Author Topic: Closed on new house with MIL apartment  (Read 2788 times)

Bearded Man

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Closed on new house with MIL apartment
« on: February 20, 2016, 08:38:07 PM »
The house is huge, has a completely separate MIL unit and is close to great commuting routes for quick jaunts to future jobs (I currently work from home most of the time).

Best part is my actual cost to live in the house after factoring in MIL apartment rent, principal pay down and tax benefits comes out to $300 a month. On top of that I have several additional bedrooms and baths in the main house still, some of which I could rent out if I fell on hard times. I still have my other rentals, but I liked this for the ability to subsidize my housing costs. Also, I could rent out the main house at any time and more into the apartment living entirely off my investments (other rentals) if I wanted to. Or I could rent both portions out and make 2K a month profit.

Although I expected the quality of the people who would rent a MIL apartment to be lower, I was quite shocked at HOW low. Not only did I have people with serious felony convictions reach out, I had people who were just plain idiots. I had people who got evicted from their one and only apartment ever after a mere month, but they swear they are a good tenant and will pay that landlord back (even though they have had years to do it).

I also had people who thought I was renting a 6 bed 4 bath, 600+K house out for 1K a month complete with granite counter tops, SS appliances and 3 car garage (this would rent for 3+K in the area). Then there was the lady who refused to tell me her income three times, citing that she could afford it, even though she had just told me she had to move out of her apartment last month because she couldn't afford it on a Denny's waitress wage.

Yep, there was a whole new level of stupid to deal with, but alas, I did rent it just over 30 hours after closing, to a guy who makes 5 times the rent and has excellent credit, single, easy going. Here's to it working out, luckily the unit is above the garage and has separate parking/entrance. Time will tell if the arrangement will work or if it will be too much like apartment living. In any case, I'll just convert both to rentals and buy something else if it comes to it or move into one of my other houses if it comes to it, but due to the location and the subsidized housing cost, I want to make it work.

I had already managed to rent out my existing primary residence before closing on this house, long before closing. Strong rental market in the Seattle area. So now I have 4 rental units, and a primary residence. It's amazing, I've noticed that now I have enough tenants that I am actually starting to see it as a part time job, there is enough time involved. 
« Last Edit: February 20, 2016, 08:44:52 PM by Bearded Man »

ceeteebee

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Re: Closed on new house with MIL apartment
« Reply #1 on: February 21, 2016, 08:49:41 AM »
Bearded Man, that's awesome! Kudos on what sounds like an excellent addition to a growing RE portfolio.

My wife and i recently relocated to the area, and have similar plans for the next few years. Starting with the purchase of a condo near downtown, which we'll probably keep as a rental when we eventually move on to the next place, ideally a multi-family house or something with a MIL apartment. What types of screening did you do for the tenants? Any recommendations on services for doing credit and/or background checks?

Best of luck with the new house and rental!

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fishnfool

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Re: Closed on new house with MIL apartment
« Reply #2 on: February 21, 2016, 05:15:49 PM »
Awesome work there Bearded Man!


zephyr911

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Re: Closed on new house with MIL apartment
« Reply #3 on: February 22, 2016, 02:01:50 PM »
'Grats dude. You're in a challenging market and I know it's a lot of work building a portfolio there.

Have you thought about hiring PM at any point? I currently self-manage but all new buys will have PM from day 1 and existing props will eventually follow. Reasons: probable PNW relocation in FIRE, and most property inside a 3-member partnership.

Jesstache

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Re: Closed on new house with MIL apartment
« Reply #4 on: February 22, 2016, 02:30:06 PM »
We have a MIL type apartment with its own kitchen, laundry and bathroom above the garage of our house with a separate entrance as well.  I've seen similar units in our neighborhood advertised on craigslist for ~$1150/month.  PITI on our 15 year mortgage is $1750.  We've discussed renting it out but it actually is partially above the master bedroom and we have very small children (2.5 and almost 5) and the apartment has direct access to the main house, specifically the area that the children's bedrooms, play room and bathroom are located.  We do not want a full time renter sharing our house with us and our kids. 

