Learning, Sharing, and Teaching > Real Estate and Landlording

First Timer Landlord - Thoughts and Critiques Welcome!

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h2ogal:
I'm buying my first income producing House this month, and hope to Close before Christmas, and I would love to hear your thoughts!   (Long post so you have the relevant details).

About Us: I "fired" a couple of years ago, but DH was still working, so I got bored and started my own LLC doing contract IT work.  DH also has a well-established S Corp with 7 employees.   Our children are grown. We own our current house (paid off), some undeveloped acreage/farmland, and some commercial real estate we rent to DH business. For the past 2 years, both of us have been spending more and more time with customers in a city about 2 hours from our residence.  We often stay in Hotels 2-3 days a week.   My investments are currently 70% US Stocks, and the rest in Bonds and Cash.   

About the Property:   
We found the city we are doing work in to be going through a 'renaissance', and decided to purchase a multi-family home there in the most popular trendy, walkable neighborhood in the city, very close to a $100 Million dollar redevelopment investment project (approved by City and starting construction Now), and right on the bus and metro lines.

We paid $330K, and financed 100% with a 30 yr fixed rate VA loan.   I got a 4.3% interest rate due to banking connections.   The total monthly cost will be about $2k, as the property taxes are very low.   

The house currently has two 3BR units, and has been fully and tastefully remodeled including all new roof, windows, furnaces, electric, piping, kitchens and bathrooms, etc.   We plan to rent one unit to a family member (Single Semi-Retired PhD) for $1000/month, and the 2nd unit will be my primary residence for a year, while we remodel the attic into livable space.   

We plan to remodel the attic into a Master Suite with kitchenette, move into it, and rent the second legal unit for $1250/month.   

Since the house is currently a legal 2 Unit, we plan to combine the finished attic (our living space) with the unit my family member is renting so we don't have a problem with zoning or building permits, while we will still maintain our separate private spaces, and each area will have a private exterior exit. 

This city apartment will be my primary residence for the next 3-5 years, but we are keeping our current (fully paid for) house as a vacation/2nd home, and we will be there Friday - Tuesday.   One of our sons will live in this current house full time also.

Our long term plan is still up in the air.   We may keep it and fully rent it.  We may decide to sell it once we fully retire (which for me will be 4-5 years out).

Do any of you experienced and smart landlords have any advice for us?   Tax advise, legal advise, ideas on unforeseen risks all welcome!

joonifloofeefloo:
Before doing anything, read the relevant landlord/tenant laws *for your region*.

Even on this forum, people will give landlord/tenant advice based on no laws, or based on the laws in their own region. You need to know the ones in yours. Should be easily accessible online. In some regions, agencies develop a guide for laymen. Worth reading *both* versions through completely.

Ignoring the laws can set a landlord up for big loss.

rothwem:
It honestly doesn’t seem like much of an investment to me. I get that it’s convenient, but you’re not making money off of it! I suspect that after you move out, it’ll be more of a headache than a money maker. 

Jon Bon:
So how much money are you going to put into this remodel? It sounds a bit significant to finish off an attic (depending)

I will say another 30k for arguments sake.

So you are into the house for 360k.

Would the house fully rented generate $3,600 a month in rent? If yes, then this is a good investment. If its less than this, probably not the best investment.

If it produces $2,400 as I suspect that it would based on your comments, this is a terrible investment. I guess since you are closing soon it is a little late in the game. But just because rents cover your mortgage and insurance does NOT make it a good investment.

The point of a rental is to harvest cash from the property.

waltworks:
Between the headaches of remodeling and the nonexistent cash flow on this property, plus the family+money potential for disaster, I personally wouldn't touch it with a 10 foot pole.

But it sounds like you're already committed, so best of luck.

-W

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