topic Re: Good Idea?? in Mortgage Loans

Good Idea??

jcstarkey8826 — Tue, 23 Oct 2012 15:31:07 GMT

My fiance' and I have a good savings (6+ months all bills covered) and have a decent amount left over every month to keep contributing. Im 1 month away from dropping my monthly debt payments down $350/mo.

I was thinking about buying a nice small house (40k and under) and renting it out. My hope is that my mortgage payment is so low that I can replace the debt I am losing, and not notice a difference. Ive found several properties and have a few co-workers already interested in renting if I buy. Average rent for the area is $750 for this size home, and my estimated mtg for this house will be around $300. Im talking to a lawyer this weekend to see what legalities I need to adhere to.

If I proceed and buy this home, will I be able to get another mortgage next year for my own living? Obviously I know I'll claim the income on taxes and am asking this as a hypothetical, being that Im assuming my DTI to be the same as it is now, worst case scenario.... best case, it goes up because of the extra monthly income.

Will this cause headaches by having two mortgages?

Re: Good Idea??

webhopper — Tue, 23 Oct 2012 15:39:29 GMT

jcstarkey8826 wrote:
My fiance' and I have a good savings (6+ months all bills covered) and have a decent amount left over every month to keep contributing. Im 1 month away from dropping my monthly debt payments down $350/mo.

I was thinking about buying a nice small house (40k and under) and renting it out. My hope is that my mortgage payment is so low that I can replace the debt I am losing, and not notice a difference. Ive found several properties and have a few co-workers already interested in renting if I buy. Average rent for the area is $750 for this size home, and my estimated mtg for this house will be around $300. Im talking to a lawyer this weekend to see what legalities I need to adhere to.

If I proceed and buy this home, will I be able to get another mortgage next year for my own living? Obviously I know I'll claim the income on taxes and am asking this as a hypothetical, being that Im assuming my DTI to be the same as it is now, worst case scenario.... best case, it goes up because of the extra monthly income.

Will this cause headaches by having two mortgages?

The rule of thumb is that you must have 2 years worth of rental history to claim it as an income source... so if you were to buy a home this year for 40k, and buy a home next year for ???K (primary residence)... You won't be able to claim the rental income. My suggestion would be to do a 30 yr conventional loan on the house that you wanna use as an investment, to keep your payment low, then refinance it to a 15 yr note, or just pay double payments after you buy the new house...

Investment properties require a larger down payment than principle residence properteis... You could buy this little 40k home using a conventional mortgage as a principle residence, and move into it for a year, and then move up in house next year with the new house that you plan to live in long term. The $300/month payment will allow you to save a ton of money, and your down payment requirement on the 40k house will be much less, allowing you to keep money in savings.

Re: Good Idea??

webhopper — Tue, 23 Oct 2012 15:42:29 GMT

I think investment properties are usually a great idea, my first home was a duplex, which I intended to use as a starter home, and then turn it into an investment property. I lived there four years, and when I decided to move up in house, I moved out and found a little place to rent for 6 months, and then rented out both sides of the duplex while I lived in a rental... In that way, I could claim the rental income from both sides, which totally offset the mortgage payment.

Re: Good Idea??

jcstarkey8826 — Tue, 23 Oct 2012 16:18:00 GMT

webhopper wrote:
I think investment properties are usually a great idea, my first home was a duplex, which I intended to use as a starter home, and then turn it into an investment property. I lived there four years, and when I decided to move up in house, I moved out and found a little place to rent for 6 months, and then rented out both sides of the duplex while I lived in a rental... In that way, I could claim the rental income from both sides, which totally offset the mortgage payment.

Thats awesome, I wish I could move into it honestly, but we are in an apt. lease. ugh...

Thats my goal, houses are cheap, the economy is crap, as long as I can afford it (incase of renter shortage) I wanted to do it. Thanks for the input regarding a larger down payment for rental properties. I wasnt aware of that. My goal is to make enough extra per month to just help with money and its kind of a, why not? situation. I think investing in a down economy is going to benefit me 10-20 years from now. I dont make a lot of money, but I dont have debt either, so I want to make more if I can without over extending myself.