Buy and rent back home

7 Replies

There is a small older home near my other rent house I am interested in. Here is why;

The house is well built in the 30's and until recently well maintained. It is currently owned by a young woman who is a single mom of 2 children ( different dads I think). Anyway she seems to be struggling with keeping the place up. She is employed in a stable but menial administrative job.

She purchased the property from a friend of mine about 6 years ago. 

I am considering offering to buy it from her and rent it back. The idea being that I would be able to make some repairs and take care of the maintenance better than her.

There are tree limbs hitting the roof ( shingles will be gone pretty soon),. some outdoor light fixtures broken with wires exposed....

Now, the property includes a build able lot next to it and the area is a very desirable area.

What might the downside be on this?

I would probably build another rental property next to it with a year or two.

btw, this is in Texas where rent laws tend to favor landlords more than a lot of other states.

@chris h for me the biggest downfall to this deal is renting back to the current owner that was not able to maintain the property as the owner. If owner cannot maintain the property will she take care of it as a renter? If you do go through with the deal a month to month rental may be best once you fix up the place.  

My biggest concern with this, is that if she doesn't make enough money to take care of it now, how is she gonna be able to afford paying rent on it.  You want to be cashflowing, so the rent should be higher than mortgage payments, which is why I ask about her ability to pay.

lol  @Shawn M.  said it well.  Apparently, we were both responding at the same time.  lol

Personally what are the upsides to have the previous owner as the tenant. In order for you to be able to make money her rent is going to be much higher than her rent. Otherwise how are you going to make money and keep the house up. I am afraid that if her margins aren't good now. How is her situation going to be better in a for-profit situation.

Of course it is mostly in the numbers. She is making her mortgage payments etc... I think the lack of maintenance is more an issue of time to attend to the problems as opposed to finances. 

My other renter is a woman who has  very good job, has a masters degree, but just does not want to be a homeowner. So she is willing to pay more than a homeowner to not have to deal with the occassional issues associated with owning. I'm thinking this could turn out to be a similar situation.

She keeps the place clean.

I think I may be able to get better terms on a mortgage than she currently has.

Even if you can get better terms, its very, very likely you will need to get significantly higher rent than her payment.  Break even for rentals when using a PM means rent is double your P&I payment.  With self management, its not as high, but its still something like 1.5X your P&I.

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