Four years ago, we moved into the house we rent for about $1500 per month. We originally signed a 2 year lease and when that was up, the owners let us continue at the same rate on a month-to-month basis. We think that this is because we are pretty good renters, we always pay our rent on time and I sometimes fix little things around the house that need repair.
Around the time we started that 2 years ago, we had an off-hand conversation with the owners where they told us that they might be willing to sell us this house as we have never before owned a home.
Two years later, I've discovered BiggerPockets and I think that buying this house might be a good way to start in REI. The house was built in the late-80's and has all original finishes and fixtures. It also seems to have original kitchen appliances. It is definitely in need of some updating. We already like the area that we live and are familiar with what the house needs having lived here for awhile.
I am feeling that we could be in a good "house hack" situation, but I have a few concerns:
- First, I have to convince my wife that this might be a good house to buy. She's always viewed owning a home as risky ever since her ex-boyfriend lost his house to foreclosure back in 2008. Also, she's not too keen on living in a house while it's being renovated. We have a newborn daughter and the thought having both of those going on at the same time does not appeal to her. Any advice? I'm thinking that if I bring her hard numbers on the deal that might help, but I'm not sure how to start putting a value to the home.
- Second, does anyone have advice on how I can approach my landlord about selling to us? I'm concerned that we may not have enough for a down payment and if we are unable to come up with a good deal, the owners may want to immediately sell to someone else and then we'd have to find a new place to live.
- Any thoughts on creative financing for the home purchase based on that? Perhaps seller financing? What about the costs for the renovation?
I want to do as much research and have as much hard data so that I can convince both my wife and the owners that this would be a win-win-win. Any help would be greatly appreciated.
I would try the bigger pockets calculators for buying a rental, and also a rent vs. buy calculator you can find online. The webinars put out by Brandon Turner or podcasts show how to use all the calculator tools.
I would ask the owners to do seller to you it would be basically the same thing as renting and they know you pay. SO they can agree to payments and maybe a premium. Tell them to do a land contract. That means you have to pay interest. But if the numbers work for you then its great. If you buy the house you do not have to rehab it right away .....
Have any other questions tag me and i will respond.
Thanks for the input everyone! So I ran the numbers on the place we are renting through the Rehab 70% rule and BRRRR calculators (using my free trials) and every which way I sliced it, I would have to propose that the Owners sell it to us barely more than what I believe they bought it for in the mid-2000s. Then I would have to sink a lot of renovation money into it to get it rent ready and propose a much higher rent than what I think I can get in my area to even make it a good deal. Seems like a lot of variables to make that deal viable. So I guess I'll need to rethink my entry point into REI.
Next question is, does it make sense to buy a rental property when you yourself are renting? Or should I stick to a different strategy until I can buy my own home?