Author Topic: Pros + Cons of purchasing a $30K house?  (Read 6486 times)

up.up.away

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Pros + Cons of purchasing a $30K house?
« on: January 24, 2013, 02:02:10 PM »
Oh, the Rent v. Buy question....

In the town we're moving to in May, real estate is crazy. You can buy a decent 3 bed 2 bath for $50-$60K, but getting a house to rent (to quote a realtor I spoke to) is like "finding hen's teeth." AND, you can find foreclosure homes plus a random house on craigslist today for $30K.  As of right now, we don't want to live in this town forever (basic stats: 7,000 pop., an hour and a half drive to any city of size), but we don't know how long we're going to stay, either. At least two years, probably 3-4, maybe maybe 5.

Now, I don't want to buy a house just because it's cheap, but I don't want to miss out on a potential money-making endeavor. The realtor I spoke with claimed that most rental houses don't even get listed because they're in such high demand--a lot of folks can't get mortgages anymore, so they're renting in higher numbers. Several of her listings on the market are being rented out until they sell. But again, this is a town of 7,000 in a rural, generally depressed part of the state... Once we leave, we'd be willing to either keep the place as a rental or rent until a sale.

The 2 available rentals I've come across so far have been right around $1K/month for a 3 bed 2 bath (necessary for home business and near-future child). This seems super high to me considering the area. I'm hoping to find an older house that would rent at around $600-$700. The $30K house on Craigslist supposedly is structurally sound but needs cosmetic updates and does not currently have central heat and air. I'm waiting on pictures, so all I know is the outside looks decent and it's in a pretty old neighborhood that is walking/biking distance to work and groceries.

As for our financial status, we have $17K in Vanguard and $6K in regular savings (no debt whatsoever). My husband will be starting a job at $50K in May, and whatever part of that is designated toward housing is not taxed (clergy--those taxes are crazy weird).

Thanks for any advice!

Richard3

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Re: Pros + Cons of purchasing a $30K house?
« Reply #1 on: January 24, 2013, 03:39:50 PM »
How much work needs to go in to the 30k house to make it comparable to the 50k ones you've been looking at?

From what you say, buying is a no brainer (even if the rental market collapses before you leave town).

Paying $50k to avoid paying 1k a month is a great deal, especially if you can pay the mortgage pre-tax (check with your favourite religious accountant).

Hamster

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Re: Pros + Cons of purchasing a $30K house?
« Reply #2 on: January 24, 2013, 04:05:47 PM »
I agree. No brainer. Buy.

Hard to believe a market like that, but if rent is $1000 per month, then you'd pay $12k per year to rent a $50k-$60k home. Even if you only stay there for 2-3 years, rent payments would amount to half of the cost of the house. Worst case, even if you sell it at a 50% loss in 2 1/2 years you are still breaking even compared to renting. Better yet rent it out for $1,000 per month and then go fill your bathtub with all the rental income you'll be making and swim around in it. I guess that would seem a bit worldly for a clergy-man, though...   :-)

TomTX

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Re: Pros + Cons of purchasing a $30K house?
« Reply #3 on: January 24, 2013, 04:49:39 PM »
Buy.

smedleyb

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Re: Pros + Cons of purchasing a $30K house?
« Reply #4 on: January 24, 2013, 05:04:38 PM »
Rent for one year (small, 2 bedroom, 1 bath apartment.)  Get to know the local real estate market (study it closely).  Make a better, more informed decision 6-8 months down the road.

The realtor gets paid when you buy, so I'm not surprised he's talking down your rental options.

James

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Re: Pros + Cons of purchasing a $30K house?
« Reply #5 on: January 24, 2013, 05:22:00 PM »
Rent for one year (small, 2 bedroom, 1 bath apartment.)  Get to know the local real estate market (study it closely).  Make a better, more informed decision 6-8 months down the road.

The realtor gets paid when you buy, so I'm not surprised he's talking down your rental options.


