If the Owner/Occupancy rate of the building you are about to buy into is less than 60% than it will raise a red flag in the eyes of most lending institutions.

If a building has most of its units leased out or occupied by someone other than the owner than the risk of a maintenence payment default is higher. Also, it tells a story about the building itself. Why don't owners want to live in this building? In the eyes of a lending institution, a building with a low owner occupancy rate is a higher risk investment that they may not be willing to lend on, or charge higher rates for.

7/2/2007 11:31:53 AM

How would you find out the owner/occupancy rate?

7/2/2007 11:35:51 AM

You can just ask the property manager, I think they have to give out that information when asked.

7/2/2007 11:40:27 AM

Good to know. Thanks.

7/2/2007 11:40:57 AM

i'm not seeing how investing in rental property is that much better than mutual funds or CDs because if one had $100,000 to invest, which route would he/she be better off:

1) CD @ 5.5% = $5500/year

2) Paying $100,000 cash for a property that rents out at $650/month, but after property tax, HOA, it's more like $500/month = $6000/year and that's not counting vacancy, repairs, upkeep, time....

3) Paying 20% Down on the same property above but paying interest on a higher rate (investment property)


To me it seems like (1) is guaranteed, (2) is more risk and if there's vacancy, it may even be less than (1) (assuming no appreciation in property value), and (3) people say it allows you to leverage but I don't think the tax deductions will offset the higher interest payments and upfront closing costs so even (2) seems better than (3)

so it's kind of a two fold question....
i don't see how purchasing investment rental property is better than CDs
i don't see how putting less down payment is better than paying it off all at once

7/5/2007 1:21:21 AM

Appreciation.

7/5/2007 1:24:32 AM

^^ if you can buy a house for say around $125k putting 20% down to avoid mortgage insurance, and then rent it for $1000 - $1200, your at least going to break even depending on your loan terms. yes you have to keep a tenant in there but that isn't hard to do around campus. in the meantime you are building equity in a house that doesn't really cost you anything except that initial 20%, which is instant equity.

cds suck. to get that 5.5% rate you probably have to lock up your money for 48 or even 60 months. for that kind of time frame you can get a knowledgeable investor, *be patient*, and easily see returns of double or triple that with the right portfolio. you're not going to get rich or retire off of cd's at 5.5%. ask donald trump.

7/5/2007 8:59:23 AM

Quote :

"3) Paying 20% Down on the same property above but paying interest on a higher rate (investment property)"

If you make it your primary residence first, you won't have to pay the higher rate.

Quote :

"(2) seems better than (3)"

How do you figure? In the third example you still have $80,000 spare cash to invest.

[Edited on July 5, 2007 at 9:11 AM. Reason : ]

7/5/2007 9:10:03 AM

I think she means the CD is better because it appreciates at 5.5% per year, where a house may or may not.

7/5/2007 12:01:37 PM

Right, but $100K could buy you a $500K house. If you can rent it out to cover the monthly payments all you need is a little over 1% appreciation to beat the return of the CD.

7/5/2007 12:03:27 PM

I get that, but you are going to have to find a renter that is willing to pay about $2400 per month plus utilities. If the house sits vacant for 1 month, you lose $2400. In the long run, it makes sense, because the renter is paying for your principal as well.

7/5/2007 12:15:16 PM

well since i own a place now, i'm not sure how to make the second property my primary residence to avoid paying the higher rate

I was thinking paying it off was better than carrying a mortgage because mortgage always comes with the added burden of interest, and if it sits vacant for any period, interest seems like money lost

7/5/2007 12:19:32 PM

I thought a second home can still be considered a residence.

7/5/2007 12:32:08 PM

Every investing class I have ever taken has advised to not have a rental property completely paid off. The idea is that much of the money you make on a residential investment is off appreciation. The interest is 100% deductible on your business properties so it will give you more income tax shelter while you are taking that extra money you have left over from only putting 20% down and investing in more properties.

7/5/2007 12:39:24 PM

^^ is there something i don't know? since i thought all second homes/properties have to be at a higher interest rate

^ yeah but i'm assuming appreciation has hit it's peak so i'm not expecting much appreciation in this property for years to come, i have also heard that although there are tax deductions/savings on the interest paid, it still does not offset the actual interest......the other fear is that if the property sits vacant or tenants refuse to pay, i have to cover the entire mortgage, including interest

7/5/2007 12:47:12 PM

Plus you are going to be taxed on the rent your tenants pay, unless you can do something under the table.

7/5/2007 12:48:40 PM

You are taxed on the gross rent, then you deduct management fees, maintenance costs, advertising, and interest. Basically if you take in 12,000 in rent in a year and 10,758 of that was interest paid. Then you are already down to $1242 before you even finish deducting the rest of your expenses.

