant doesn't take good care of the place, etc., can you fix it by yourself or will you have to hire someone?
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Old 03-06-2010, 07:16 AM
 
1,813 posts, read 3,503,156 times
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Quote:
Originally Posted by Chrisk327 View Post
yes and no
good idea, all depends on the details
1) have to assume at points in time you will be paying the mortgage with no rent coming in.
this can be due to deadbeat tenants still living there and not paying, or vacancies
2) you have to have a strong stomach to evict someone in general, and consider being put in a situation with a single mother with 2 kids living there, and she stops paying the rent. What do you do? are you ready to evict her?

3) are you ready to see the house used and abused?

4) are you clearing enough extra each month that you feel its worth it? I would consider it this way, if its a 50/50 split in size etc, take the mortgage, divide in half, they should be paying more than than each month by a decent sum, to cover the wear and tear on the property, vacancy periods etc. if that isn't the case, its not a good deal.
Thanks Chrisk for the ideas to think about.

1. Yes, I was going to make that assumption, especially the first year. If I can't afford the full mortgage, than I won't do it. The purpose for me is to invest in property whilst also making decent contributions to my savings and retirement accounts.

2. I've evicted people before with kids way back when I had an apartment in my house. It's a pain, but I have NO tolerance for people who spend money on crap they don't need (which includes cell phones and cable tv in my book) and then complain they can't make their obligations. I guess I'm a hard arse that way. I believe you pay what you have to first, then you can splurge on the extras with what's left. However, that doesn't seem to be a common sentiment around here, which does give me something to consider.

3. To a certain extent, yes. I do expect the house to be lived in and I expect that they won't take the care an owner would. However, this would be a short term ownership (maybe about 5 yrs) and is not my 'dream home' so I won't have the emotional attachment that some have to their homes.

4. I am handy to a point - I refuse to touch anything electrical, so would hire should something come up that was past my ability to fix. But having been too poor to hire someone when I first bought my house, I was able to learn quite a bit on my own. Also, if the rental cost doesn't equal about 75% of the mortgage amount, then it's probably not a property I'd purchase. I do have a decent down payment, so I'd be putting a good percentage down and would have a lower mortgage than most. My idea would be to keep the house for awhile, then move out of state and sell this house when the market turns around.
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Old 03-06-2010, 07:21 AM
 
1,813 posts, read 3,503,156 times
Reputation: 727
Quote:
Originally Posted by FrmlyBklyn View Post
If you have to get a mortgage, any good bank lender will assume that the apartment will be un-rented for at least 30% of the time. Do you have the ability to shoulder mortgage, taxes and insurance should the tenant fail to pay you? Also, assume tenant resides in apartment, doesn't pay rent and you need to evict - if you hire a lawyer, it will cost you $$$, if you do it yourself, it could take a really, really long time to get them out - it can be a real nightmare. Are you handy? - with a tenant, things break, the tenant doesn't take good care of the place, etc., can you fix it by yourself or will you have to hire someone?
Thanks for the comments Bklyn!

I'm going to make the assumption that there will be times I'll have no tenant, or even worse, a deadbeat one. If I can't make the full mortgage without a tenant, then I won't consider the property. I must be sure I can meet the obligations in the worst case scenario before I will sign on the dotted line. I'm also pretty handy, having been a poor, single homeowner in the past without the funds to hire anyone to do the work. My Daddy taught me a lot - I think more women should know how to do things like fix a leaky sink and stuff like that, but that's a personal rant! Besides, no one takes the care you do on your own property - the old saying is true - if you want something done right, then do it yourself.
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Old 03-06-2010, 06:28 PM
 
Location: Nassau, Long Island, NY
15,855 posts, read 17,174,014 times
Reputation: 6523
Quote:
Originally Posted by lialleycat View Post
I'm considering lowering my cost of living by buying a duplex and renting out the larger half (if there is a smaller/larger difference). Now on paper it looks good, I can put some money down, get a nice place and lower my costs by renting out part of the place - saving money so that when I'm between tenants I'll still have not problem making the mortgage.

Has anyone done this? How does reality stack up to how it looks on paper? Can one really get ahead this way?

I'd love to do this for a few years, finish school and then eventually sell when the market comes back and buy outside the area.

Opinions anyone?
You can find a duplex that costs less than the single family home you currently live in? Have you looked at any? Homes with rental income cost more than single family homes, unless you are moving to a less costly neighborhood than Rocky Point (not known for being expensive in the first place). You also mention you are going to school. What are you going to school for and how long? That adds to your cost of living too of course. Unless you live in a high end house in RP that you can sell for more than a duplex, I don't see buying a duplex as saving you money, even with (not guaranteed) rental income. Proceed with caution (but I know you will). I think people who bought before the "bubble" with the corresponding much lower mortgage payment can get ahead this way (one unit of rental income), but even though prices have gone down, I don't think they have gone down enough to make it anywhere near a sure thing ...
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Old 03-07-2010, 07:48 AM
 
1,813 posts, read 3,503,156 times
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Thanks, IloveLI.

All good points. The house I'm looking at is a bit cheaper than what my current home would list for, but not much so I'm guessing it would cost me about the same, maybe a teeny bit more after all the closing costs. It needs a few cosmetics, but major stuff was already done - like the siding, roofing and heating. I could easily finish the rest myself.
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Old 04-26-2010, 06:56 PM
 
Location: Huntington
899 posts, read 1,870,858 times
Reputation: 465
Quote:
Originally Posted by agemery195 View Post
Hi, I'm Alex. I'm also in need of a really solid rental agreement to cover me if I need to kick out tenants eventually for any reason. If one of you has a link to a good rental agreement that would be great.

Thanks for any tips you may have.
Cheers,
Alex
hillshooteremery@hotmail.com
Hi Alex - try The Landlord Protection Agency &reg ~ Free Rental Forms, Credit Reports, Landlord Tenant Law, Lease Agreement, Rental Agreement, Eviction notice, Rental Application, landlord q&a forum, landlord advice, For Rent Ads. There you will find all sorts of help for veteran and rookie landlords.
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