[Sunny K]

Hello Folks,

I have been working in Troy Michigan and saved about 40k. I thought of buying a starter house(About 150k) close to troy area.However my employer is planning to move me to new plant in Lyon township for 1~2 years after which I would come back to troy. I am not interested in driving from troy to Lyon, so I think I will rent an apartment in Lyon for two years and buy my house after 2 years.

My question is I have this money sitting in Bank which I have saved. I am not sure how to make best use. I am considering following options.

1. Contact Brokers and put money in Mutual Funds or stocks/bonds and let it grow. Since I don't know much I fear I will lose money in stock Market. Everybody is saying Stock Market is due for correction

2. Since mortgage rates are low, Buy not a very expensive condo(100K) and rent it for couple of years and then sell it after 2years to buy my house. I I go this route, Can anybody let me know what cities I should look where I could get tenants and property rate will rise? Does this seem a good option?

Thanks for your replies

[MIEng]

My opinion, if you are only planning to keep the house for the next two years, after paying closing cost, non homestead property taxes and fixes that might come up, you might end up losing money. If you would have done that in 2012 and you would be selling now then it would be different but prices are now getting closer to their 2005-2006 peak in some areas.

If you plan to keep it for longer than that then it could make sense as you will have more time to recover closing cost and any initial expenses that might be needed to get the house in condition for tenants. Also for 100-150k I think is better to buy a house, which you can easely find in north Warren. Condos have other issues when you have tenants, shared walls are not good and increase the chances of having issues with neighbors, also there might be additional condo fees and houses are more desirable for re-sale, at least in the areas you are looking.

Just a few tips, good luck.

[Sunny K]

Thanks MI Eng for your valuable post which rules out my 2nd option of buying something for just 2 years.

Would you know how easy is to rent a small houses about 1300~1500 sqft in North sterling Heights?
I was thinking To buy a house in good school district(Utica) and stay west of mound, North of 17 Mile, rent it for couple of years and when I am back from Lyon Area, just live in the house. would that make sense?

Other option is put money in funds/stocks expect it to grow for 2 years and then with some more savings, May be I can afford a bigger down payment and less interest? Concern with this option is the house prices might increase and interest rate goes up and the same house whicj I can get about 150k today cost me much more

Thanks again

[jackmichigan]

If you're that risk averse that you don't want to invest in mutual funds or stocks, then I'd say just keep your money in the bank and save some more. I would definitely not buy a condo if you're just going to sell it in two years. Actually, I wouldn't buy a condo as an investment under any circumstances...nor would I buy any real estate as a rental if the intent is to sell it in two years. With holding costs and closing costs, plus the headaches and aggravation of owning real estate--especially rentals--that might be a good way to lose money (unless you found something WAY under market value).

One exception regarding buying real estate and selling it within 1 or 2 years would be if you could find a cheap, fixer-upper single family house and do all of the work yourself. If you're handy, and know anything about real estate, you might be able to make some money if you found a structurally sound house that just needed cosmetic repairs (e.g. painting, cleaning, etc.). You'd still need to purchase it for substantially below market value. If you're not interested in doing that, just keep your money in the bank as I mentioned before.

However, if buying a fixer-upper appeals to you, I would suggest that you look around for a house in the South Lyon area. If it's your principal residence, and you live in it for two years, any profit would be tax free (there are potential tax benefits after just one year, too). Plus, you'd be saving on rent. For such a short time-span, though, you can't afford to pay anything close to market value. You can't expect the market to appreciate enough in 2 years to cover your holding and closing costs in a typical real estate purchase.

[Sunny K]

Thanks Jack. I have ruled out the option of selling it in 2 years. I am considering to keep it for longer than 2 years. I am considering to buy a house, rent the house to tenant for 2 years and then live in the same house after 2 years.

Would you know how easy is to find a tenant for houses about 1300~1500 sqft in North sterling Heights?
I was thinking To buy a house in good school district(Utica) and stay west of mound, North of 17 Mi

[keraT]

Originally Posted by Sunny K

Would you know how easy is to rent a small houses about 1300~1500 sqft in North sterling Heights?
I was thinking To buy a house in good school district(Utica) and stay west of mound, North of 17 Mile, rent it for couple of years and when I am back from Lyon Area, just live in the house. would that make sense?

I am in similar position as you. I saved up money with the hope of buying a house but then I got married & my husband had a livable house in Detroit (not in Downtown but in the ghetto still its good for short term). Like you I didn't know anything about investing and how much one has to pay back in tax/fee, how does it work, how long should a person invest to make it worth while. So I stayed away from it and I am doing similar to what you are doing.

I am buying a house that I plan on living in eventually. But for first few years, my plan is to rent it out. This will help pay down the mortgage. Yes there is a risk of having bad tenants who can ruin the house but I am hoping against it. I think your new plan of buying a place you want to live in but renting it out for 2 years sounds like a good idea. Just screen your tenants well.

My cousin just rented out her old condo in 18mile & Ryan for $1500/month. My brother had really fancy house 2400 sqft in 18 1/2 mile & mound that he had to rent out due to temporary relocation & he is getting $2000/month for it. Its rentable area.