Personal Residence with Two In Law Suites

[Richard Yount]

Hello All,

I have a few questions about my first potential property that I will be buying and I wanted to pose them here on the forums to seek advice.  My girlfriend and I are looking at buying our first property in the Central Florida/Orlando area.  It is a single family home with two in law suites attached to the property (under the same roof).  We would be living in one of them, and renting out the main area (2/1.5) and the other in law suite (1/1).  Those two units bring in $1100 and $800 respectively and our expenses on the property come out to roughly $1700 including repairs, cap ex, and some vacancy.  We are excited that it works well for us as a primary residence so we can save money (and even cash flow) so we can begin looking into other rental properties to invest in.  My question for you all is whether we should be breaking our back looking for a mortgage company that will forgo mortgage insurance to keep our expenses as low as possible?  Between the two of us, our combined income is only $80k so we are under the $109k threshold to have mortgage insurance still be tax deductible.  We currently have a lender that will allow us to do a 5% down conventional mortgage (we need a low down payment option) without mortgage insurance, but the fees associated with this lender come out to about 2k more than a few others that I have shopped around.  Do you think it would behoove us to pay the additional 2k up front, make this property cash flow roughly $125/month better, but forgo the potential benefit of having that tax deduction (to anyone who responds, I'm not very tax savvy, so please be gentle with your responses to this), or should we keep the mortgage insurance as this tax deduction might be beneficial.  Something else to consider is that if we were to move out of the property, it would be cash flowing close to $400, so will we need this tax deduction when we have it later on as a rental property?

Thanks for your help with this in advance! Feel free to let me know if you need more information, I'll be happy to provide!

Richard

[Steve Vaughan]

Originally posted by @Betty Cruz:

@steve Vaughan thanks for the good info. I'm wondering why buying with a partner is any more nightmarish if a couple breaks up as it would be buying with a spouse and the couple breaks up.

Hi Betty. 

If it was treated like a partnership with fair ownership percentages, clear communication, clear expectations and everything was in writing, it wouldn't be any crummier than a normal partnership :)

However, when a couple buys real property and they are just in lovey-dovie land, they don't do any of these things.  It will be all good they think.      "Just get the loan in your name, honey.  I'm still paying off my student loans and my car and my credit card from our trip to Aruba.  I'll help make the payments and I'll work on it, too."   Try getting your time, work and money back on a handshake deal in RE.  It's just gone.    

Married people are covered legally. Community property.  Non-married people are just roommates (or friends) in the eyes of the law.