Author Topic: Looking at houses this weekend- would love advice  (Read 5322 times)

MgoSam

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Looking at houses this weekend- would love advice
« on: March 17, 2015, 10:37:06 AM »
Hey everyone,

I'm in Minnesota and currently living with a friend of mine (in his condo). I have been living with him for about a year, before that I lived with my parents so as to save up as much as I can, and now have a significant chunk of money invested with Vanguard. My aim is to buy a house that I can afford on my own and rent out the rooms. I have never owned real estate, and would like to buy additional rental properties in the coming years, but want to start by first buying a personal residence.

Here are the listings

http://www.themlsonline.com/minnesota-real-estate/listings/property/4550354

http://www.themlsonline.com/minnesota-real-estate/listings/property/4565104

http://www.themlsonline.com/minnesota-real-estate/listings/property/4563525

http://www.themlsonline.com/minnesota-real-estate/listings/property/4525591

http://www.themlsonline.com/minnesota-real-estate/listings/property/4548406

http://www.themlsonline.com/minnesota-real-estate/listings/property/4571644

Please let me know what you think of these.

waltworks

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Re: Looking at houses this weekend- would love advice
« Reply #1 on: March 17, 2015, 11:23:00 AM »
Without some info on what you'd expect in rent, how much you want to put down, where you work and how close each place will be...etc, nobody can give you any good advice. Sorry, but you are going to have to do more than post some links to listings if you want anything useful.

FWIW, your basic plan sounds fine to me.

-W

TheOldestYoungMan

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Re: Looking at houses this weekend- would love advice
« Reply #2 on: March 17, 2015, 11:46:17 AM »
I can give you some info on renting out rooms.  I've done it for a couple of years now, but I didn't buy my house with the intent to do that.  If I were doing it all over again I would be looking for the following features:

More rooms.  I'm committed to live in landlording at this point, so a bigger place with more rooms would bring in alot more income, and isn't that much more cost.

More parking.  Most tenants are going to be driving and shuffling cars is a hassle.

Private entrances.  If my bedroom had a back door I could completely avoid the tenant if I wanted/needed to.  If their room had an exterior door they could likewise do the same.

Bathrooms.  I got a 3 bedroom 2 bath smallish family style home.  In practice this means the second bathroom is basically child-sized.  It has an impact on potential tenants, particularly as the two rented rooms share the one bathroom.  I could probably easily justify the cost of larger/more bathrooms on the mortgage in higher rents/higher quality tenants.

Multiple stories.  Along with the more rooms idea, once you get over a certain amount and go multi-story, some homes have a great layout for being a landlord.  This is often listed as "mother-in-law" or something similar.  There's common areas but the landlord might be able to stay in the smaller room with a little kitchenette, and really open up what potential tenants are available.  There's alot of single-mother of two out there looking for a place that I have to turn away.

So are you looking to just subsidize your housing or totally cover the cost?  A little bit more upfront can double the rents you can get/reduce vacancies.

The basic idea is sound though.  Living by yourself is overrated and intensely expensive.  Good luck.

MgoSam

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Re: Looking at houses this weekend- would love advice
« Reply #3 on: March 17, 2015, 12:02:48 PM »
I appreciate your advice, and please let me know if there is anything information I should provide.

All of these houses are in Minneapolis, a fairly central location. They are a few miles away from Uptown (fun, yuppy place that is very popular in the summer) and a few miles from downtown Minneapolis. They are also within a 10 mile bike ride from work (huge factor for me).

I am going to be putting down at least 20% towards all houses. I have already been pre-approved for a 30 year mortgage at 3.875% and can take out as much as $200,000 for a personal residence.

My plan is to buy a house and make monthly payments. My goal is to rent out the rooms and use this cash to save up for a downpayment for a rental property. I don't have a timeline for the second property. I do not plan on liquidating any of my Vanguard investments except for the downpayment.

Rents for a one bedroom apartment are approximately $800/month in this area. One of the things I will be looking at is the parking situation. All of these places have a minimum of 2 garages, so will be able to include useage of one of them to a tenant.
« Last Edit: March 17, 2015, 12:06:03 PM by MgoSam »

MgoSam

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Re: Looking at houses this weekend- would love advice
« Reply #4 on: March 17, 2015, 01:04:01 PM »
Without some info on what you'd expect in rent, how much you want to put down, where you work and how close each place will be...etc, nobody can give you any good advice. Sorry, but you are going to have to do more than post some links to listings if you want anything useful.

W- thank you for your response. For putting down, I am looking to put down 20% and take out a mortgage on the rest. I am willing to put down up to $40,000 for a house ($200,000) but have been looking to find a house that costs far less. Let's say that if I find a house for $160,000, I am going to put down $32,000. I am interested in your (and everyone on here's) experience, so if you think I should put down more please let me know.

For rent, I am don't know enough about comparable in the area to make an assessment. I'm hoping to charge $500/month per room, but as I said, I don't know enough to see how feasible that is in this area. All of these houses are within 10 miles of my work, most of these are 5 miles away. They are also 5 miles from downtown Minneapolis (huge area of employment).

