All Forum Posts by: Paul Farley

I am thinking of renting my home. Do I need to obtain a real estate license to do this or any form of certificate? I own the home and there is no mortgage. I live in Ohio. I can't find this anywhere online.

Anyone?

I am attempting to plan the next steps of my life. There are a couple different strategies that I am listing below. I would appreciate your opinion, but without too much bias with this being a Real Estate investing site ;).

Background:

I landed a good secure job last year and things are going well. I also operate a web design/digital marketing company that help produce extra income.

Currently, I live in my childhood home with my family (wife and two kids - I am 30 years old). I inherited the interest of the home and finished paying off the mortgage last year. I own 62% interest of the home and my sister owns 38% (we worked it out this way and the deed reflects this). We were planning on moving into a new house this past summer, but I felt it would be smarter to wait until next summer. We REALLY want to move, but at the same time I want to be smart with my decision.

The home is realistically worth only about $80,000. 

Dilemma:

Again, I want to move bad, but unless I would sell my home now, I would not be able to get the home I want. If I did decide to move now, after selling, I would use the money from the home to pay off student loans and to have some extra. 

I started thinking about my current situation though. Not many people can say that they own a home and don't have a mortgage. All I would have to do is buy out my sister's interest of the home and then I could put the home up for rent and make profits on it without having much overhead just taxes, insurance and repairs (at least I think).

My home requires some work though. If I was going to just sell the house, I was going to do only the necessities and then put it up on the market. If I would buy out my sister's interest, I would repair more than that. The home could use windows, hardwood refinishing, furnace in the future, and basement carpet are the major things.

Before I would even try renting out the home I would want to pay a good chunk of my student loans off (if not all) and then pay off my sister - around $30,000. I would also do some minor repairs and eventually do the major repairs, though I would potentially refinish the floors - let's say that is $2,000. Paying off all of this would be $62,000. 

Strategy Options:

Strategy 1 - Sell my house

Pay off as much student loan debt before this summer. Sell my home and just buy a new house.

Positives - Short-term benefit of spending less and getting satisfaction quicker. I wouldn't have to worry about paying off my sister as it would come out of the sale of the home. I can put my kids in a better school district, feel better about where I am living, but I would not be where I want to be financially yet. 

Negatives - We have outgrown our current house and really want to move. The purchase of the new home would take away a lot of my disposable income I currently have. Vacations and the style of life I live now would be drastically reduced.

Strategy 2 - Rent my house

First, pay off my student loan debt. Keeping this consistent with the first would position me to be able to buy a home at anytime if I decide not to rent my home. Then after I would pay off my sister's interest. I then would spend more money to get the house ready to rent and look into the business side/league aspects of renting a home.

Positives - Long-term financial benefit; I would assume that I can get roughly $900 a month renting this home - after taxes and insurance it would be safe to say I would profit $725. I would always have a fall-back home in the case something happens financially. I want to have multiple rental properties at some point, so this would be my first and it is ideal by not having a mortgage. I could use the extra $725 to offset my new mortgage or invest with it.

Negatives - I push back getting a new house by at least a year or two. I take a risk with my house in the fact that it is older and having to spend a lot of money in the future in repairs for tenants. I will have to move my kids to new school districts.

Questions:

• Do tenants occupy rental homes longer than a duplex/condo?
• Is it more difficult to rent a home?
• Does it make sense to rent my home? 
• Is $725 profit realistic with a $900 rental fee without a mortgage?

What do you all think? What makes more sense? Let me know if you need more information.

Not like I should as I didn't start getting seriously into my game plan until about a month ago.

The house next door to me sold last summer for $95,000. It is in better shape (siding, windows, general better shape inside). However, it has a tiny single car garage, I have a two car garage, and a breezeway which is about 200 sq ft (not sure if this adds sq ft, but I have been thinking about combing this room and my kitchen to increase the sq footage). I also have a fenced in yard. 

 I have floors that need redone in my house, so I would say it is worth $70,000 now, but with the floors re-done, I would say $75,000 - $80,000. The windows and siding really need re-done I just don't know if I would make back the money I put into it. 

The biggest issue is the neighbor hood/city is declining in value. A house just sold in auction across the street from me in a Probate auction for $55,000. I know that can't help the value of my house at all because that was one of the better houses on the street. New siding, windows, large extra lot, etc. 

