So I have a predicament, I have some cash saved up (about 20k) plus I own a house outright (valued at 120-150k). I believe this would be a great financial start for me but I have family living in the house for free. There is no cash flow for me. I want to start investing in real estate, specifically flipping houses and I think with my money saved plus the equity in the house I have a pretty good head start financially speaking. I know I should charge at least rent or something and I really want to sell the house, but this requires me to evict my family currently living there. I cannot do that. I have thought about liquidating the equity in the house but then it is a race against time because I have a loan on the house and I also know nothing about flipping houses nor real estate. I want to do this but there is a whole lot of unknowns. Does anyone have any advice or thoughts for me?
This is not a full answer, but to start, you shouldn't give assets away for free...even to family. You need to start by talking to them about charging rent. If it makes you feel better about it, make the rent *slightly--not significantly* below market rent. Let that house of yours make money for you. Treat it like a business. Is your family going to push back against paying rent or completely refuse to pay rent? If so, you have a tough choice to make. But in the end, if family refuses to pay you rent because you're family, they are using you. Do not allow anyone to guilt you otherwise.
Nicole W., thank you very much for the advice. I did leave this part out in my post because I wanted to stay away from it but I didn't just luckily land this property outright for nothing. My grandmother bought this house in 1979 and she passed it down to my uncle when she passed away. Then my uncle was unemployed due to the economy and the house was in foreclosure with a mere 11k mortgage left on the lien. It was about to be auctioned off so my uncle provided me with a choice. I can either let this property go into the hands of another real estate investor through the auction and essentially lose the house, or I can pay the balance of the lien and he would do a quit claim to me for the house. The only stipulation to that was he will only quit claim it to me if I let him live there for the rest of his life for free. I had 2 days to think it over before the bank closes the door and puts it in for auction so I agreed, paid the lien and got my quit claim deed. I couldn't let the potential 120-150k equity I will acquire just go to someone else. Now I pay taxes and insurance on it so it's actually costing me money. Plus I will sell it one day and with them living there I know the actual house is going through wear and tear and I know it needs remodeling before I sell. Isn't there something else I can do? What do you think about that?
That's a tough situation. I hate to sound like a life insurance company, but how old is your uncle and how is his health?
Wow, that is an awkward situation @Thomas Harrelson .
Is your agreement with our uncle in writing? I know you want to honor your agreements, but he's really got you over a barrel. Is he a reasonable person? Perhaps you can modify the arrangement. If not, you may just be looking at a VERY long term investment. If the house is in a good area for appreciation that could still be alright in the end.
You could still get cash out of the house through a refi or line of credit. But you'd need to be really sure you'd be making enough profit off of that money to cover the payments.
lol david.. As bad as it sounds, I keep telling everyone as soon as he dies I'll sell the house. But as of late it's been burning a hole in my pocket. My word is my bond Jean so unfortunately for me I won't kick them out or make them pay rent. However, I do want to look into a line of credit or refi the house but like you said I would have to make enough for my payments and I have no idea where to start out if I do.
Well, see what your payments would be for a loan. Then buy a cheap place that'll rent for enough to cover everything and the loan. It can be done! Use this calculator to start and you can plug in the loan payment added to the total "monthly expenses" category:
Step 1) Honor your word. Step 2) Take a loan out on the property. It will light a fire under your arse. Before you take step 2 do a gut check, pray, maybe talk it over with someone who's opinion you will give weight to in this situation. Be sure to check here for advice. Good luck!
Find experience flippers and joint venture on a deal to learn the ropes. That's what seems to work best for newbies
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