TheOldestYoungMan

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Re: Looking at houses this weekend- would love advice
« Reply #5 on: March 17, 2015, 01:36:14 PM »
https://www.rentometer.com/

Remember that renting a room in a house is considered "nicer" by many people than an apartment.  So a good 1 bedroom setup might just fetch that full $800 or more.  Particularly if you can offer garage parking, that is typically an additional cost at an apartment if it is offered at all.

I definitely like buying smaller than you think you can afford.  Particularly if this is your first time buying.  20% down to avoid the mortgage insurance, putting more down is entirely up to you.  Psychologically a mortgage is a constant wound on my soul, so I have a hard time recommending financing, your mileage may vary.  The transactional costs were more than I thought they would be.  Every time I buy a house these catch me off guard.  The whole homebuying process is just /vomit/.  I'd still do it again.

Once you've got more details you can post a case study on the property and these real estate people will help break it down with you.

http://forum.mrmoneymustache.com/real-estate-and-landlording/how-to-real-estate-case-study-sell-or-rent/

MgoSam

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Re: Looking at houses this weekend- would love advice
« Reply #6 on: March 17, 2015, 02:27:30 PM »

So are you looking to just subsidize your housing or totally cover the cost?  A little bit more upfront can double the rents you can get/reduce vacancies.

The basic idea is sound though.  Living by yourself is overrated and intensely expensive.  Good luck.

Thank you for your advice, I'm looking to have roommates subsidize the costs. I'm able to afford paying PITI for all these places on my own, and rental property will be helpful. I don't know what I will do with the earnings (advice would be appreciated), but my current thinking is to put it in a separate bank account as a reserve fund towards maintenance and other expenses. This fund can later be used towards buying a second property, or moved to Vanguard.

affordablehousing

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Re: Looking at houses this weekend- would love advice
« Reply #7 on: March 17, 2015, 02:55:46 PM »
I would say look to a house that lets you have your own bathroom and leave the other(s) to the tenants. I never rented rooms in a house I owned but I was the "master tenant" and sublet rooms to cover my rent. Renters destroy bathrooms so try to carve out your own space. I would look more to the layout, to make sure you have your own private area. Also, airbnb might be much more lucrative than renting rooms. In my area you can cover a month's rent just by renting an apartment on weekends, and have more control over the calendar. This also means you aren't stuck with a crummy roommate for months on end.

MgoSam

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Re: Looking at houses this weekend- would love advice
« Reply #8 on: March 17, 2015, 03:26:44 PM »
I would say look to a house that lets you have your own bathroom and leave the other(s) to the tenants. I never rented rooms in a house I owned but I was the "master tenant" and sublet rooms to cover my rent. Renters destroy bathrooms so try to carve out your own space. I would look more to the layout, to make sure you have your own private area. Also, airbnb might be much more lucrative than renting rooms. In my area you can cover a month's rent just by renting an apartment on weekends, and have more control over the calendar. This also means you aren't stuck with a crummy roommate for months on end.

+1 to Airbnb, I am starting to look into it to see local rules and regulations for it. I would be open to it. One of the houses I am looking at is 5 bedrooms, and I don't think I would like to actually have 4 roommates, so would love to have one or two of the rooms open for people to rent with Airbnb.

clarkfan1979

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Re: Looking at houses this weekend- would love advice
« Reply #9 on: March 17, 2015, 05:38:35 PM »
I think you need to ask more pointed questions. I would read a landlording book first and then post some more specific questions in 1-2 weeks.

MgoSam

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Re: Looking at houses this weekend- would love advice
« Reply #10 on: March 17, 2015, 07:17:14 PM »
I think you need to ask more pointed questions. I would read a landlording book first and then post some more specific questions in 1-2 weeks.

Good point, I'm reading, "Building Wealth one house at a time," and hope to finish it tomorrow.

accolay

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Re: Looking at houses this weekend- would love advice
« Reply #11 on: March 19, 2015, 08:50:01 PM »
I'm in your area. Do you have a real estate agent and access to the MLS yet? I'm not, just curious. A lot of those homes you can find online are already gone. Full swing property season has been building.

I wouldn't buy on Cedar Ave for my own residence. Tempting due to price, but not unless they improve it like Lyndale. (when it is decided poor people can have a nice street like richer people on Lyndale, but I digress).

Always make sure there is room to put snow once it's removed. I dislike long driveways that are next to houses with the garage in back. You could get a snowblower, but to me a snowblower is just another engine to maintain and break.

I always like houses in Mpls with alley access and at least a parking pad for reasons above. And especially with snow emergencies, off-street parking is a huge bonus.

Houses in some areas of Mpls are very tempting in price, but there isn't always a great exit strategy. I could be wrong as I don't know NOMI or Harrison well, and it's certainly better than it was a few years back. I like this guys blog, he has done work in NOMI, although a lot of his older entries are gone since he updated his site: http://www.investmentpropertyanswers.com/ If some of those homes are listed at 80k, what needs to be fixed, and what are the other reasons why such a beautiful home hasn't been snatched up already, especially that last one- the Four Square with the door to nowhere?

