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  1. #1
    Sold: LS1 '85 El Camino ls1camino's Avatar
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    Thinking of buying a second house to rent out

    I bought my first house almost a year ago (June 18th), and now that my wife is working a steady and well-paying job, we're talking about investing for our future. One very common option is to invest in real estate, and either rent it out or fix it up (if it needs it) and sell it for a profit. We're not interested in flipping houses, so we're considering buying to rent out.

    Any of you have experience with this situation? Anyone have any advice fro buying a second house? Can I still get a tax credit for the interest I pay on the mortgage?

  2. #2
    O U 8 1 2 Spaz's Avatar
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    Quote Originally Posted by ls1camino View Post
    I bought my first house almost a year ago (June 18th), and now that my wife is working a steady and well-paying job, we're talking about investing for our future. One very common option is to invest in real estate, and either rent it out or fix it up (if it needs it) and sell it for a profit. We're not interested in flipping houses, so we're considering buying to rent out.

    Any of you have experience with this situation? Anyone have any advice fro buying a second house? Can I still get a tax credit for the interest I pay on the mortgage?
    i wouldn't do it with a single home... with a multiple unit place i would...

  3. #3
    Senior Member FasstChevys's Avatar
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    Quote Originally Posted by ls1camino View Post
    I bought my first house almost a year ago (June 18th), and now that my wife is working a steady and well-paying job, we're talking about investing for our future. One very common option is to invest in real estate, and either rent it out or fix it up (if it needs it) and sell it for a profit. We're not interested in flipping houses, so we're considering buying to rent out.

    Any of you have experience with this situation? Anyone have any advice fro buying a second house? Can I still get a tax credit for the interest I pay on the mortgage?
    My guess is that if it isn't your primary place of residence, no.

    I'd be interested to know if a bank would even lend the money, unless you have a substantial amount of cash to put down on it, or buy it outright.

  4. #4
    LSX whore allbaugh_04's Avatar
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    Depending on your credit, you will need at least 20% down on an investment property, however, you'll need the loan for your new primary residence. I'm sure it'll work the same way.

  5. #5
    Feels so good BadBlueBird*'s Avatar
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    I am considering this but I want a small beach home to rent out. Watch trulia.com, lots of great buys out there!

  6. #6
    Member blackcar's Avatar
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    Every town is a little different. In our area rent houses are a great investment. I manage right around 100 different units, for about 20 different owners. The rental demand is very high in our area.

    Most cases you will need 20% down. Some banks will take a pledge of 20%. For example, if you had enough equity in your current home to equal the 20% you could pledge it. But if for some reason you could not make the notes on the rent house the bank would get both homes.

    Yes the interest is tax deductable as a business expense.

    I would sugest you talk to a REALTOR in your area and someone who has rental property. Or a REALTOR that has rental property.
    Last edited by blackcar; 06-06-2011 at 01:23 PM.

  7. #7
    Member Ls1_385hp_T/A's Avatar
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    Quote Originally Posted by allbaugh_04 View Post
    Depending on your credit, you will need at least 20% down on an investment property, however, you'll need the loan for your new primary residence. I'm sure it'll work the same way.
    ^ This.

    Multiple units are OK but they're a pain in the ass. A single home would be a great start off to see how it goes for you. My dad just bought another home to rent out, he put 20% and is paying about $700 a month, renting it for $1300.

  8. #8
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    Quote Originally Posted by blackcar View Post
    Every town is a little different. In our area rent houses are a great investment. I manage right around 100 different units, for about 20 different owners. The rental demand is very high in our area.

    Most cases you will need 20% down. Some banks will take a pledge of 20%. For example, if you had enough equity in your current home to equal the 20% you could pledge it. But if for some reason you could not make the notes on the rent house the bank would get both homes.Yes the interest is tax deductable as a business expense.

    I would sugest you talk to a REALTOR in your area and someone who has rental property. Or a REALTOR that has rental property.
    Unless you get both loans from the same bank and both go into the same investor pool there is no way the pledge of 20% could come before the first mortgage he has on his primary house. The only thing that comes before a 1st mortgage is when property taxes go unpaid and the county/city F/Cs on the home.

    Some people have two homes and have just two plan jane mortgages. So rule number 1 is make sure you get a loan that allows you to rent.
    Last edited by Zinergy; 06-06-2011 at 02:13 PM.

  9. #9
    Member blackcar's Avatar
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    Quote Originally Posted by Zinergy View Post
    Unless you get both loans from the same bank and both go into the same investor pool there is no way the pledge of 20% could come before the first mortgage he has on his primary house. The only thing that comes before a 1st mortgage is when property taxes go unpaid and the county/city F/Cs on the home.

    Some people have two homes and have just two plan jane mortgages. So rule number 1 is make sure you get a loan that allows you to rent.
    You are right. But if he put the first home up to get the second loan and he quit paying the note on the rent house the bank would take both homes. The proceeds from the sell of his primary home would pay off the first loan. If there was anything left over it would go towards the loan for the rent house.

  10. #10
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    The interest rate on your second, non-primary property WILL be higher.

  11. #11
    Senior Member 1MileCrash's Avatar
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    it's a huge friggin pain in the ass. i've got a mortgage out on my duplex right now...i live in the bottom and rent out the top. if you're serious about it i'll give you a few tips.

    1. save all your receipts for tax write offs
    2. purchase a house/duplex that is in good condition. you don't want to be putting a ton of cash into the place if you don't have to. windows, roofing, siding, appliances, furnaces, water heaters, etc...should all be in good condition and relatively new within the last 10 years.
    3. fixed rate mortgage
    4. 15 year mortgage rather than a 30 year. you make your money back quicker
    5. screen potential tenants and know what you can and can't do legally. the last thing you want is drug dealers in your house or people who won't take care of the place and cause you huge cleanup and repair headaches or cause problems for the neighbors. you're the landlord and you want to be on good terms with surrounding property owners.

    i made out pretty good and got a fixed rate 15 year mortgage for 5.5% back around 2003/2004 and put $5k down on $55,000 with my dad cosigning for me.
    Last edited by 1MileCrash; 06-06-2011 at 04:52 PM.

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