If all the other expenses exceed what was left then you can end up taking a loss and shelter yourself from paying taxes on some of your other income.

7/5/2007 12:57:15 PM

so in terms of monthly cash flow, would it be better to be a little bit in the positive, break even, or a little bit in the negative, all things considered

also which of you actually do have rental properties now and can provide some true experiences, whether it's good or bad

7/5/2007 12:57:36 PM

^^I was referencing her previous posts that stated she was thinking of paying the rental off. Then there is no interest to deduct.

[Edited on July 5, 2007 at 1:00 PM. Reason : .]

7/5/2007 1:00:14 PM

In the positive.

You will need a certain amount of operating funds to cover repairs and the payments during vacant periods. Unless you want to dip in to your personal income to pay for this stuff you will need a way to keep an account funded for these expenses.

7/5/2007 1:03:53 PM

I get a check for approx. $410.00 every month on a mortgage that I pay a total of $444.00. The principal is paid down by about $110 each month, but the property has depreciated as we discussed before. At tax time, it pretty much washes out (rental income vs. deductions).

On this condo in Driftwood Manor, I'm going to try to do a rent to own for anyone who has a down payment between $2,000 and $3,000 starting Aug. 1. I'm not looking for a sucker, but that deposit is a nice hedge against damage, missed rent, etc.

7/5/2007 1:05:32 PM

I'd still prefer to build a nice portfolio of mutual funds before I dabbled in real estate investing.

7/5/2007 1:42:33 PM

yeah, there were a bunch of articles recently that did an analysis of whether returns were better when investing in real estate vs. the stock market, and the stock market kicked real estate in the ass.

I think it was in last month's Forbes. I can't find a link, but it was definitely in the print version.

7/5/2007 1:44:21 PM

7/5/2007 1:51:10 PM

Here is one for you folks to ponder.

This home is for sale for $424,000. Someone was murdered inside in the last year. NC law or Real Estate rules do not consider someone dying in the home to be a material fact that the listing agent would have to disclose. If you moved to the area and dealt directly with the listing agent (did not have a buyer agent) you could easily buy the home without finding this out until you already were under contract or possibly had closed on it and moved in.

A buyer agent could tell you the information and would probably be obligated to if he/she was aware of it.

What do you think about that?

Also do you think it will sell? Right now they have it marked up $45,000 dollars over what the family bought it for.

7/7/2007 3:49:03 PM

Quote :

"What do you think about that? "

I dont give a damn if someone died in the house, as long as it is free of mold, asbestos, raydon, etc.

7/7/2007 5:01:49 PM

^^ that house does not look haunted to me. its ok to buy

7/8/2007 6:20:37 PM

Quote :

"Right now they have it marked up $45,000 dollars over what the family bought it for."

They'll make a killing on it!

7/8/2007 6:25:52 PM

7/8/2007 6:30:29 PM

Quote :

"yeah, there were a bunch of articles recently that did an analysis of whether returns were better when investing in real estate vs. the stock market, and the stock market kicked real estate in the ass."

i'd just be a lot more worried about putting hundreds of thousands of dollars in the stock market. it's pretty much an almost sure thing you'll get your money back out of a real estate investment, and I guess if you know your shit maybe it's true for stocks but i dont know shit about them so i'll stick with real estate

7/8/2007 6:37:12 PM

I'd say the exact opposite. I love the liquidity of mutual funds. Real estate doesn't have that luxury.

7/8/2007 9:04:26 PM

unless you made $300K in real estate last year then you lose.

cause i did.

[Edited on July 8, 2007 at 9:36 PM. Reason : nobody said anything about liquidity]

7/8/2007 9:36:09 PM

Quote :

"it's pretty much an almost sure thing you'll get your money back out of a real estate investment"

Quote :

"nobody said anything about liquidity"

Look up liquidity dumbass.

7/8/2007 10:45:06 PM

i said you'd get it back, not that you could have it back any day that you wanted it

7/8/2007 11:35:12 PM

Quote :

"What do you think about that?"

would i want to know that? definitely. do i think it's something that should be disclosed? no. there's all sorts of illegal activity/crazy/wild things that go on in houses that doesn't have to be disclosed. there's nothing about that murder that really decreases the value of the house in and of itself. unless there are blood stains on the carpet or something like that.

i learned from my neighbors that my house was a previous site of serious domestic violence, and who knows what the hell else. i had cops showing up every so often for about 2 months after i moved in trying to serve warrants, etc. makes sense since it was a foreclosure.

as for investment, for me i decided it made alot more sense to put my money into the market being young. as referenced earlier in this thread, i was considering buying a second property for rental/investment but decided against it for now. i'm glad i did with the continueing downward trend of the market, i think i can pick up something cheaper down the road.