We have, over the last 2 summers, rented the apartment for 3 month stints to interns at our work for about half of market value ($550/mo) as the rental market is very tight here and it's near impossible for them to find a place to live for a reasonable amount of money on intern pay.   We like knowing that we have the option of additional income should we need additional cash flow in the future.  Once it is only us, we will either rent out the apartment and live in the main house, rent out both parts or sell the entire thing.  We have two other rental houses in the same area so moving into one of the others may make more sense as they are 1 and 2 bedroom houses.  It's nice to have options!

Bearded Man

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Re: Closed on new house with MIL apartment
« Reply #5 on: February 22, 2016, 05:49:50 PM »
Jessstache, is there no door separating the two units? By the sounds of it there is not, as if they can access the main house unobstructed. In my case there is a door with a lock on it. Nice thing is, I can move the door a few yards down the hall and add 3 more bedrooms and another bath to the unit! I could probably rent that for close to my mortgage. You must have bought at a good price or put a more than 20% down.

Zephyr, where in the PNW are you thinking of FIRE? Surely not the high cost Puget Sound area? WA is pretty inexpensive in areas like Aberdeen or Spokane, but the Sound, as you know, is HCOL.

ceeteebee, I personally will no longer use Tenant Background Search (.com). It requires the tenants to fill out information they already provided me and that I already put in, to authorize the check. My understanding is that this is because they use TransUnion. The other thing I don't like about them is that they ask the tenant what their income is in the form, and present that to me in the report as if they pulled it from the IRS or something. It's kind of like asking the tenant what their credit score is and then presenting me what they put as their credit score.

Jesstache

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Re: Closed on new house with MIL apartment
« Reply #6 on: February 22, 2016, 07:12:41 PM »
Jessstache, is there no door separating the two units? By the sounds of it there is not, as if they can access the main house unobstructed. In my case there is a door with a lock on it. Nice thing is, I can move the door a few yards down the hall and add 3 more bedrooms and another bath to the unit! I could probably rent that for close to my mortgage. You must have bought at a good price or put a more than 20% down.

There is a door but not exactly confidence inspiring.  We could add a more secure door but we really just do not want to share our home for long periods of time with someone else at this point.  We bought very close to the bottom for $370k in early 2012 and put 200k down so a little of both. Current value is somewhere around $600k.  We have also duscussed making the upstairs a true 2 bed, 2 bath plus office by putting a door between the ground floor and the upstairs.

SwordGuy

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Re: Closed on new house with MIL apartment
« Reply #7 on: February 22, 2016, 08:43:49 PM »
We closed on and moved into a large house with a MIL suite.   It's perfect for us.

We're using the MIL suite as art studio space.  I intend to teach classes in it once I retire from my day job.   It has a separate entrance for classes, but connects to the main house for our convenience.   We could rent it out if we ever had to, but hopefully we won't need to!

Dicey

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Re: Closed on new house with MIL apartment
« Reply #8 on: February 22, 2016, 09:22:58 PM »
I also had people who thought I was renting a 6 bed 4 bath, 600+K house out for 1K a month complete with granite counter tops, SS appliances and 3 car garage (this would rent for 3+K in the area).
Recently, we put our freshly rehabbed new property in a resort area on MLS. Our agent goofed and listed the 3bd, 2ba 1730sf home for "Sale", not for "Rent" at $1950. Would you believe she was immediately inundated with calls from people who wanted to buy it sight unseen? Really, they couldn't figure it out? PT Barnum got it right...
Congrats on the new place. I hope it serves you well.

zephyr911

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Re: Closed on new house with MIL apartment
« Reply #9 on: February 23, 2016, 08:39:44 AM »
Zephyr, where in the PNW are you thinking of FIRE? Surely not the high cost Puget Sound area? WA is pretty inexpensive in areas like Aberdeen or Spokane, but the Sound, as you know, is HCOL.

Primarily Oak Harbor. One of my sibs is happily established there, probably for life, and the other may move there eventually (they love Orcas but perpetually struggle with COL).

Avg $/SF is ~50% more than where we live now, but far below Seattle and not rising much in recent time. 2BR condos start at $99K and the stuff we like is $200-250K. Assuming I finish my 20 years for a military retirement, the NAVEX and commissary will help reduce costs. The magic number still goes up a bit, but... family has held an ever-increasing importance for us and we generally think it's worth it. We'll reevaluate over time as funds accumulate and market conditions change.