Which To Buy First: Home Or Rental Properties?
I am new investor needing advice. I just got an offer accepted on a house for me in my family to live in. The house is the ideal house with about $50,000 worth of equity in it according to the assessor. Currently we are renting at $690 per month. THe new mortgage will probably be around $940 per month. We can manage this payment but, things are going to be a little tight.
My thinking is this: I want to start buying rental properties, but I am afraid that if I start buying rental properties FIRST, then it would be hard to buy a house for me and my family to actually live in.
So I was thinking to buy a house for me and my family FIRST then start buying rental properties. This way I can get a HELOC for the down payment of the rental properties.
Is this the best way or am I making a Huge mistake.
Tenacitude,
If a senior lien is foreclosing, then the foreclosure itself extinguishes all junior liens regardless of who ends up with the property.
Because of the glut of REO inventory, you can usually get a better price when buying from the bank after the foreclosure than you would pay if you were the successful bidder at the auction.
This thought is the right one, IMO: "So I was thinking to buy a house for me and my family FIRST then start buying rental properties." Regarding "THe new mortgage will probably be around $940 per month... things are going to be a little tight..." keep in mind that home ownership brings tax advantages that you need to calculate into/against the $250 per month higher payment.
Since you have an accepted offer on a property which will become your primary residence, you seem to have already answered your own question.
Purchase your home first.
Congrats on getting into the business.
The home I that has the accepted offer will be my primary residence. I agree with buying the primary home first, so I guess I did answer my own question. Thanks.
Quote:
On 2010-05-07 14:26, cjmazur wrote:
Check is the LLC is the best structure. The was a "hidden" clause in (I believe the Recover Act), that gives special tax treatment for qualified small business stock, which has from what I have researched, has to be a c-corp.
The tax benefit accures to the owner of stock in a qualified small business, not to the issuer of the stock. This benefit would seem to be more advantageous to a venture capitalist than to the OP.
If there people for an LLC, ea. w/ a one third ownership.
the c-corp equivalent would be ea. person oning 33% of the stong?
If no VC or equity investors, the founders are the "VC", no?
I would say that your deal is not very good and likely is a retail property. You need to learn to buy at steep discounts by identifying properties with problems that you are willing and able to solve.
Very few SFR landlords make a full-time living off rental income until the mortgages are wiped out. You have to learn to wholesale or retail properties for large chunks of cash. This skill set will allow you to be a full-time real estate investor as well as provide cash to buy long term keeper properties.
I would also say that having 2 other partners is a mistake. It is absolutely inevitable that one of them will move, get divorced, not want to work, need money, or something else that will destroy the partnership or force you to sell properties quickly.
I would never recommend having more than one partner.
[addsig]
Quote:
On 2010-05-09 00:30, cjmazur wrote:
If there people for an LLC, ea. w/ a one third ownership.
the c-corp equivalent would be ea. person oning 33% of the stong?
If no VC or equity investors, the founders are the "VC", no?
Are you trying to make the LLC a qualifying small business? Remember, the LLC treated as a C-corp for tax purposes is still an LLC, not a C-corp. The LLC does not issue stock.
I was planning to use the LLC for a protection blanket between my personal estate/portfolio. I have revised my thinking a bit and would like opinions. My original plan was to buy the first home via personnal loan/cash from each of the three of us. Instead, I am now thinking we will initially get a traditional15 yr fixed mortgage on the property. Once we get a renter in, we will then reevaluate how to pay off that loan and put the house in an LLC. From there, the LLC will have an assest free and clear that we can hopefully use as collateral for the second house. I like this idea as the barrier to entry is a bit less bumpy....I think!
Wells likely bought the note from the sub-prime lender for a discounted price. So they may not necessarily be losing money.
Keep you eye on this property, it has become part of the growing "shadow inventory", myth or reality?
If 135k is not full market value but rather somewhere around 85% of FMV, and 80k is your ARV, then you have a deal.
Well, that definitely corroborates what I have read then. Thank you for your time and insight!