That was my thought also, talking to the realtor about renting probably isn't your best bet.  I'd try to find someplace you could rent for 6 months, or even just find someplace to stay for a couple weeks if nothing else.  Spend some quality time visiting possible properties and possible rentals.  Once you have actually been in both and can compare what you can buy compared to what you can rent, then make the decision.

lhamo

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Re: Pros + Cons of purchasing a $30K house?
« Reply #6 on: January 24, 2013, 10:39:23 PM »
I'd be really, really careful with what you buy.  Gut level feeling is that that kind of housing market is going to have a higher than average percentage of meth labs and other problem houses. 


Hamster

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Re: Pros + Cons of purchasing a $30K house?
« Reply #7 on: January 24, 2013, 11:44:27 PM »
Now everyone else is making me a bit leery. If you are going to be part of a congregation, I would guess the people in the church would be a natural group of contacts to float your thoughts past, as they should know the market and the issues.

I assume that you confirmed the realtor's statements regarding price and availability of rentals?

Karl

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Re: Pros + Cons of purchasing a $30K house?
« Reply #8 on: January 25, 2013, 07:45:28 AM »
OK.  Let's go back to the future!  People are having trouble selling.  People are renting their houses until they sell.  Can you make a Rent-to-Own contract on a house that is currently for sale and falls in your price range?

Another Reader

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Re: Pros + Cons of purchasing a $30K house?
« Reply #9 on: January 25, 2013, 07:57:34 AM »
This is clearly an unhealthy market, if the agent is correct.  No one can qualify to buy or there is a good reason not to buy.  Are property taxes 4 percent or more of value every year?  Is the housing stock so old that no one can afford to renovate and maintan the building on top of the payments?  Are the neighborhoods in decline?  Are the schools awful?

Maybe if you give us a general idea of where this is, we could be more helpful to you.  Location determines value, and if you are committed to moving because of a job, it's best to know everything you can before you choose your housing.

up.up.away

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Re: Pros + Cons of purchasing a $30K house?
« Reply #10 on: January 25, 2013, 10:22:24 AM »
Thanks for the feedback, everyone!

Rent-to-own is an intriguing concept. It might work for a house through a realtor (most of which are in the $50-$70K range), but im not sure if we could do that with the $30K house, considering it's being sold by-owner. But I really don't know. How do those usually work?

We will definitely be using the congregation to get some information once all the paperwork is signed and the job has been announced, but like with the realtor, it's a tricky situation figuring out what advice is for which party's benefit. I'm guessing the people at the church will tell us how great things are and that the market there is fine, because if we buy, then our placement there will feel more permanent to them--they've had several rectors in the past 5 years, and they want someone to stick around for a while. They are very sweet and nice people, but that doesn't mean they'll be frank :) That being said--we are in contact with a member of the search committee who has just moved away for a different job about renting his house (we've posed the question, but haven't heard back yet).

As for property tax, this is what I found (and don't understand at all): "The tax is calculated based on 20 percent of the fair market value of real estate, property based on the millage rate of the school district." (The millage rate is 51.2)
A couple for sale listings have had property taxes included, and I haven't seen any that are over $500/yr. Though some mentioned a "homestead property tax credit" of $350.

And yes yes yes, we want to be super careful, because the last thing we want is a life-suck, especially as I'm growing my business and getting preggo. We've already decided that anything with major structural issues is out, but we're willing to deal with cosmetic stuff (most of these houses were built in the 50s and need updates desperately). We will run away from anything that looks questionable/meth-ish for sure. This is something that we would def. consult the congregation about--most of them live in the neighborhood we're looking in.

And how much work does the $30K house need? No idea, I'm waiting on pictures. If it looks promising enough, I'll ask around for inspector recommendations and take a trip out to see it + other houses on the market.



 Here's a little more information about the town...

