All Forum Posts by: David S.

I think trade school is a great idea... probably what I would have done instead of a full degree with 20/20 hindsight, and the metrics in favor of this approach have only gotten better over time. I plan to recommend the same to my two boys, though that's up to them of course. Regardless, at your age, and with that two year employment requirement (typically at the same employer or at least in the same line of work) for most loans, finding a good place to work where you can climb within the organization for a while might be the best place to start. 

Now if your father has an actual business, I don't see why you wouldn't want to work for him for a few years, learn some property remodel techniques which will likely help you over the long run, and potentially make a bit more than you might otherwise. I can't comment on how a lender would look at the heredity of the matter however.  

At that point, take those skills, buy a place that needs some work, and do it. I'm fixing up my 3rd house, and though the market has done me some favors, the fact is, fixing up your primary dwelling is a GREAT way to get ahead. If you can combine that with a house hack, well, you just got your leg up into property investing right there. But for now, unless your father is signing for a property, you're going to have to focus on the income side of the equation. 

Stick with it and keep learning... you seem to have a great mentality! I should warn you... you will always run into the naysayers, especially when you're young. Usually they're just jealous or otherwise worried they'll be left in your dust... tune those people out and keep plugging away... and do your homework right!

@Joe Splitrock I'll have to look at those bridge loans again; I remember looking at them last time we sold a home and the feasibility was rather lacking in the US relative to places where they're more common like Europe (in speaking a family member across the pond). It's possible something has changed or even that I wasn't looking in the right places. Thanks for that pointer sir. 

You are indeed correct on the assigned value of the home initially. Beyond that I don't recall the details for this particular home. Again, they were both purchased as "one" primary residence as they were on one and the same parcel which seems to impact the suitability of the 1031 exchange, but again, that's what my accountant is for. It's been a while since I had this talk with him... this time I'll take better notes!

@JD Martin Thanks for the good input, I think you got the details fairly well, and that perspective helps! 

I think most people are reading into the scenario a bit too much... we're not looking for luxury and lots of sq footage, American entitlement, etc, but a bit more practicality would be significant. 

@Nathan Gesner and @Steve Vaughan, there's also no need to save for a home as we'd own our home free and clear before selling it; I know there was a lot of info in the original post, perhaps too much. We'd have some money to invest after selling the rental home and we'd be free and clear on our primary as well, just to clarify. 

As to the income, many people on here can attest that it's actually not hard to live on $50k when you have no mortgage, no car payments, no other debt, you have health coverage, low taxes, etc, and fortunately that number goes to $60k next year without considering any other cash flow (purchase of rentals, may pick up part time work myself for extra savings, etc.). There's also plenty of flexibility for extra hours/income if it were needed, but the idea is not to run ragged in favor of the almighty dollar so long we're constantly improving our balance sheet. 

But I'm tending to agree, that by the time we rent a year, I'll have spent as much as half a rental home in some Midwest markets... so we're opting to keep the house we're in for another year and reevaluate as we go. There's a sad history tied to the home we live in, hence the desire for a fresh start, but I won't get into those details here. The idea is to get a bit more home on less land, so a lateral move rather than moving up.  The only reason we'd like to be renting is to go back into the market as a cash buyer rather than subject to the sale of the current home and so we're not rushed into a purchase. Even if we waited a few years, that's not an ideal way to buy a home in my opinion; it's optimal to be able to buy cash without the requirement of selling your existing home and relying on the buyer's financing coming through. 

@Joe Splitrock I'm actually pending a call with my accountant regards the rental home and how that's looked at from a tax perspective. It gets complicated with this property being that it wasn't purchased as a second home. I can't remember all the laws there, hence the call I'm waiting on. And yes, I'm not too worried with missing out on some appreciation with rates climbing; again, renting would mean I could go to the table cash, which should make up for some, maybe all, of the costs of renting for a year. Though that point is moot since we've decided to keep our primary for now based on the feedback here. 

Thanks all

Thanks all for the feedback so far; exactly the info I needed. 

There's other options for us such as staying where we're at for another year after selling the rental; we'd be mortgage free, AND I'd be able to test the waters in an out of state rental market as I'd still be able to buy the first unit/home cash (we'll clear about $150k on the sale of our rental after paying off the note and other fees).  This would allow us to transition into some more income/cash flow more gradually and eventually we could still sell the home we're in in favor of something more suitable. 

Or there's the possibility of selling our primary home while buying a more traditional home for less (without the acreage) and eventually keeping it as a rental down the road if we find a home we really like once the market frees up a bit. It's extremely unlikely we'd be able to buy a home we happen to see ourselves in long-term while selling the home we're in at the same time. 

