My wife and I have been hunting for a good deal on our first home. We do not have to move anytime soon, but if the right thing comes along we are ready to jump on it. We have been mostly looking at foreclosures in west Michigan where we live.
So here is the situation that we are currently thinking about:
- 4br, 1-1/2 ba house on the market for $26,900
- Comes with a duplex which is situated behind the house (all told, it's about .7 acres, but a lot of that is pretty wet)
- One tenant in the duplex currently paying $375 who wants to stay (she has lived there 20 years)
- Home is older (1930's) and has a lot of original items in it including the fuse box/wiring, windows, but generally in good shape interior and exterior
- The one glaring problem is both structures have very wet basements. When we saw it there had been no rain for at least 4 or 5 days and both basements had about 1/4" of water on the floor. The area has a high water table.
We are relatively new mustachians, both finishing grad school and so don't have a large stash of cash, but we have parental financing available at 5% for the next 5 years. Hopefully it would be all payed off by then, but if not we'd get a home equity loan for the balance.
My thinking is that this would be a way to start building equity instead of paying rent, all while bringing in rental income from a property that will (hopefully) be easy to manage since it is in our backyard. There is already a tenant who really wants to stay even with the current condition and said she's willing to pay more if someone were to fix up the place a little. We like the character of the house and the location is convenient. It's not exactly in a neighborhood - a little street of houses between a park, some open land, a city maintenance lot and a preschool.
So, my questions are has anyone else done something like this before? What are the pitfalls to watch out for? I'm thinking of taking care of the basement water myself by installing drain tile running to the sump. Anyone done this before?
We're new at this, but it seems like a potentially really great deal. Thanks for any thoughts you have.