My own (from-afar, internet) research supports what the two realtors in town have told me: there isn't much in the way of rentals getting listed anywhere. Searching for rentals on the internet typically brings up a "no results." According to the one realtor, this is because rentals in demand and are being done by-owner and not listed anywhere but maybe craigslist. She claims rentals are high because folks around there use small businesses that don't report to credit bureaus to buy things like furniture and cars, so then they end up with a shitty credit score and can't get a mortgage (I have no idea if that's bs or not).

As for the town, it's in Arkansas--Mississippi river delta. Rice, soy, cotton, a prison, a 2-year college, duck hunting, not much else. The area has been economically depressed for a long time, but things in this town specifically don't seem to be as bad as some other parts--they have had increases in jobs and decreases in unemployment in the last several years. Plus, they're getting a Wal-Mart Supercenter! Oh boy! They have a top rated elementary school (and are very proud of it), but the high school is more on the average side. There are efforts going in to revitalizing downtown, but right now it's looking pretty sad--one block of open storefronts, one block of closed ones, and churches. The $30K house is within a 5 minute walk to the high school and a 15 minute walk to the church (which is downtown--built in 1875 and beautiful).

up.up.away

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Re: Pros + Cons of purchasing a $30K house?
« Reply #11 on: January 25, 2013, 10:30:41 AM »
Oh, also, I saw somewhere that the median rental price is $425. So the two $1,000 rentals one realtor has listed are definitely on the high end.

Forcus

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Re: Pros + Cons of purchasing a $30K house?
« Reply #12 on: January 25, 2013, 11:21:07 AM »
House next to mine has been up for sale for almost a year. The area is very similar to the one you describe. Not much rental but houses fairly cheap. They moved to lead another congregation and still have this house sitting here. My opinion, stay far far far away from buying. $30k sounds attractive. Closing costs, 2-3k in property tax per year, repairs ($$$), etc. are not. Especially if you have a job where you KNOW you will have to move sometime. If you live in a "toxic" area, the taxes tend to be higher because they have less tax base to draw from... further reducing interest when you put yours up for sale. Even if it worked out financially, the headache (to me) would not be worth it. If renting, you pack your stuff up, get your deposit back, and you are out of there.... not sitting on a property you have to maintain when you are many miles away.

Kriegsspiel

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Re: Pros + Cons of purchasing a $30K house?
« Reply #13 on: January 25, 2013, 08:12:42 PM »
You are describing where I live, almost exactly so.  Houses are a bit more expensive here.  I decided to rent until I move away.  I'm renting a 1br apartment, so it's not the same as you renting a big house for a grand, but I'm sure you can find a cheap rental you're happy with until you move away?

James

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Re: Pros + Cons of purchasing a $30K house?
« Reply #14 on: January 27, 2013, 05:27:13 PM »
...this is because rentals in demand and are being done by-owner and not listed anywhere but maybe craigslist.


I assume you have checked craigslist?  And I assume you have some contacts there, time to start networking.  That is how to find the good rentals.

Peter

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Re: Pros + Cons of purchasing a $30K house?
« Reply #15 on: January 27, 2013, 07:24:37 PM »
I hate the idea of real estate. But if I had a job in a town with that kind of housing market I would be buying up the whole damn town and renting it back out again!

up.up.away

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Re: Pros + Cons of purchasing a $30K house?
« Reply #16 on: January 28, 2013, 08:38:05 AM »
...this is because rentals in demand and are being done by-owner and not listed anywhere but maybe craigslist.


I assume you have checked craigslist?  And I assume you have some contacts there, time to start networking.  That is how to find the good rentals.

I've been keeping my eye on craigslist--as of right now, there are three posts for housing in the town, two rentals and the $30K house. I called the rental that would've suited us and it was taken.

We are looking into renting a house from a parishioner who just moved away, but we don't know if they're planning on renting or selling (the house is in the $80K range). Once we have a signed contract in hand and the announcement has been made to the congregation our network of folks we can talk to expands a whole lot--until things are finalized it's kind of hush hush.