Buying A Home
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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.
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Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
Should we buy a cheap house in a not so great neighborhood to rent out?
There are a lot of houses that are about 15 minutes away from our current house priced under $25k. They're small (<1000 sq ft) 2 bedrooms, 1 bath. Most of them are foreclosures, and the houses in the area go anywhere from $30-50k. We would probably just put 20% down, and use the rent to pay off the mortgage (we can afford that mortgage and ours at the same time if renting it out takes a while.)
http://www.zillow.com/homedetails/2339-Waterbury-St-Winston-Salem-NC-27107/5762543_zpid/
Thats an example of what we're looking at. What do you guys think? I think we would slowly make improvements over time, but its a low income area.
Re: Should we buy a cheap house in a not so great neighborhood to rent out?
Do you own any other properties? Being a landlord is not nearly as fun, or the windfall that it often appears to be. My luck has been great so far, but I know there are others on here who will spew the horrors of being a landlord to anyone who will listen.
Have you talked with a Realtor and/or mortgage broker? Getting a loan for a rental is getting harder by the day. Last time I checked in, we would have needed at least 30% down, with significant cash reserves. It was all moot anyway, because in this area there are no loans available through a broker for less than $60,000.
It is much more work to manage a property that needs significant improvements.If you purchase, I highly recommend getting a home warranty to cover any major break-downs. Consider the costs of needing major plumbing work, new roof, etc. Are you guys handy? If so, you'll be better off.
Consider accepting Section 8 (or whatever your local housing assistance program is called). If the area is "low income" you are likely to get many applicants wanting to use their assistance. I do not accept it, because I get plenty of applicants without it, but I might consider it if I had to.
In my experience, the best way to acquire rental properties is to turn your current residence into a rental, and buy a new house for yourself. You'll have a better loan this way, and more working knowledge of the house. I know it's not an option in most circumstance, but it has worked out very well for me. I also feel better about renting out homes that I would (and have) lived in myself.
It seems like becoming a landlord is the new flipping. It can be a really lucrative investment for some people, and a nightmare for others. Just make sure that you spend a lot of time researching every piece of the puzzle.
I'm also curious what type of people live in the area. Even in the best of areas renters can get angry and trash to house, or get lazy and not mow the lawns, or be testy and try to figure out any way under the sun to sue you for the smallest and stupidest reason. From the other end what are your expectations as a landlord. Would you be ready to throw their stuff on the curb if they were 2 days late with the rent? Would you run to do fix problems when they arose to keep the house kept up? I know it sounds ignorant of my to ask about your end, but in low income areas some neighbors get really clique like tight and it becomes a game of 'overthrow the landlord' if they don't like how you 'treated their peeps'
I guess it all comes down to the expectations on both ends. And you should expect to be treated right, no matter what the neightborhood. You get to choose who you rent too, and if you get the feeling there is going to be a meth lab in the basement you get to chase them out of town with a torch and pitchfork.
Oh, and the house is adorable! I doubt it would need much in the way of improvements at all.
Do you have the cash for all the renovations? Upkeep? You will need a large emergency fund should you have to replace a furnace/AC waterheater, or an appliance.
Become informed of the legal side of being a landlord. Talk with a few landlords before jumping into this role.
::takes a bow:: Thank you. And you make it sound like puppy dogs and rainbows, so I figure we balance each other nicely
We should save our best posts and prepare a pro/con thing to save us both the trouble of responding to all these posts every time.
OP, you're not gonna want the kind of tenants who are willing to live in that neighborhood. Even if you get people who are respectful of the property, there's a good chance they'll have significant problems paying rent. ILs inherited a rental property nearly identical to the one you linked to (same price point, comparable condition) and they spend all their time evicting people for non-payment. Of course, the lead up to eviction takes 3-4-5 months, all the while you're not getting paid. And you cross your fingers that they don't trash the house on their way out. They're about to spend $8k to do some upgrades in the hopes of attracting a better quality tenant.
And here's a good spewing forth of horrors for your edification
My Pinterest
The Googlesites Paint Bio
Thinking of doing cosmetic updates to a dated home? These were our costs.
It's so true, but I do it because I know you'll be around to offer the complete opposite experience. Maybe we should start a Landlording for Dummies website together, sell off our rentals, and rake in the royalties of the website
That is my point exactly though. Some people have great experiences, some have horrible, and most probably have an in-between. It's the bell curve of rentals.
My experience has been excellent, with very minimal time, effort, and money (aside from normal monthly costs). However, my husband and I are very financially conservative. We've thought carefully about each decision and try to minimize our risk in every way we can. The biggest piece, though, has probably just been regular dumb luck. That's not something I can advise anyone on how to acquire. I would sleep much better at night if the only mortgage check I wrote every month was for my own residence. That piece of mind would be nice.
Even with my awesome experience, I hope no one thinks that collecting rentals for $5 at auction is and then swimming in their money like Scrooge McDuck is realistic.