Hi everyone, thanks for the ideas. I was
going over the basics of this to myself to see
what the gains and losses might be say over
3 years, buying for self use, renting for self use
then later renting out for self income. Please give
ideas as I never did this kind of thing before.
Option 1) buying in cash for self use 3 year cost/gain
Gains
estimated 2% property value gain per year on $200,000 (cash cost of house) = $12000
losses
house insurance per year $1000 = $3000
property tax $2000 = $6000
heat and water = 700/year average = $2100 loss
upkeep of house = $3000 (3 years)
total loss = -$2100 (3 years)
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Option 2) renting an apt/house for self use 3 year cost
Gains $150/m maybe on $200,000 bank interest gain = $5,400 (3 years)
Losses
$1000 per month = $12,000 = $36000 (3 years)
(no heat and water costs, no home insurance, no property tax though)
total loss = - $31600 (3 years)
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Option 3) investing to rent out house entirely
price of home $200,000
gain
$12,000 rent per year at $1000/m = $36,000
$12,000 % increase per year value = $36,000
(at estimated 2% value per year increase)
loss
insurance per year $1000 = $3000
property tax $2000 = $6000 (3 years)
$150/m maybe on $200,000 bank interest gain = $5,400 (3 years)
heat and water = 700/year = $2100 loss (3 years)
upkeep of house = $3000 (3 years)
total potential gain $72,000 over 3 years - $19,500 losses
Total gain = +$52,500 (gain in 3 years)
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I never really realized there was such a difference. I have always been
lazy and liked the idea of renting from someone for the peace of mind to
not have to think about bills and idiotic year long leases which I absolutely
despise dealing with so I refuse and just rent from hotel like places instead
who don't demand to know every detail about your private net worth which
I will to the death refuse to give publicly to anyone.
Of course you wouldn't get all that $52,500 gain for renting out after income tax but
still, that is making me think of buying 2 now. Even if I buy only one and never rent out I am still not loosing anywhere near as if I rented just for the convenience of not having to do a few things a year like pay the property taxes, utilities, insurance, etc. I would not
go greedy with the rent, just something to be reasonable.
I was getting tired of my even 1.5% interest at the credit union
so I think this is a better option, to buy cheaper places and rent
them, it will give me a lot more than leaving it in the credit union
and is a whole lot less stressful than dealing with the stock market
which I was looking into for a long time but think it is too rigged for now.
So I think my answer is that I will buy IN CASH outright. If I put it
on a mortgage while still living in it it would make no point, I would loose
more than my $1000 in total per year on the mortgage interest rates.
It only makes sense to mortgage if you have renters I am seeing since
you need a whole lot more cash flow to cover the mortgage interest rates
and if you are just living in a house without renting out at least part of
it you are always leeching cash.