Make sure you check out the Mpls crime maps for your area to make sure of your comfort level:
http://www.ci.minneapolis.mn.us/police/statistics/crime-statistics_codefor_index
Crime is leaps and bounds better than it was, but something to be aware of.

If you're thinking to rent to downtown professionals, I would absolutely be thinking South Minneapolis walking distance to the Light Rail and bus lines. Also easy access to the airport. Also opens you up to Augsburg, MetroState, MCTC and UM students etc.

A personal note- I hate older houses that have had their old original windows ripped out for new cheap "superior" vinyl windows. Older windows can always be fixed (normally very easy fixes) are made of far superior  wood etc. etc. When they are refurbished with a quality storm window, they are as effective as a replacement window and will last longer. There is a lot of info about this online, see John Leeke.

Lastly, I think $500 a month for a roommate situation in Mpls is a bit high, but it seems like it's what the market will bear. As long as that includes all utilities it might be reasonable, but I'd think more like $400-450 would be reasonable to me. Vacancy rates (4.7% 4th quarter http://www.ci.minneapolis.mn.us/cped/resources/reports/cped_trends_reports_home) are low now even with the apartment building be done around the city and Manhattan style rents they are charging. Although it seems Millennials are more averse to the idea of buying a house and renting instead, I'm waiting for that bubble to pop.
« Last Edit: March 19, 2015, 11:19:18 PM by accolay »

MgoSam

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Re: Looking at houses this weekend- would love advice
« Reply #12 on: March 20, 2015, 09:22:18 AM »
I'm in your area. Do you have a real estate agent and access to the MLS yet? I'm not, just curious. A lot of those homes you can find online are already gone. Full swing property season has been building.
Yes, of the 6 I listed, 4 are now off the market. I emailed my Realtor another 3 listings and of those, at least one is off the market. Such things happen, and this is a useful reminder to make real estate acquisition a rational process instead of an emotional one.


Always make sure there is room to put snow once it's removed. I dislike long driveways that are next to houses with the garage in back. You could get a snowblower, but to me a snowblower is just another engine to maintain and break.

I always like houses in Mpls with alley access and at least a parking pad for reasons above. And especially with snow emergencies, off-street parking is a huge bonus.
Great advice! I haven't ever had to deal with snow removal problems and this is one of the concerns I do have.

Houses in some areas of Mpls are very tempting in price, but there isn't always a great exit strategy. I could be wrong as I don't know NOMI or Harrison well, and it's certainly better than it was a few years back. I like this guys blog, he has done work in NOMI, although a lot of his older entries are gone since he updated his site: http://www.investmentpropertyanswers.com/ If some of those homes are listed at 80k, what needs to be fixed, and what are the other reasons why such a beautiful home hasn't been snatched up already, especially that last one- the Four Square with the door to nowhere?
Thanks for this, I read some of his articles and has some great advice.
Make sure you check out the Mpls crime maps for your area to make sure of your comfort level:
http://www.ci.minneapolis.mn.us/police/statistics/crime-statistics_codefor_index
Crime is leaps and bounds better than it was, but something to be aware of.
Yeah, this site has been a great resource.


A personal note- I hate older houses that have had their old original windows ripped out for new cheap "superior" vinyl windows. Older windows can always be fixed (normally very easy fixes) are made of far superior  wood etc. etc. When they are refurbished with a quality storm window, they are as effective as a replacement window and will last longer. There is a lot of info about this online, see John Leeke.

I admit I know very little about windows, great advice and will look John Leeke. Thank you for your post, it was very helpful. If you are available, please let me know if you would be interested in meeting up. I would love to buy you a drink and pick your brain.

arebelspy

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Re: Looking at houses this weekend- would love advice
« Reply #13 on: March 20, 2015, 10:22:30 AM »
I'm in your area. Do you have a real estate agent and access to the MLS yet? I'm not, just curious. A lot of those homes you can find online are already gone. Full swing property season has been building.
Yes, of the 6 I listed, 4 are now off the market. I emailed my Realtor another 3 listings and of those, at least one is off the market. Such things happen, and this is a useful reminder to make real estate acquisition a rational process instead of an emotional one.

You don't have to buy today, so that's not an issue, just take it slow and steady and keep looking at ones and you'll eventually hit a good one with the right timing to purchase.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

accolay

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Re: Looking at houses this weekend- would love advice
« Reply #14 on: March 20, 2015, 09:39:47 PM »
Glad to be of service. To maybe save some time with realtors, just drive by some of the properties you're interested in first. What looks good online can look like a real turd in daylight. Maybe at different times of day too just to see what the neighborhood is like.

MayDay

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Re: Looking at houses this weekend- would love advice
« Reply #15 on: March 21, 2015, 06:09:40 AM »
I didn't click on all your links, but 2 thoughts:

1. When we lived in St Anthony, we had a lot of interest from single parents with one or two kids who they had partial custody of. That kind of set-up would be in big demand I think.

2.  NE mpls is so nice and a quick commute downtown.