Purchasing a house in a low income neighborhood

[mustachemayhem]

8 Months ago we purchased a house in cash for 35,000 to be used as a primary residence. Previously, we were renting an apartment in the city for ~1600 a month. The house we purchased is in a low income area a mile northwest of where our apartment was. This allows us to still walk/bike in to and around the city.

I did a ton of research including the following prior to purchasing.

• Check reported crime for the area
• Check house value trends for the neighbor hood (is it on an upswing,stagnent or declining) It was a slight uptrend.
• Drive through the neighbor hood multiple times through the week leading up too purchase
• Check for liens on property
• Check past sales records for property

Since this was an all cash purchase, we decided to forgo the normal mandatory home sale closing items such as home inspection ( did this myself) , survey, title check. Total closing costs came in at $27 dollars which was filing fee at the clerks office.

I'd be more than happy to answer any questions for those that have considered doing something similar.

[Scooter]

How did you check house value trends?

[dcheesi]

Hmm, not sure I'd skip the title check. Nothing worse than thinking you own a home and then finding out that someone else has an outstanding claim on it...

[Cassie]

I would only skip the home inspection if you had the skill to do that yourself. We did on our cash house but hubby was able to do it himself so no ugly surprises.  We still did the title search-totally worth the $.

[mustachemayhem]

I did the title search and home inspection myself.

For the title search, i pulled all the property records dating back to when the plats were initially sold. I did make sure to get a warranty deed from the seller.

For the inspection part i walked i did a thorough walk through of the house. All of the plumbing and electrical seemed to be recently updated. All outlooks worked, had GFCI,etc. Luckily the house is raised off slab so you can visually inspect the foundation, electrical and water lines.

For value trends i looked at comparable home sales in the area as well as tax data.

[Davids]

Congratulations, it is amazing how there really is a line in so many parts where a 1 mile (or even 1 block) difference can represent an upscale neighborhood vs. a lower class neighborhood.

[BFGirl]

I did the title search and home inspection myself.

For the title search, i pulled all the property records dating back to when the plats were initially sold. I did make sure to get a warranty deed from the seller.

For the inspection part i walked i did a thorough walk through of the house. All of the plumbing and electrical seemed to be recently updated. All outlooks worked, had GFCI,etc. Luckily the house is raised off slab so you can visually inspect the foundation, electrical and water lines.

For value trends i looked at comparable home sales in the area as well as tax data.

Did you check the probate records as well?  Not all title transfers occur by deed.  Was it a general warranty deed or a special warranty deed?  In other words, did the seller guarantee title all the way back or only from their point of ownership? Also you have to sue the seller if there is an issue.  If they are broke you can't collect anything even if you win in court.

A title policy is a worthwhile investment.

[jawisco]

Great move and congrats.  I would still take out title insurance or have a title check done by a professional though -especially if you are going to put money into the place - it is cheap and worth it.

Great ROI - especially since you were paying 1600/month in rent!  Two years of rental payments will pay the purchase price!

[mustachemayhem]

It was a normal warranty deed. There is always the chance that the title could be clouded in some way but I was willing to take the chance as the house was only $35k. Title insurance was going to run $1200 dollars and take a few weeks. If i would have waited that long i would have lost the property. I see it as no different than buying a house from a tax sale which i'm considering doing right now.

[greenmimama]

I am intrigued, what am I paying for when I pay more than 5k to close on a house then? it wasn't a cash deal, but hopefully our next one later this year will be and I can glean from your experience.

[mustachemayhem]

I am intrigued, what am I paying for when I pay more than 5k to close on a house then? it wasn't a cash deal, but hopefully our next one later this year will be and I can glean from your experience.

You normally pay for the following when closing

• Home inspection
• Home appraisal
• Title insurance
• Land survey
• Real estate broker fees
• Credit report fee
• Loan origination fee
• Pro rated taxes

Our purchase didn't involve any real estate agents. I did draft up a purchase agreement that we both signed.  Paying cash was so much easier. It was literally 24 hours between seeing the house to having the deed and keys.

Our first house (which we currently rent) was financed and we had this monster packet of stuff to sign. I went through an agent on that one and had everything on the list above done as mandated by the financing company. Unfortunately, i didn't do any real due diligence myself. The house passed inspections with flying colors. A week after moving in the water heater went. A month later the roof started leaking. A month after that we had termites. I learned the hard way that there was really no recourse against any of the inspectors.

[2527]

This is really interesting.  I'd like to hear about your experiences with the neighborhood in six months to a year from now.  If it is an OK living experience, you have done really well.

[mustachemayhem]

This is really interesting.  I'd like to hear about your experiences with the neighborhood in six months to a year from now.  If it is an OK living experience, you have done really well.

It's been 8 months so far without any real issues. We do have an alarm, and we are diligent about locking doors. We've met some of our neighbors who all seem nice. I've always been somewhat reserved with neighbors trying to be friendly, but not so much so that i they want to have an hour conversation every time they see me outside.

