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I'm considering buying a property in a small town which is essentially a "suburb community" of a nearby large city. I'm currently living in another small town in a home I own and am still working. Within the year, I'll be retired and, not long after that, my plan would be to either rent or sell my current home and move into this one so as to have easier access to more leisure-time activities in retirement. However, my stay there would be temporary, as I eventually plan to relocate permanently to the beach once I'm free to travel and scope out locations (I'm not currently), where I would buy a vacation property to owner-occupy in the off-season and rent out to tourists under a PM's supervision in the vacation season to supplement my pension, at which time I'd travel or live in a second home.
The particular property I'm considering for the short-term, which I would hope to either continue renting out under a local PM or sell once I make the second move, is in a decent area which is gentrifying; the downtown is being revitalized, and property values are already increasing. Appealingly, it's about half the price of any other prospective property I've considered. One reason is its size: at just under 500 sf, it's about half the size! This suits me, as I love "tiny houses" and live a minimal lifestyle myself. The "tiny house" movement is also a thing lately, so I doubt the size alone would discourage any single or couple from renting or buying it, particularly given its proximity to the new "cool" downtown area and quick access to the interstate, bridges, and the big city, which is less than ten miles away. It's basically sound, although it could use some sprucing up, which I would do before moving in, but not while it's rented.
It's currently rented to what appears to me to be a slightly shady tenant (he freelances) who is month-to-month; no lease. The owner has had it less than two years, never lived in it himself, is also selling off other rental property (not sure why), and this tenant has been there just over a year. The monthly rent amount is surprisingly high for both the area and the property. I know little to nothing about the tenant/arrangement. He also pays utilities and cuts the grass. Overall, I'd be more than happy to let him stay there MTM.
My only concern is the layout of the home itself in terms of future rental and/or resale. The bedroom is an addition that appears to be sitting on 4x4 stilts on a concrete pad which may or may not be "to code." I checked with the city, and no permit is on record for it. Additionally, the only bathroom (full, with shower and tub) is in the basement, which is unfinished, but dry. This wouldn't bother me personally, and obviously it doesn't bother the current tenant, but I wonder if either of these two things might come back to bite me.
I could find a more traditional home which would be an easier rental/sale for twice the price but, again, that would eat into my buying-at-the-beach fund. I was quite thrilled to find this little diamond in the rough, if that's indeed what it is. Your thoughts? And thank you!
My DH and I bought a condo in the city when we sold our big house the year he retired. We had tried selling the house on and off with no luck so when we got an offer we sold with really no place to go. We knew we would leave the area for our final retirement home, but were traveling a lot and evaluating where to move to. We didn’t want to rent. So we bought a condo in the city to live in while we decided. I am an experienced Landlord so I was not concerned about using it as a future rental. It was a mistake. I tied up way too much of our money in the condo and we only resided there 2 years. When we finally decided where to move to, we bought a house but I would have been happier with a bigger budget and didn’t want to spend as much because we had sunk a lot of money into the city condo. Now we probably are going to move again to another house so have to go to the hassle of selling the condo to get funds for the next place.
I have a mistrust of property managers. Many actually encourage tenant turnover by being unresponsive to tenants since most PMs charge owners a lot more for finding new tenants than the monthly commission. Also many property managers have deals with local contractors and get a kickback when repairs or maintenance is needed on the properties. That opens the door to fraudulent or inflated repair fees.
My DH and I bought a condo in the city when we sold our big house the year he retired. We had tried selling the house on and off with no luck so when we got an offer we sold with really no place to go. We knew we would leave the area for our final retirement home, but were traveling a lot and evaluating where to move to. We didn’t want to rent. So we bought a condo in the city to live in while we decided. I am an experienced Landlord so I was not concerned about using it as a future rental. It was a mistake. I tied up way too much of our money in the condo and we only resided there 2 years. When we finally decided where to move to, we bought a house but I would have been happier with a bigger budget and didn’t want to spend as much because we had sunk a lot of money into the city condo. Now we probably are going to move again to another house so have to go to the hassle of selling the condo to get funds for the next place.
I have a mistrust of property managers. Many actually encourage tenant turnover by being unresponsive to tenants since most PMs charge owners a lot more for finding new tenants than the monthly commission. Also many property managers have deals with local contractors and get a kickback when repairs or maintenance is needed on the properties. That opens the door to fraudulent or inflated repair fees.
It's been suggested that I rent rather than buy in the big city as I transition into retirement and my eventual destination, especially if I could rent out my current home and use that money to pay the rent, but -- probably like you -- I'm "into" real estate, have been a landlord (I once owned four properties at once), and have a perhaps an unreasonable aversion to what I see as throwing money away paying someone else's mortgage (it would be a cash purchase for me). Additionally, I have pets who aren't always the neatest and cleanest, as they're aging and have some health problems, so that may be an issue. I've also considered buying an RV of some sort and living in the park in the large city. That way, I "own" it, I could resell it when done with it (or keep it if I wish), my pets would have a home of their own, and I'd pay only lot expenses. Oh, and...that's discouraging to hear about property managers! What about those onsite at beachfront vacation condo rentals, such as I may eventually own? I always viewed that as a whole different situation.