I agree that renting for a year is a great way to waste a lot of money when we don't have to, but selling a home and buying at the same time in CO is a tricky thing to get done in this market (it's essentially a gridlocked market). If we rented for a year I could buy our next home cash and save money on the purchase while not being rushed into buying something. 

In a way, we're trapped in our current home even if we own it free and clear, which is an odd circumstance.

Hi guys, I find myself in a unique predicament and need advice. Here’s the situation:

My wife and I currently have two homes, one is our primary, one a rental. Both homes were originally on one parcel which we’ve been able to divide into two separate parcels. We are listing the rental for sale July 1st as it sits on acreage and makes for a poor rental property. We also happen to be selling our primary home in August as we have a third child on the way and need more space (among other reasons).

We intend to rent for a year ourselves and see how the economy looks in another 10 months before deciding to purchase again. After the sale of our rental we will own our primary home free and clear, so the proceeds of our primary home will end up as investment capital as well as earmarked for our future home. My wife has a full time job that pays roughly $50k but I’m the stay at home dad who’s homeschooling our kids. We just dissolved a small business as well, so this is a fresh start for us. We have no debt, essentially perfect credit, and no other blemishes on our records.

In other words, we’ll need to lock in a rental before we close on our primary home but we’re relatively income poor, especially when most LL’s want 3x monthly rent for income, while at the same time we’re relatively asset rich with very low overhead.

The idea is to deleverage while the economy has had a long run, start investing in rentals out of state over the next year or two, and find a more suitable primary home while not selling and buying at the same time here in CO. 

What would it take for a LL to consider us for a 12 month lease if we’re talking around the $2000-$2300 a month range? I would be willing to put 6 month’s worth of lease amount in escrow and pay the typical first, last, and deposit. Is that a common thing to do or would most LL’s turn us down just because it’s an unusual situation?

We’ve always done things different which has paid off for us over the years, but that makes for some odd situations too. Last thing I want to do is put my family in a bind, but fortunately the baby isn’t due till December.

What would you do in my shoes? What would you require if I looked at your property and wanted to sign a lease? 

@Mindy Jensen I'm of the opposite opinion of @Jen R. and would only consider the purchase if you're considering keeping the look as is with cedar shingles since they add most of the character of the home. I guarantee you that plenty of people like the way it looks except for the fact that the roof is in need of replacement. 

Unfortunately, as you are probably aware, insurance companies out here along the front range DO NOT LIKE CEDAR SHINGLES. You're asking for a difficult time finding reasonable insurance if the roof is kept cedar. 

All that said, you may want to pass on it, especially if the rest of the roof behind it is flat rather than sloped. 

Perhaps you should plug a picture of the house into the certa pro home paint application which is pretty easy to work with and play with the roof color just to give yourself an idea of what asphalt would look like. You may have to look at it cross-eyed for best results being it's a roof rather than the siding/brick. 

Side note: if you did buy it and found yourself replacing the windows, I'd opt for a side by side style for the dormers/second story windows rather than the horizontally split windows... they just don't look right.

Good luck with that one; you owe us after pictures if you end up buying it! 

If your comps indeed pan out that way, why not buy the New Britain property, then refi and be back where you started out? Seems a no-brainer in that sense. Just be sure of what you've got. Leverage is half the battle in this business... as long as you've got your ducks in a row and know those numbers for a fact. Depends on your definition of "in decent shape" really... for some that's a home that needs $5,000, for others that's $50,000.

Personally I highly doubt it. You're not only up against property costs, but also permits, utility tie in, taxes, materials, a hot labor market, etc. The price of lumber is roughly 3x what it was only 5-10 years ago... A sheet of plywood at my local Colorado building outlet is now $38! 

There's a reason that most homes going up today are in strong markets and typically for the higher-end buyer... they simply can't build them cost effectively otherwise. Don't forget these outfits have this down to a science... they know where to buy materials and how to save costs while meeting code. For every dollar they spend, you'll likely spend a buck fifty if not more. Why do they build such large communities? Because they can create value adds such as club houses, golf courses, pools, entry gates, etc that boost the perceived value of each home significantly. 

In my opinion you're far better off buying on the secondary market and investing that energy in needed improvements, especially if they involve curb appeal! 

Improvements made by the tenant may seem great, but in the end of the day you need to realize that your tenant is by default making a poor investment himself and stepping on your toes to boot. There's a mentality problem here that may seem minor on the surface but this is a big red flag in my opinion. 

I had a similar type tenant who acted like none of the improvements he had done to the place were a big deal (I inherited this tenant with the property and should have kicked him out in hindsight) until it came down to eviction and a lawsuit. In the end, his game plan was to try and take the property out from under me! In his mind he literally deserved to be the owner. 

That to say, give a man an inch and they'll take a yard if they can. Your renter's mindset should concern you and isn't natural for the most part. Watch out!