What is the best way to check comp prices?

Thanks @Varinder Kumar. I appreciate the kind words and advise.

What does everyone think about me getting a loan to pay off the current mortgage I have (the 6k) and then paying that loan off a little bit faster than the scheduled payments?

Would it be wiser to sell the home and use the $50,000 or so as a down payment or use around $25,000 as a down payment and rent out the home for around $800-$850 a month and use that to help pay the new mortgage? 

Thanks for the response @Matt Vogt.

As of now I am making the mortgage payments because probate isn't over and I don't want to pay more than I need to right now in the case that something goes wrong with Probate, but it shouldn't. This isn't something I am looking to do right now. I am thinking about 2 years from now I will be ready. Regarding the current house, my questions was going more towards the point of should I take out a loan to pay it off to help my credit score and to help future lenders see I can pay off a loan in good standing. I could pay off the house right now in cash if Probate was over.

The good thing about my current situation is I basically have 0 debt other than student loans. I pay like $200 a month for them. Then I have my credit cards which is around a $50-$100 payment a month. I don't for see this changing, unless I have to get a new car, take the loan to pay off the house or something bad comes up.

In the next 2 years I am hoping to save in the range of $25,000-$50,000 more towards my goal. Everything I make from my freelancing business I save for this goal. In a month and a half I have saved $6,000. 

My initial post was gauge problem areas I had with my current standing, thinking if nothing changed. So, let's go with this scenario. If my debt situation doesn't change, let's say:

-$300 a month in debt (house paid off)

-$75,000 down payment

-725 credit score

-$40,000 a year income with the possibility of a spouse at $20,000-$30,000

Would that be enough to get my in my $200,000 price range home?

When this gets closer I will definitely sit down with some mtg brokers, but at this time I feel it is way too early and I don't want to get sold on anything.

This isn't something I am wanting to do right now. I am forecasting a 2 year plan. 

I made another $8,000 in a side freelancing business I have, but did not include that total as it wasn't "on the books per say". I am planning to be in the $40,000-$50,000 income category by that point. Plus my girl friend will most likely be my spouse at the point with another $20-30,000 in income. 

I wanted to go into this with what I am doing now to see what is really my holding back figure. Based on your comment is the income really the holding point? What would you say it needs to be at?

Hi all,

I am trying to make a game plan for the next 2 years or so. I have two questions/topics I would like to get some advise on.

1. Current Mortgage

My mother passes away about 2 years ago and probate is finally coming to a close. My sister and I will be awarded the home. I am currently living in it and paying the mortgage. There is approximately $6,000 left on it. My sister just moved out of the home and did not want to continue paying the mortgage, so we drafted a quit-claim deed and I now will own 65% and she will own 35%. I was wondering if I should take out another loan to pay off the mortgage and make payments to the other loan or if I should just continue paying the existing mortgage the way it is set up now. The mortgage is in my mom's name and doing me no good in terms of gaining credit. Either way, I would wait until Probate is over and the deed is in my name. What would you do in this situation?

2. I am wanting to buy my own home. My goal is for something in the $200,000 range. I don't want to spend $120,000 on a home and sell it 2-3 years later because of outgrowing it. My fear is I don't make enough or my credit isn't good enough. Here are some factor that may help lead me in the correct direction.

-I have a 640 credit score - 1.5 years ago it was HORRIBLE at a 490, so I have been working really hard to get it in decent shape, though, I still have a ways to go.

-I make around $32,000 a year. I enrolled back into school to and am 2 classes away from my Associates degree which will allow me to at least get a little better paying job. Most likely in the $40,000 range, but I will lose longevity. On my resume it would show I stay with companies for a long time; not sure if that would help.

-Even though my income and credit aren't the best. I will have anywhere from $40,000-$50,000 I can use as a down payment. The only debt I currently have is student loans and 15% credit card utilization. 

So my question for this topic is what would I have to do for a lender to allow me to be approved for a $200,000 home? Is my income the largest determining factor that I need to increase or what would it be? I'm looking to be pro-active to allow myself to be able to purchase a home I want to be in for some time.

Thanks!

Thanks for the help everyone! I really appreciate the feedback everyone has left.

I had a couple of revisions done and a new concept created for the gear. What do you all think?