Minneapolis/St. Paul Nesties
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Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
If you have questions about this, please email help@theknot.com.
Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
Investment Property Advice Needed
We're considering buying the house next door to us (South Mpls) and renovating it, then either renting it out or selling it. We'll do most of the work ourselves, possibly hiring a few sub contractors here and there.
For the $ that we'd have to invest to make it profitable I'm guessing that we'll have to hold on to the property for awhile until the market turns around, hence the renting. I'm also thinking that maybe we could rent it out while we're working on it.
Any advice from those of you that have bought investment rental properties would be much appreciated.
Re: Investment Property Advice Needed
We don't have investment rental properties but my biggest thing is how comfortable/secure are you both in your jobs? Have you looked into getting a 2nd house/mortgage? I'm guessing it would be pretty difficult right now unless you had a major downpayment.
I have a friend that does rental properties and he *thought* his job was very secure. He was laid off and lost two tenants all within a month of each other. Thankfully he found new tenants quickly but he still had clean carpets, paint walls, etc before he could rent again. He ended up taking a job in Ohio just to make ends meet with the hope of coming back to MN in the next year.
You might want to check into the laws/regulations for rental properties in Minneapolis. You may not be able to rent it legally if you are still doing some major renovations. Personally I wouldn't want to live/rent in a house that was in the process of major renovations unless the rent was extremely cheap (less than 50% of normal).
However, from your stand point, something may be better than nothing during that time period.
Just my two cents...
We own a rental property ... I didn't intend for the rental to be a rental when I first bought it, I lived there for 3.5 years. We kept our former home as a rental when we bought our current home. Here are a few thoughts ...
Not sure how much you've checked into the financing end of things. If you don't have a history of rental income, you wouldn't be able to count potential rental income to help you qualify for a mortgage on a rental property. You'll have to qualify for the mortgages on both your current home and the rental property with no rental income - the bank will want to know that you can pay both mortgages without rental income if you need to.
Also, interest rates on mortgages for rental properties are much higher than interest rates on primary residences and not all banks will even do mortgages for rentals. You can't use FHA or VA financing on a rental, so you need to have a higher down payment.
Consider all the costs before you go into "flipping". Have you ever watched the show Property Ladder? It seems like renovation projects done by amateurs always cost more than anticipated and take much longer than anticipated. Be realistic about what your budget and timeline will allow for. If you run out of money mid-reno, it could be a disaster for you.
The real estate market right now isn't great for flipping. There's no real sign that property values will go up anytime soon. Make sure you're ready to hang onto the house for awhile if you really want to make a profit.
I'm not sure how many tenants would be willing to live in a home that's in the process of being renovated. You'd probably have to offer fairly discounted rent to find a tenant who's up for that kind of disturbance in their home.
Are you sure you want to deal with tenants? We've been really lucky so far (knocking on wood), but I've heard horror stories from other people. Make sure you're prepared & willing to deal with problem tenants who trash the place, stop paying rent, etc. I mean, hopefully that doesn't happen, but if it does, you need to be educated about your rights & responsibilities as a landlord. My best advice ... even though it can be a pain, be thorough in screening tenants. Check their references. Do a credit check. Do a criminal background check. It might be a bit of a PITA, but it could save you some major hassles down the road.
Sorry that got so long ...
Mr. Sammy Dog