Home buying thread

Onoes said:

Hey, I'm thinking about something, and despite being well known as the guy on FOH making solid and rational decisions when it comes to important things... thought I would ask some advice here.

So, I currently own a home, I owe a little less than 180,000 on it, and have 12 more years on the lease. My current homes value is 380,000-400,000. I've stumbled upon a recently renovated duplex (two bedrooms on each unit, plus a 1 car garage each) in a nice location in my town. I checked the Zillow and it looks like someone bought it in 2021 for $220,000, renovated it, and resold it in 2023 for $330,000. No clue why the new owners are trying to sell it within a year of buying it, but my guess is they would be happy walking away with the $330,000 they put into it.

I checked local apartments, and for a 2 bedroom they are running $1200+, so I'm guessing I could get $1400+ per unit on this duplex. Also, my wife and I have a monthly surplus of about $4,000 AFTER what we budget for, so even if we had no tenets, we could make the monthly payments ourselves (Assuming no major life changes, which is always a risk). I do think we could put down the down payment, but would have to finance the rest, and it would wipe out our savings/emergency fund. The other option would be to borrow against the equity on our current house for the down payment, to ensure we still have a pile of money on hand just in case.

Do you guys think this is something worth looking into more, or should I really not be considering this?

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There are lots of forums you can read up on how to value a property on whether it's financially wise to buy to landlord. At least in the past when I looked at it, it was a super competitive market and most properties weren't viable.

You've really got to be prepared for vacancies, shitty tenants, maintenance costs, etc. It's not as straightforward as just "I'll get $1400/month in rent."

Gravel said:

Seems relevant.

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Meh a group of ten Mexicans will have another frame up by Thursday

Onoes said:

Hey, I'm thinking about something, and despite being well known as the guy on FOH making solid and rational decisions when it comes to important things... thought I would ask some advice here.

So, I currently own a home, I owe a little less than 180,000 on it, and have 12 more years on the lease. My current homes value is 380,000-400,000. I've stumbled upon a recently renovated duplex (two bedrooms on each unit, plus a 1 car garage each) in a nice location in my town. I checked the Zillow and it looks like someone bought it in 2021 for $220,000, renovated it, and resold it in 2023 for $330,000. No clue why the new owners are trying to sell it within a year of buying it, but my guess is they would be happy walking away with the $330,000 they put into it.

I checked local apartments, and for a 2 bedroom they are running $1200+, so I'm guessing I could get $1400+ per unit on this duplex. Also, my wife and I have a monthly surplus of about $4,000 AFTER what we budget for, so even if we had no tenets, we could make the monthly payments ourselves (Assuming no major life changes, which is always a risk). I do think we could put down the down payment, but would have to finance the rest, and it would wipe out our savings/emergency fund. The other option would be to borrow against the equity on our current house for the down payment, to ensure we still have a pile of money on hand just in case.

Do you guys think this is something worth looking into more, or should I really not be considering this?

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Onoes as a landlord sounds like the kind of quality thread potential we need around here.

I vote you do it (please don’t do it)

Lanx said:

ask slum(land)lord Daidraco

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That sounds like he's in for an education the hard way.

Onoes said:

Hey, I'm thinking about something, and despite being well known as the guy on FOH making solid and rational decisions when it comes to important things... thought I would ask some advice here.

So, I currently own a home, I owe a little less than 180,000 on it, and have 12 more years on the lease. My current homes value is 380,000-400,000. I've stumbled upon a recently renovated duplex (two bedrooms on each unit, plus a 1 car garage each) in a nice location in my town. I checked the Zillow and it looks like someone bought it in 2021 for $220,000, renovated it, and resold it in 2023 for $330,000. No clue why the new owners are trying to sell it within a year of buying it, but my guess is they would be happy walking away with the $330,000 they put into it.

I checked local apartments, and for a 2 bedroom they are running $1200+, so I'm guessing I could get $1400+ per unit on this duplex. Also, my wife and I have a monthly surplus of about $4,000 AFTER what we budget for, so even if we had no tenets, we could make the monthly payments ourselves (Assuming no major life changes, which is always a risk). I do think we could put down the down payment, but would have to finance the rest, and it would wipe out our savings/emergency fund. The other option would be to borrow against the equity on our current house for the down payment, to ensure we still have a pile of money on hand just in case.