^^yeah, i think you're the one that needs to look up the definition of liquidity.

[Edited on July 9, 2007 at 12:00 AM. Reason : .]

7/8/2007 11:54:20 PM

Quote :

"unless you made $300K in real estate last year then you lose. cause i did. "

Why would I give a damn if you made $300K in real estate last year? I'm basing my decisions on decades of financial data, not on one guy who made some cash in the real estate market one specific year.

7/9/2007 7:38:43 AM

my pre-drywall meeting is next week

7/9/2007 1:44:24 PM

Nice. What builder/subdivision?

7/9/2007 1:49:35 PM

Beazer, The Towns at Umstead. I'm really excited because the community is starting to look great as some of the bigger houses are being completed...and I need to start becoming familiar with Umstead State Park since I'm within walking distance.

7/9/2007 2:10:31 PM

Which floorplan?

7/9/2007 2:12:35 PM

lennox, but i'm having the "unfinished room" finished and that will be my office and the gameroom is a home theater room. so it ends up being 1500+ sq. ft and it will have everything that i wanted: dark hardwoods across the entire main floor, granite counters, all stainless steel appliances and other nitpicky things. they have a REALLY good deal on a hartsfield right now that is like $15k off because it's the only one that hasn't sold in one of the units (7 townhomes per building).

7/9/2007 4:19:25 PM

does that mean that your office will have the water heater basically in the room?

i think that they should have found a way to make the basement a garage with an entrance from the rear but maybe it just wasn't possible with the land - seems like a lot of wasted room if unfinished - you made a good decision to finish it off and use it though - but if you watch tv down there what is the point of the space by the fireplace unless you really want a sitting area - the master bath should have 2 sinks and should be standard but if not it's probably an upgrade everyone gets anyways -overall looks nice - would like to see some inside pictures of how it's actually setup instead of how they do the model

7/9/2007 5:07:46 PM

the water heater will be walled in and have a door to get to it as needed and the same paint and carpet as the rest of the house. i chose to have outlets run in that room as well which basically got me the drywall for free.

other units have garages, but for where i'm at in my career now, i could use the space more effectively for an office (with a nice tax deduction) and i don't think it will hurt resell value considering the placement of my unit. not to mention it is $15k more for the model with the garage. you're right about the master bath, it's a double vanity and i went crazy with upgrades to make it EXACTLY what i want. i spent more on upgrades than the model unit, but if i'm living there and paying for it...i want it to be perfect.

the living area will be a sitting area because i'll have flat screens in the bedroom and tv room and want to grow up a little by having a nice dining and relaxation area . i'll be sure to post pics when it's complete...i feel very fortunate to be able to make an investment like this for my first home and it will sure beat renting (which i've done for six years like an idiot).

[Edited on July 9, 2007 at 8:24 PM. Reason : .]

7/9/2007 8:23:10 PM

What are the tax ramifications when you sell the place from using the office to get a deduction?

7/9/2007 9:56:26 PM

signed the contract and loan papers at the bank yesterday
closing on the 30th!

1600 sq ft. split level. 3 bed/3 bath. wood burning fireplace. fenced in back yard. ceiling fans. cathedral ceiling in living room & kitchen. 2 bonus rooms (dog room and den/office/reptile room)

Putting on a new roof this weekend and the new siding starts next week

starting other renovations in August:
* painting every room (and stenciling)
* hardwoods
* installing new light fixtures in bathrooms and kitchen
* put up new blinds (thinking plantation shutters for living room)
* stain and treat front and back deck

We (me, husband, and father-in-law) are doing all the renovations inside ourselves.

Can anyone recommend places to purchase materials (other than Home Depot which is where we'll go unless we find a better deal elsewhere)????

Next summer we'll redo the kitchen

7/11/2007 5:18:58 PM

is a split level the same as a bilevel?

as far as the light fixtures, make sure you wait to paint until after you remove the old ones but before you put the new ones up. that way, you can fill in holes or spaces if you switch the size of the fixtures.

7/11/2007 5:23:53 PM

not sure

the living room in on the middle floor. go up 6 steps and the kitchen, hall, 2 beds and 2 baths. go down 6 steps and you have a 2 bonus rooms, bath, and 3rd bedroom.

oh yea and the house is in Raleigh

7/11/2007 5:29:24 PM

a bilevel is pretty much just a foyer with stairs leading up or down. they really suck b/c you have to go up or down anytime you leave the house. That bottom level should stay a lot cooler.

7/11/2007 5:32:45 PM

how hard is it to replace with new roof and new siding? are you doing it yourself or hiring someone. what's the cost. may be time for me to start thinking about renovating my place. lol

7/11/2007 6:02:52 PM

how big is it

7/11/2007 6:03:55 PM