My main concern with this one I'm considering is that I not get "stuck" with it.
Thanks for your response.
Last edited by otterhere; 11-23-2019 at 10:28 AM..
Do not buy.
1. Lack of permitted addition.
2. Bathroom in basement.
Find something else.
Your previous experience of selling a "weird house/property" should have convinced you to avoid the unusual.
And, this "Although there was some rapid economic and population growth in the 1960s, both tapered off in the 1980s and have remained fairly stable since that time." would convince me to "get out of Frankfort".
"Do not buy.
1. Lack of permitted addition.
2. Bathroom in basement.
Find something else.
Your previous experience of selling a "weird house/property" should have convinced you to avoid the unusual."
If it were just for my own use - forever - I wouldn't hesitate. However...
Would you recommend buying a more expensive, more traditional home for the short term (possibly to keep and rent out later under a PM) or going the "RV" route? Traditional renting for myself doesn't appeal to me for the above-stated reasons. Or any other ideas??? I realize we're getting more into "Retirement" territory than "Renting" now, but I'm open to suggestion.
It sounds like a good area to invest in. Small rentals are OK.
But here is my advice for investing in rental property: never buy anything that is not up to code (or easy to bring to code) Never buy anything that is unpermitted. Never.
There are three problems with it. Unpermitted properties are difficult to sell. The building department might make you tear the whole thing down. But that's not the bad part. If you get a marginal tenant, they look for permit issues and code issues and use that to blackmail the landlord. It isn't unheard of for tenants to stop paying rent and then the courts won't evict because it is not a legal dwelling.
Always before you buy, check to make sure all additions and all work was done with permits and signed off as complete after inspection.. Make sure everything is well repaired and up to snuff in case you get habitability complaints filed by the tenants.
The potential permitting issues and the basement bathroom are both of concern. I think the biggest consideration, though, is the timing. If you're getting ready to retire, especially since this would apparently be a temporary holding, why look for more work to do? Tying up your money in this house may hinder your ability to buy something more to your liking if it happens to come along. Personally, I would wait and be more selective in what you purchase. Don't deplete your "buying-at-the-beach fund" prematurely.
What do you care what the tenant does for a living as long as he pays rent on time?
Your thinking is convoluted.
I may have missed this but why not just buy in the beach town you want to live in instead of buying somewhere else first?
Also, why not just buy something smaller that you don't have to rely on renting out. Things happen and what if you can't rent it out? Cities change zoning, you could come down with an illness (God forbid) and can't leave, etc.
The potential permitting issues and the basement bathroom are both of concern. I think the biggest consideration, though, is the timing. If you're getting ready to retire, especially since this would apparently be a temporary holding, why look for more work to do? Tying up your money in this house may hinder your ability to buy something more to your liking if it happens to come along. Personally, I would wait and be more selective in what you purchase. Don't deplete your "buying-at-the-beach fund" prematurely.
Good point about avoiding more work to do.
Who knows what could happen to this place over time. I am a fan of tiny homes, but this one seems to have issues.
What do you care what the tenant does for a living as long as he pays rent on time?
Your thinking is convoluted.
I may have missed this but why not just buy in the beach town you want to live in instead of buying somewhere else first?
Also, why not just buy something smaller that you don't have to rely on renting out. Things happen and what if you can't rent it out? Cities change zoning, you could come down with an illness (God forbid) and can't leave, etc.
Permitting may not have been a big issue...UNTIL I called the city to ask if this was permitted/up to code! It would be a problem if I became the owner and then, thanks to my raising the alarm, I couldn't rent/sell/occupy it for that reason. I would definitely talk more with the city's inspector before proceeding...
I would "care" about the tenant if he, say, were a felon with a criminal past or a drug dealer and I became his landlord. Shouldn't I? However, as I say, my inclination would be to let this fly under the radar and let sleeping dogs lie as long as he pays the rent and no issues come up. If a criminal, though (that may be why he's renting a tiny place with the bathroom in the basement and paying more than market rate for it), I would hope he wouldn't get angry when I asked him to leave so I could move in myself when the time comes.
I have an obligation here that I must honor for the next couple of years at least. For that reason, I'm unable to travel at this time, so can't go scope out places at the beach. I could buy sight-unseen, but probably not recommended. Additionally, I've always longed to live in this big city, at least temporarily, and retirement is this chance before moving to (possibly) a small beach town.
"Buy something smaller"? Than 400 square feet??? To repeat, it's half the price of anything else for sale in the area; a price comparable to buying that travel trailer (another option I'm considering) and paying lot rent in the big city RV park (utilities and taxes at the tiny house are actually less than those expenses).
Yes, I have no doubt that my "thinking is convoluted"; I am completely confused as to what to do. That's why I'm asking you!
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