We are finally, FINALLY, moving (renting out our house at a $250/month loss) and planned to rent in our desired town, which is the same town as my parents and BFF (my parents will be PT daycare when we have a baby), five minutes from my work, and five minutes from a train station for DH.
The problem? There are literally no rental houses that are either above 1,000 square feet or are below $2,000/month in rent (our max is $1,700). As a result, we are considering buying. This is the town we want to stay in long term, so aside from our anemic e-fund, I think it makes sense.
Houses are all built in the 1960s and 1970s in this town, so nothing is very attractive. That said, are we crazy for considering this one? The same model, but updated, is being sold two streets over for $309K. My parents already own this model as well, so I know its quirks and benefits. I was thinking we could try to get this one for $210K and do a 203k loan to get an additional $20K so we could make some immediate improvements. We'd still be below market value on the cost.
The small houses available aren't just small. They're hideous. Brown paneling, kitchens that haven't been touched since 1950, etc. I don't mind buying and improving a house like that, but we'd have to live with it as is for two or so years if we rented, which kills me since we'd be paying as much or more than a mortgage for a larger house. Renting is still very much an option--we have another month or so for more houses to get listed.
Can you qualify for a loan without selling your current house? Keep in mind you generally have to qualify for both mortgages or be able to prove a 6-months to a year of rental income.
I don't see what about that house needs a 203k. Some wallpaper and paint and its good. I would not, especially in your situation, take out more when it doesn't need it. 203k should be used when the house is uninhabitable, not just to make it pretty (IMHO). Also, you do know that if you do a 203k, then a contractor has to do everything and the bank pays the contractor, right? You don't just get a bonus 20k to go buy some cabinets and paint.
Also, when you said a neighboring house is "being sold for" - do you mean it is listed at $309k? That does not mean it will sell for that. You have to look at recent sales, not listings, to see what the values are.
That all said, we bought a second house, rented out our first house, and moved b/c we needed to move. Its worked out well for us. We did it b/c we have a big dog and we would prefer owning rather than renting. Its not for the weak of heart, and we were on a very tight budget until the rent started coming in.
If nothing in this town is very attractive, and this house is essentially as good as any, and this is where you want to live, then don't let looks deter you. However, I would live with the ugliness and remodel slowly over time.
That said, I have been in your position, being unable to find anything to rent that meets my needs. MM told me to look harder and I did, and I ended up getting creative to find a rental in my budget. We ended up being tight every month on cash and I was so glad I went for the cheaper option.
I personally would rent a tiny house and save until I could buy something I liked, but that's mainly because I couldn't stomach buying something I didn't like.
We qualify for a $250K loan on top of our existing house. The 203K loan requirements sounded like it could be for structural or for cosmetic improvements, but I may have read it wrong. It's being sold as is, so I imagine there are things that NEED to be done, like new furnace or new roof. I figured we'd use the money for those things and then replace the flooring throughout before we move in, since that would be a PITA later. All other changes would be saved up and paid for as we went along.
I'm sure we won't end up with this house, but I'm having fun daydreaming about what it could look like. Too bad it would probably cost $100K for my vision to be a reality!
Can you qualify for a loan without selling your current house? Keep in mind you generally have to qualify for both mortgages or be able to prove a 6-months to a year of rental income.
I don't see what about that house needs a 203k. Some wallpaper and paint and its good. I would not, especially in your situation, take out more when it doesn't need it. 203k should be used when the house is uninhabitable, not just to make it pretty (IMHO). Also, you do know that if you do a 203k, then a contractor has to do everything and the bank pays the contractor, right? You don't just get a bonus 20k to go buy some cabinets and paint.
If you're renting out a home for the first time, and buying, most lenders require you to show at least 6 months of reserves just for the rental.
But, you don't always have to have a contractor do work on a 203k - at least that is what my clients' mortgage broker explained to them when they purchased their home with a 203k last year. Yes, a contractor has to oversee larger projects but you can actually use a streamlined 203k just to purchase appliances. All that said, they are a HUGE pain in the ass to close!