Do you guys think this is something worth looking into more, or should I really not be considering this?

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Consult a property management company.

Most of them are tied to realty agencies. They'll be overwhelmingly helpful, obviously. But they typically wont let you walk into a bad situation blindly. As there MAY be rules in place that dont allow renters, etc. Just like an HOA would do. Never mind an inspection that may expose any issues, as well. Also, insurance may be different etc. Too many variables. They want to earn your business and make the most money off the situation as they can - so of course they'll steer you in a positive cash flow direction.

They'll also tell you what you can get for rent, just be aware of what they want to charge you. 8% is the low end, 12% is the high end. Some are fee based, but its essentially just a flat rate that equates roughly to one of the percentage fee's above. Im suggesting percentage based because it behooves your agent to rent it for the most amount possible. There are some that will handle and pay for all repairs, but they'll take a much larger share. I personally dont want the people that are making money off me, to cut corners and still get paid the same.

The next thing is to concern yourself with repairs and how they'll be handled. Will you be forced to go through their company, or will they get you multiple quotes and let you decide. The degree of control they give you is what you're looking for here, and some kind of assurance that they arent going to reem you if theyre deciding your fate. I give my clients 3 quotes. Also, in that same breath, ask how they handle evictions and will they be the ones present in court.

Any other questions, just ask.

I own a duplex that I bought when I first moved to Seattle and lived in half and rented out the other half. I now live about 10 minutes from it.

I recently had to evict my renter of 6 years (with me...he came with the property when I bought it) because he got a settlements, got into drugs and stopped paying rent. When I finally evicted him, he was about 15k behind plus lawyer fees. This was a pretty simple eviction as he didn't fight it in court, but if he had, I'd have had another 6 months to get a court case, have it continued then get a second date.

This tenant was there from before I owned the property and was a smoker. The apartment had to basically be gutted besides we were able to remediate the drywall. The total remodel was over 60k. Granted I get to jack the rent 1k a month for the new tenants with the remodel, but it's going to take about 6-7 years to recoup what I put into it.

I do all the management myself to save the 10% that Daidraco is talking about above, but you really have to want to be landlord and deal with this kinda stuff. This isn't a set it and forget it type of thing. My wife was pissed at me for about 6 straight months while I was trying to evict this tenant.

Unidin said:

I own a duplex that I bought when I first moved to Seattle and lived in half and rented out the other half. I now live about 10 minutes from it.

I recently had to evict my renter of 6 years (with me...he came with the property when I bought it) because he got a settlements, got into drugs and stopped paying rent. When I finally evicted him, he was about 15k behind plus lawyer fees. This was a pretty simple eviction as he didn't fight it in court, but if he had, I'd have had another 6 months to get a court case, have it continued then get a second date.

This tenant was there from before I owned the property and was a smoker. The apartment had to basically be gutted besides we were able to remediate the drywall. The total remodel was over 60k. Granted I get to jack the rent 1k a month for the new tenants with the remodel, but it's going to take about 6-7 years to recoup what I put into it.

I do all the management myself to save the 10% that Daidraco is talking about above, but you really have to want to be landlord and deal with this kinda stuff. This isn't a set it and forget it type of thing. My wife was pissed at me for about 6 straight months while I was trying to evict this tenant.

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I lived in a state that was landlord friendly. I only did one eviction. Christmas week...LOL. Went smoothly from paperwork to throwing them out. Fucking morons. They had plenty of notice, but did nothing until I showed up at 7 or 8 AM dead of winter. Dark, cold as fuck. I woke them up and told them they had 15 minutes or something to get the fuck out. They hadn't packed or anything. His mom called and hollered at me and then begged me not to crater his credit. Ended up getting his back rent out of her, so not too bad. Ended up towing his non running vehicle away...I bet he abandoned it.

What a fuck up. I mean...he could have just asked her for the back rent instead of getting thrown out, or he could have started packing and moved out when he got the eviction notice instead of being ushered out in the middle of winter. Some people's children.

