The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: fizzgig on January 22, 2018, 03:43:23 PM
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I've never considered this kind of thing before. I live in North NJ where real estate and taxes are too high for me, I only make around 60K a year. In Jim Thorpe, PA, a town I like and will possibly live someday, nice homes sell for just over 100K. There's no jobs in that area, so I don't want to move there right now. I was thinking of putting down 20% and having a property management company deal with the rest for about 15 years or so until I could move there. Is this a nutty idea? I'm assuming rent would pay for the house until I'm ready to move in many years down the road.
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How are you going to rent this house if there are no jobs?
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How much do similar houses rent for? If you don't know, you're not ready to make this kind of investment yet.
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How are you going to rent this house if there are no jobs?
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This is exactly what I thought when I read OP's post. After doing some google-fu of the charming little town in question, it appears that the no jobs comment is not an exaggeration.
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I'm from a similar place in the Southern Tier of Upstate NY. While there are "no jobs" in the sense that I could not find worthwhile employment there, many people do live there, and a large number of them rent. Median household income in Jim Thorpe is $35,976, and median rents are around $1,150, which makes sense. Property taxes seem pretty low, so a $100k SFH might even cashflow a little while you work on FIRE.
Of course, run the numbers on the specific property before you pull the trigger. But that town looks like a great LCOL area to relocate to post-FIRE.
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It sounds like a great idea, but more complicated than you let on. You need to find a rental that will cash flow well. Start by using the 1% rule and the 50% rule. You can google these. Next, you'll need to find a good property management company. Easier said than done, but lots of blogs detail how to do this. I live in Korea and have 20 properties in Alabama, and it's working well for me.
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I am pretty sure that in 15 years time, there will come another house for sale in that town. No need to buy now to ensure a house.
The other thing is that you cannot not really oversee your future 15 years ahead. I would wait buying something until your FIRE was closer. It would give you less mental trouble. Something else is if the rental, with a property manager, would give you a really good revenue.
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If it’s a place you could see yourself living, and would possibly like to spend time there, why not buy a property that has multiple buildings on it? You can rent out one part and live part time in the other. That way it could be an investment for the future, but also something you could get pleasure and use from now.
I did that with my rental property. I used to live there and really like the area, but especially the yard space and started a garden that I really didn’t want to give up. I can’t live there because all I have on that part of the property is a big workshop, that was made into an illegal studio apartment by the former owner. But I built a fence separating the two buildings so the tenants could have their own private yard and I could still have my garden and workshop. I work across the street so I visit the property several times a week. It’s in the city and where I live now is in the suburbs, so it’s nice just to have a place to hang out in for a change of scenery. It’s near a river, so I’m going to see if the tenants wanna go in on sharing cost of a canoe or kayak, which could be stored on the property.
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I'm assuming rent would pay for the house
This is not a safe assumption, as some others have commented you need to check rent prices in the area and not assume the rent will cover the cost of the house. It very likely will not, or will on some houses there but not others.
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I've never considered this kind of thing before. I live in North NJ where real estate and taxes are too high for me, I only make around 60K a year. In Jim Thorpe, PA, a town I like and will possibly live someday, nice homes sell for just over 100K. There's no jobs in that area, so I don't want to move there right now. I was thinking of putting down 20% and having a property management company deal with the rest for about 15 years or so until I could move there. Is this a nutty idea? I'm assuming rent would pay for the house until I'm ready to move in many years down the road.
Without knowing the numbers, you can get yourself into some trouble. If you buy a rental property that has positive cashflow and a good CoC return, it can work. Otherwise, very bad idea.
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In Jim Thorpe, you may do better with weekly vacation rentals instead of year long rental. that also allows you to enjoy the space over the next 15 years before moving there full time.
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Ignoring the rest of the question and focusing on the part about a property manager for a house 90 minutes away, I would say it depends. Right now, I have a rental house that is about 100 minutes away from me and do not use a property manager. Going down there to address an issue is a full day event, so if the property was one of those high needs / high returns "2% rule" properties so it would be worth it to get a property manager. As it is, the rental is a B+/A- and all the tenants so far have been low needs (screening is important). It also helps that I lived in the house for 8 years before turning it into a a rental, so I know the various systems/issues inside and out.