Advice Wanted: Buying a House to Rent Out

[Chips]

So here's my situation; an opportunity has come up for me to purchase a house in my home town so that I can rent it out to students for profit (I'd actually be purchasing the house with a very good friend). The house is right near a college that is currently undergoing massive renovations to house almost double the amount of students that it once could. I figure that this is the perfect opportunity to make this decision since the economy is still shaky and it's a good time to buy.

I am also a student (21 yrs old), but I don't go to school anywhere near my home town (about 2 and a half hours away). The house is going for approximately $150,000, and can fit 6 students at a time. Both myself and my friend would be able to each take out a loan of about $80,000.

Basically I'm asking if this would be worth it, and if it is, any possible advice some of you might have.

[SaviorSelf]

Would have to crunch some numbers, but if you haven't already, watch some shows on HGTV that talk about stuff like this all the time.

Are you going to have to fix it up?
Are there permits needed to be able to rent it out?
How's the condition of the house?
Pass all inspections?

There's tons of questions to be asked, but all and all with the school being close by and being redone, it could be a great income property.

Edit: Where are you located? Also, rent to girls if possible. From what I've seen tenant wise, college guys will just trash it and not care. I've evicted the last two guys who rented my other house out; place was completely fucking trashed.

[Takedown3]

dont rent to dirtbags, drug dealers, frat boys, or any other undesirables. NEVER rent to friends either, it's the same as the lending money rule.

make sure you know your landlord tenant act rules and regs

dont rent it by the room, rent it for say 1500 or whatever and have them pool there money.

take pics before and after rentals just in case you need to go to court for shit.

being a landlord is tough since tenants have more rights then you.

for example, in canada, if a tenant thinks he needs a new furnace, toilet, anything crucial to live, they can have it replaced for however much it costs and bill you and there is nothing you can do about it.

make sure all your shit is good to go before renting it out.

[archibaldcrane]

The good thing about college students is you can usually require they have their parents cosign on the lease, which significantly reduces your chances of getting fucked on rent.

It sounds like a good opportunity - the main question I have is how will you maintain it while they living there. If maintenance is needed (especially stuff that needs doing in, say, the next 24 hours) and you're off at school yourself, is your co-owner friend in town to take care of stuff? If so is he comfortable shouldering the lion's share of the upkeep, etc?

[tyven]

that property is gonna get destroyed, renting a house to college kids seems frightening.

[archibaldcrane]

Also, rent to college girls and then engineer a situation where one can't afford her rent and has to provide special favors to stay living there. Just do it man, bitches love confidence.

[Tyche]

Have you purchased your own house yet?

[SaviorSelf]

^

Byebye.

[Headspace]

Also, rent to college girls and then engineer a situation where one can't afford her rent and has to provide special favors to stay living there. Just do it man, bitches love confidence.

This.

[Quixon]

Do you have additional Funds available?

You are going to be paying for a lot more than just the sticker price on the house. Closing costs, Lawyer fees, inspections, title searches, etc. I believe you need to budget another 10-15% of the home for those expenses.

How much are you putting down on the loan? If you are paying less than 20% (I think) Down on the mortgage you will need to pay for mortgage insurance as well. Mortgage insurance varies, but that is another $100-$200/month there.

Are you a handy type of person, or will you have to call a repair guy for every little thing that goes wrong at the rental property? This will seriously cut into your profits if you need to hire someone to fix shit every time it goes wrong.


The next is obvious, but I'm saying it anyways:

You need to hammer out how much this will cost monthly, and then figure out the max you can charge for rent. You really need to figure EVERY cost into the situation, otherwise you may end up going through all this shit and turn out not making much at all on the deal.



Also..... how old is your business partner? It may vary by state, but I know at least in NY you can't get a mortgage until your 25 (I tried).

[Demosthenes]

I do something very much like this.
House cost per month $1150
Renting out 3 rooms at $500 a pop.

Have a lease, a damn good lease that lets them know you are in charge. I had my Lawyer draw one up for me. Evictions are just as easy, lawyer handles all that too.

If you are pulling in more than your mortgage costs, you are doing okay in my book.

[Yabby]

Have a solid contract. If you have never leased before go ahead and take the time and money to get a lawyer in the field to wright up an agreement for any damage that may/will happen over the course of their stay.

Someone above said to rent to females only if possible which is a good and bad thing. You do have a higher % chance that they will take better care of the home, but if you don't screen them good enough nasty females > nasty males any day of the week. They can be the nastiest things alive, and would make a frat boy gag.

[Chips]

Edit: Where are you located?

The house is located in the Niagara Region of Ontario, Canada.

It sounds like a good opportunity - the main question I have is how will you maintain it while they living there. If maintenance is needed (especially stuff that needs doing in, say, the next 24 hours) and you're off at school yourself, is your co-owner friend in town to take care of stuff? If so is he comfortable shouldering the lion's share of the upkeep, etc?

My friend and I discussed this and as of now he doesn’t mind having to be the maintenance guy since he lives quite close to the house in question. Obviously if anything goes wrong, we’ll split the costs.

Have you purchased your own house yet?

I have not – when I go home for the summer I live with my parents.

How much are you putting down on the loan? If you are paying less than 20% (I think) Down on the mortgage you will need to pay for mortgage insurance as well. Mortgage insurance varies, but that is another $100-$200/month there.

You need to hammer out how much this will cost monthly, and then figure out the max you can charge for rent. You really need to figure EVERY cost into the situation, otherwise you may end up going through all this shit and turn out not making much at all on the deal.

Also..... how old is your business partner? It may vary by state, but I know at least in NY you can't get a mortgage until your 25 (I tried).

As of right now I don’t actually know how much we can afford as a down payment. I only work full time during the summer so there’s only so much I can actually contribute to this – but my friend works full time all year round and has said that he wouldn’t mind having to put up most of the down payment. Like I said, this part isn’t something we’ve fully worked out so we’ll have to sit down and crunch some numbers.

As for monthly costs, my parents’ home is in the same city so costs for hydro, gas, etc. will be roughly the same, I think the only thing I don’t know yet is what mortgage percent we’ll be paying.

My friend is also turning 25 very shortly.

Have a solid contract. If you have never leased before go ahead and take the time and money to get a lawyer in the field to wright up an agreement for any damage that may/will happen over the course of their stay.

Luckily I volunteer during the summer at a law firm, and I can have the contract drawn up for next to nothing.

[Tyche]

I would focus on your own house first. Taking out 2 mortgages isn't a financial liability someone in your position should take. Not to mention that getting approved for a 2nd mortgage isn't a given.

Also, I took out a mortgage at 22 or 23 years old, so it definitely varies state to state.

[Altariel]

do not accept section 8 assistance unless you want your place trashed.

[eunhye]

Also, find grad students in computer science. They want a nice place to study and have access to the net. Plus, grad students are the best tenants.

[archibaldcrane]

Also, find grad students in computer science. They want a nice place to study and have access to the net. Plus, grad students are the best tenants.

I don't think many grad students are looking to rent a 6-person house.