Another tenant tried to abscond with the new appliances I put in. I called him and told him he could stay out of jail if he beat the police to my unit.

I had a unit that had been smoked in for years. What a PITA. I had to paint it twice. Once with Kilz and again with regular paint. God damned power outlets had that sticky nasty cigarette tar in them. Tops of kitchen cabinets had cigarette butts and burn marks on them, and ashes everywhere. Washed the interior windows a few times, replaced all the light fixtures, new pad, new carpet. Patched and re textured the drywall. Whole 9 yards. Did it all myself save for the carpet and pad. Went from shit to a sweet little house. God damn cigarette filth behind the dishwasher and stove and in the HVAC and behind the washer and dryer. I have no idea how people live like that. I have no idea how people live like that. I have no idea how people live like that.

Knowing Onoes luck his first tenant application will be from that hooker he bought a car from all those years ago… and knowing Onoes decision making/friendly guy attitude he will probably give her a “second chance since she swore she’s changed”

So let's say you still owe $150k on it. You can sell it for $400k and net $230k (6% realtor fees plus a little extra for misc costs).

You invest all of that money into an S&P 500 or total market index fund. Which have averaged about 10% per year. That $230k is throwing off $23k a year ($1900/month), and you don't have to worry about tenants, repairs, or vacancies.

That's why I took a look at landlording and immediately said fuck no.

Were you also just informed of a tax appraisal valuing your home much higher than previously?

We got a notice yesterday that our insurance is dropping us. All the houses we looked at pre-hurricane Andrew had awful insurance rates. So we bought new thinking we'd have a pretty long time before they fucked us. Turns out we had 3 years. Our insurance is good through October, but I guess we'll be shopping here over the summer.

It's also making building a place in Orange Beach, AL a lot more appealing. Florida's marketplace is a shit show.

Oh, and this place is built with lumber. A bunch of our neighbors are having termite infestations. Despite all these houses having been treated recently. So chalk another one up to building our own place...with concrete.

Gravel said:

We got a notice yesterday that our insurance is dropping us. All the houses we looked at pre-hurricane Andrew had awful insurance rates. So we bought new thinking we'd have a pretty long time before they fucked us. Turns out we had 3 years. Our insurance is good through October, but I guess we'll be shopping here over the summer.

It's also making building a place in Orange Beach, AL a lot more appealing. Florida's marketplace is a shit show.

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AL beaches are some of the more underrated in the country IMO.

They also take a stance of trying to limit the spring break bullshit from college kids which is a huge plus for most folks

Kithani said:

AL beaches are some of the more underrated in the country IMO.

They also take a stance of trying to limit the spring break bullshit from college kids which is a huge plus for most folks

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Yeah, we ended up here in Florida because we'd been going to the in-law's place in Orange Beach for a decade. We're about 90 minutes away from there. My father-in-law had suggested we build on their property since it was a double lot, but I needed to be in Florida for working at Duke (they didn't allow WFH from Alabama). I quit Duke after only 5 months, which was sort of pre-planned; we knew we'd be retiring soon, needed W-2 income for buying a house, but weren't quite ready to retire when we came here. Combined with the covid/vaccine shit and other political nonsense going on in 2021, we decided Florida was the better option.

Father-in-law passed away at the end of 2022, and mother-in-law would rather we just take the property now instead of inheriting it. In retrospect, I wish we'd found a workaround and just gone there to start with.

We're trying to figure out how to financially do this though. It'll likely mean pulling money out of our 401k's and eating the 10% fee. Which isn't the worst thing since mortgage rates are sitting in the 7%+ range anyway. It's also possible we can get an asset backed mortgage, but I think the rates are even worse on them.

If it's going to be a primary residence you can just take a loan from your 401k with no penalty can't you?

So I guess I should correct that. We don't actually have 401k's anymore since we're retired. Even then, it sounds like the max is $50k (significantly shy of what it costs to build a home). IRA loans apparently are only for first time buyers, and capped at $10k.

Gravel said:

So I guess I should correct that. We don't actually have 401k's anymore since we're retired. Even then, it sounds like the max is $50k (significantly shy of what it costs to build a home). IRA loans apparently are only for first time buyers, and capped at $10k.

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No whole life insurance policy either?