Holy smokes... I may be buying a house

[MissMillie]

My landlord called me last week and asked me if I had any interest in buying the building I am living in. It's a duplex, in pretty good shape. To be honest, I was a bit miffed that he's thinking of selling right after I just moved in back in May.

But I've been checking out a few mortgage possibilities, and it looks like this might be do-able.

Who would have thought that after I got uprooted from my last place (when the building was sold to a new landlord who promptly raised the rent 30%) that the end result would be that I would end up OWNING property?

[GOPisEvil]

1. Is the other unit rented?

That unit can help make your mortgage payment. I hope you have good tenants who don't wreck the place, though.

[MissMillie]

2. Not only is it rented

it's under Section 8 contract for the next 10 months, which means that the rent will come, on time, every month, from the government.

[rainy]

3. Buy it!

Take the risk, you may suffer from buyers remorse at first but it will pass and you will be glad you are not throwing away money but investing it. The hardest step is saying yes. The rest is easy.

[midnight armadillo]

4. Congratulations!

My wife and I were eyeballing our finances last night. If I work two jobs (one will be a weirdly lucrative adjunct teaching job at a college at night) thru spring we'd be able to be in the market next summer provided we're willing to move west of Boston. What a weird feeling, we had figured it was going to take 3-5 years.

[wryter2000]

5. Do it

If you can swing it at all, do it. That's how we bought our house. Otherwise, we'd still be renting.

[bleedingheart]

6. Do everything legally and on the up-and-up..

I say this because my aunt bought a house this way and ended up finding out too late that she owed a lot of money in back taxes because her landlord had told her there was no need for those costly real estate fees and title searches....

I think it is a great idea otherwise! Congrats!

[pagerbear]

13. In NY you MUST have a lawyer for a RE transaction

I think. That would have been a good thing for your aunt.

[On the Road]

7. It Could be a Great Deal

Just make sure you get a fair value. Bargain hard -- if your landlord wants to sell, he saves a LOT of money on real estate transactions, renovation costs, and holding costs by selling it to you. I would get a professional appraisal, making sure to tell the appraiser that you would benefit from a lower value. Then ask the seller for a discount based on the amount he saves. For example, if he puts the house on the open market, he will have to make 2-3 extra mortgage payments, clean and possibly paint and recarpet the place, and pay extra to a real estate agent. Ask for 10% off the appraised value and see what he says. You might be able to negotiate a better price.

The danger is that you'll buy it for a price that you cannot resell it for if the equity bubble bursts. That really commits you to that house for awhile, unless you rent both units. It's more risky if you're in an area where prices have doubled in the last few years.

Being a landlord is a really good long-term thing. But there's a certain amount of hassle involved -- as long as you're prepared for that.

[Cybergata]

8. Congratulations!

I bought my house when I was 24, in 1976. It was the best decision I ever made. As the price for rent rose, my house payments stayed the same. Of course, I am now having to rebuild half the house, but that is due to the fact that it was built in an area that was once riverbed (the water table is about 10 feet deep, which is pretty amazing in New Mexico) & it was built pre-1940s. Half the house sank & is cracked in half. My whole neighborhood is suffering from this problem. Even considering this, I've gotten my money's worth 20 times over, and I have a safe hideaway from the world....or a better description is a safe haven for 5 spoiled cats which is why I call it the Duranas's Cat House. :hippie:

[redqueen]

9. Wow - congrats!

Hope it works out for ya... sounds like a pretty sweet deal!

[jayavarman]

10. Awesome News!

Some advice, though . . . .

Make sure you get title insurance & make sure you get a good home inspection. . . . . That way you are entering the transaction with your eyes open.

Also, are there separate utilities (separate meters) for the 2 units? Hopefully yes as I'm sure you would rather not pay the tenant's utilities. Since it seems like you are friendly with the seller see if he has any copies of utility bills or a spreadsheet with all of the expenses laid out.

Also, see what the terms are of the sec. 8 lease- Does the local housing authority pay 100% or is there a tenant portion? What utilities are tenant paid vs. landlord paid? (yes I'm a landlord with some private market tenants & some sec 8!) Also, another bit of good news is that you should get both deposits (yours & the tenants) when you close . . . .as well as both leases. (now yours will get ripped up, but the seller will have to sign a form letting the housing auth. know that you are the new landlord, etc . . .

I know I've laid out alot of things to think about-- Don't let it freak you out! You already know more about the home you are buying than the vast majority of homebuyers . . . . You already live there!

Just try to learn as much as you can about the house & about being a landlord . . . And again congratulations!

[bearfan454]

11. Go for it.

Be careful on the section 8. The section 8 places around here are usually trashed. Hopefully not where you live MissMillie.

[kat21]

12. Okay here's one silly piece of advice -

After you apply for a home loan opt-out with the credit reporting agencies. Otherwise you are in for a ton of junk mail.

Oh, here's another not so silly piece of advice, if you are using a mortgage broker get referrals from friends. Make sure the mortgage broker is willing to take the time to explain things to you before you agree to work with them.

Good luck to you!

[rucky]

14. those are two darn good pieces of advice

I'm swimming in junk mail. really deceptive stuff, too. they use my broker's return address for "important messages" and everything.