The only issues we've had thus far is we had an amazon delivery stolen off our front porch. I've had several packages delivered since then without incident. We are on a corner lot so anything on the porch is easily visible. We do have the occasional door knock for someone offering to mow the yard. I'm suspicious of these people but we had the same even when living in "rich" neighbor hoods. I do have visible security cameras which i would hope would deter any petty theft.

We do get the occasional "stray" or unknown neighbors dog that passes by. We've never had an issue with any of them. They always walk right by. That said, it does make me a little nervous as they are usually pitbulls and other aggressive looking dogs.

Overall, the neighborhood seems to be on a slow upswing. Lots of neighbors working on their homes, and lots of young families.

[Zamboni]

It sounds like you did really well picking and buying that home.  Congratulations!  Do you want to come and pick one for me? I've looked at some dogs lately (and not just stray dogs, although those seem to trot by here as well.)  ;-)

[2527]

Sounds like it was a good move.  I'm sure paying cash at that price has really given you a lot of financial flexibility. 

This is really interesting.  I'd like to hear about your experiences with the neighborhood in six months to a year from now.  If it is an OK living experience, you have done really well.

It's been 8 months so far without any real issues. We do have an alarm, and we are diligent about locking doors. We've met some of our neighbors who all seem nice. I've always been somewhat reserved with neighbors trying to be friendly, but not so much so that i they want to have an hour conversation every time they see me outside.

The only issues we've had thus far is we had an amazon delivery stolen off our front porch. I've had several packages delivered since then without incident. We are on a corner lot so anything on the porch is easily visible. We do have the occasional door knock for someone offering to mow the yard. I'm suspicious of these people but we had the same even when living in "rich" neighbor hoods. I do have visible security cameras which i would hope would deter any petty theft.

We do get the occasional "stray" or unknown neighbors dog that passes by. We've never had an issue with any of them. They always walk right by. That said, it does make me a little nervous as they are usually pitbulls and other aggressive looking dogs.

Overall, the neighborhood seems to be on a slow upswing. Lots of neighbors working on their homes, and lots of young families.

[2527]

Can you comment on whether you have children or not?

I found that when I had children, I became more conservative.  Not politically.  But less inclined to take risks with things that would affect them, and sensitive to how our life circumstances would be perceived by them.  About the same time, I achieved my financial goals so that is a factor, too.

I must imagine living there for 8 months now has been a boast to accomplishing your financial goals.

[RootofGood]

We live in a "below median price" neighborhood.  Nowhere near $35k, but there are plenty of homes in the $35k-50k within a block or two (in the same neighborhood).  Typical SF houses are more like $100-150k though. 

Crime isn't bad.  Occasionally there's a string of break ins to houses or cars, or silly high school kids doing dumb stuff kids do. 

The best part is the people.  Regular, ordinary people.  Who mostly don't care what the Joneses are up to.  We save a ton on housing and we save even more by having frugal friends in the neighborhood who enjoy frugal activities. 

Edit to add: also paid cash at closing with zero closing costs.  My FIL inspected the house, I pulled together half the money in cash and my parents gave me a short term loan (where I paid them a lot more interest than the bank was paying them).  I did the title search (law school grad). 

Closing was me meeting the real estate guy from the City (from whom I bought the house) at my new house.  He gave me the keys and what little info he had on the house.  I gave him a check for $105,000.  After a few minutes of pleasantries, he left and I said "WTF, I just bought a house".  :)

[zolotiyeruki]

Having only purchased a home through the "normal" process with all the closing costs, I'm oblivious to how a cash sale goes through.  Can you detail the steps you went through to buy the home?

[mustachemayhem]

Can you comment on whether you have children or not?

I found that when I had children, I became more conservative.  Not politically.  But less inclined to take risks with things that would affect them, and sensitive to how our life circumstances would be perceived by them.  About the same time, I achieved my financial goals so that is a factor, too.

I must imagine living there for 8 months now has been a boast to accomplishing your financial goals.

It's just the GF and I. It's hard to say how having kids would effect our situation. I'd like to think i would stay here even if we decided to have kids.

[mustachemayhem]

Having only purchased a home through the "normal" process with all the closing costs, I'm oblivious to how a cash sale goes through.  Can you detail the steps you went through to buy the home?

Our sale was realtorless on both sides. I found the house on zillow and setup a showing with the owner directly. After seeing the I made an offer which was accepted the next day. That night i researched property records on our local county assessor website (most counties have these online now and they are surprisingly detailed). I met the owner the next day, at the house again to do the inspection. We agreed after the inspection to meet later in the day at the county real estate assessor office. I got a cashiers check for the full amount and met him there. He wanted me to sign a special warranty deed that he drafted up. I said no and we instead used the states form (which was available in the law office in the same building for a 35 cent printing fee.

Once the normal warranty deed was filled out, we filled it, paid the filing fee and both got copies. It was at this point, I gave him the check and he gave me the keys.

It was amazing how simple of a process it was. The hardest thing was just being unable to solicit advice from other friends and family. It was a truly " you are on your own here moment.

[Exflyboy]

Dont forget to price the cost of a couple of shotguns into the ROI..:)

Good job, you bought a house for an almost disposable amount of money.. I mean if you left in 5 years and burned the place to the ground you'd still be way ahead of renting!

Frank