Lurker jumping in here.. I have done tons of rehab on my previous home. It is so worth it. However it is a PITA..I would replace the carpet only before moving in. Then start one room at a time. ripping down wallpaper is easy and can be done while you live there. The paneling can be painted white for the time being until you can save for the "full remodel" as it may need new dry wall. The kitchen looks like it functions. Save for the remodel then do it. I would go for it. The style of home is NMS but if it were in a town that I loved etc like you stated. I would go for it.
I can't say without knowing what all is wrong with the house aside from cosmetics. If it's JUST cosmetics... maybe. If it's structural, roof, furnace, just about anything else, that is a red flag.
I would be very concerned about having a lapse in renters as well. I would want my efund to cover expenses for the other place for 6 months at a minimum, plus living expenses for your family for 3 months at a minimum. If you don't have that in place, I wouldn't purchase this or any other home.
Sorry. From this post it sounds like you can't afford it without risking big time trouble.
Okay, the real reason I want to buy is so we can short sale our current house if anything goes wrong, without preventing us from buying again in the future.
I know, I know, we shouldn't buy. It just sucks, and I'm bitter that we're so far underwater on house 1.
I think I've just been spoiled. We bought a new construction house with tons of storage space, a big kitchen, everything nice and new...and now we're cutting the size in half and everything is 50 years old. I sound like a snob, and I swear I'm not. I just need to remember that my commute will be 100 minutes shorter per day and H's will be 120 shorter. The house won't matter with the increased quality of life!
Post by kittycatlove on Jan 20, 2013 21:07:17 GMT -5
I grew up and live only a couple of towns over. As someone who wanted to stay in the area I knew we would have to buy an older outdated home. Cosmetically we are making approvements as we go, but we have had quite a few unexpected expenses. One month after we moved in our sewer pipe collapsed from tree roots, $2000 later. Then 6 months later our water heater died, another $500. Two years later we needed to put in attic fans to keep the attic from mold, another $700. My point is even if you can live with the outdated decor, in an older house you never know what happens next. We are lucky we have a nice efund and are now saving to do our kitchen in 2014, and we will be able to pay cash. Given your non existsnt efund I would not buy it.
We will end up renting, I'm sure. My parents are planning to downsize in two years, and they have this same model, but MUCH nicer on the outside, a huge yard, and an inside that needs some cosmetic work, but not as much as this. We can buy their house at that time. It will be more expensive than this one, but also won't need quite as much work.
Ditto everyone else, sorry. I just don't think it's a good idea right now.
But since we are also looking into buying while renting out our current home I want to ask what you mean that you are eligible for $250k on top of your current mortgage. I admit I haven't done the actual research myself but H did and we have to have to show a certain number of condo mortgage payments in reserves before we buy again as well as prove that we're not paying more than 28% of our gross on both mortgages. That's mostly why we're waiting until we have 10% to put down plus a sizeable e-fund. Waiting sucks so I feel you but as someone who is strapped into one mortgage you don't want, don't double your problems, know what I mean?
You said your parents live here, any chance you could move in with them for 6 months or longer to help save up?
If you did buy a house, I wouldn't take out additional funds for improvements, especially cosmetic ones. I'd rather live with ugly than have a beautiful house that I can't afford when there's some financial blow.
The rental looks fine. With your reduced commute times you will have much more time to exercise your dogs and it sounds like will make everyone happier right away. Then you can buy your parents house in a few years and you will know a lot more about the home's history and maintainence. It's a really good situation honestly. I hope you can come around and look on the bright side.
No, you aren't crazy at all. My house was just as fugly when we bought it, and is still a work in progress. You won't know if it's a money pit until you get a home inspection. It's very possible that it's just cosmetically ugly, which is easy to fix, but there is no way to tell at this point. We did end up having some stuff come up in our inspection and ended up negotiating the house price down by something like $20k because of various necessary repairs.
I think I've just been spoiled. We bought a new construction house with tons of storage space, a big kitchen, everything nice and new...and now we're cutting the size in half and everything is 50 years old. I sound like a snob, and I swear I'm not. I just need to remember that my commute will be 100 minutes shorter per day and H's will be 120 shorter. The house won't matter with the increased quality of life!
Post by thinkofthesoldiers on Jan 20, 2013 22:23:02 GMT -5
You are coming across as spoiled and snobby. There is *nothing* wrong with that rental. Paint it, live in it for a few years, and save. And if you've never lived in an older home, I wouldn't even consider it without a decent efund.