Need non-bias random people advice on houses

So long story short is I have a job waiting for me pending my degree (not worried there), my mother is going to be buying a house/moving in with her boyfriend.... her house will go up for sale then, but it has been in the family for 3 generations so she would like it to go to me.

Option 1: my mom's house
It is right on the water and assested at ~350,000. She currently owes 80k and "owes" her boyfriend 50k (he bought her a car and she wants to pay him back).... so in talking to her she would like to sell me the house for ~180k. I can get her current loan put in both of our names to keep her recent refinanced rate of 4.3%. I would then need to go to the bank and get a loan for ~120k (20k extra to pay off school loans ~10k and a 10k master bath renovation)

Its expensive for a first place (in our area) but see no way I can possibly lose money on it... and would have no problem staying there for 10/15+ years.

Option 2:: triplex/Du-plex
Other thing I am thinking of is where I would be working is about a 15 min drive from a college town Stevens Point, Wisconsin. There are currently a handfull of 2/3/4 unit houses right by the campus for sale. A really really nice tri-plex is currently up for 130k. With this I figure I live in one of the 2-bedroom units, rent out another 2 bed and a 4 bed unit. Doing this for a few years (until I get married give/take) I would live for free (if not make money) and if work had a promotion open up at another plant I could and just get the placed managed by someone and still be making money off of it. If i stayed in town I could rent the whole thing out and hopefullly come close to paying that mortgage as well as another house for the wife and I.

All my friends/mom/fiance all have their best interests in mind.... just wondering the advice of a random who doesn't have anything to gain (even though since one is waterfront i expect some bias to that).


Sorry for the looooooooooong post, thanks !!!

Number 1 - no brainer. If you pass up a deal like that now you will regret it for the rest of your life. UNLESS it's falling down and will require a ton of money to maintain.

Sounds to me like the problem with option #1 is that you are stuck hanging onto the house. Otherwise how could you pass up getting a $350K house for $180K?

Are you sure they will let you assume the loan in #1. Most mortgage companies will not.

but yes, #1 for sure if the payment doesn't strap you every month. Rentals are a PITA, especially in a college town.

First one.

Where I live 350K doesn't buy you much of a house at all let alone be on the water.

I LIKE THE IDEA OF HAVING YOUR OWN HOUSE.i did the rent it out thing when i was young,it takes away from your privacy.the real question is option #1 affordable to you? if so it seems to be great from a equity and personal perspective.i would only question how old is your moms house and does it need alot of work or upkeep. you have to budget that in to the equation.

Simple really......

Number one is a home for you and sounds like a good deal.

Number two is a investment. Probably be a great call in the long run.

It totally depends on what you're looking or. If you want to get into the investment game early, then number two sounds like a good way to go. If you just want a nice place to live and you're into keeping the property in your family, then option one is for you. FWIW.... I'm not sure I'd want a rental in a college town. You'll have to screen your tenants very closely. It could be a nightmare, but it could go the other way. I've got a tenant in rental now that has called me maybe 3 times in 3 years. She's super easy.

@Paul - we have gone to the bank and the house is currently in my Grandmother and Mom's name - they would take my grandma off and put me on with here.
@Big D - My mom's place was build 60+ years ago but has many updates.... pretty much everything except no ductwork and/or central air - which would be nice... the plumming is also NOT PVC (but no issues) - so that maybe something I would have to do at some point.

One problem would be hanging onto the house.... The company I would be with has a lot of room to grow within, but with that comes potentially having to move or stay where I am (lots of plants across the country).... also the fiance isn't sold on it. My best buddy lives 3 houses down, my other two best friends/cousins live right next door.... she hates that now they always just come over and hang out (we never lock the doors so they just come in) - and she knows it won't stop if we take it over. She wants our first house to be " our house" .... I want it to be a screaming deal.


I guess i didn't mention, the biggest kicker for my mom's place is the taxes there.... roughly $7000 a year for those.... also where we are right now is almost all 2nd homes/vacations homes - so since the economy has been down a lot of people are trying to sell the 2nd home/boat/sports car etc etc .... so places are selling at 17% less than assest value right now. My biggest worry is that I get into the place and find out that with bills/insurance/taxes/etc etc etc I have this nice place on the lake but ZERO money to do anything else.... the place that has offered that job hasn't mentioned anything about pay - I would guess I'm going to start between 55-65k but who really knows these days.

don't really have much for photos on the inside- but my mom just recently did all the windows and siding, redid the kitchen, and two of the bathrooms.

things left to do would be:
add another garage stall (1 stall sucks hard with Wisco winters)
knock out a wall between master bed and 2nd bed to have a LARGE master suit (current master bath is tiny tiny tiny) - still have a good sized room, new big bathroom, and a walk in closet for her or something
Basement is partially finished.... could use some TLC

Here is the house (and more importantly the lake)

Option #1 sounds killer. Don't overlook higher property tax & insurance costs with the higher value.

Option #2 will teach you a lot about real estate and managing a business. If you think you can keep it rented, sounds like you can't really lose there either, but it sounds like more work for shabbier living arrangements. You can find a triplex with (2) 2-BR's and (1) 4-BR for $130k? If so, that's seriously like half the cost of just the materials to build something like that.

Don't be a F&**ing idiot. Buy that house! If your girl doesn't like your friends coming over all the time tell her she hangs around too much.

On a serious note, if you buy the home from your mother, the taxes should go down to the sales price.The county doesn't have any idea what the inside condition of the home is, so you could just argue that it needs a lot of work.

$1583/month PITI. Assuming 120/month on insurance and 180K loan balance.

LOL @ Paul, either you're not married or are married to a Stepford Wife.

Where i live in FL the taxes are not based on the sale price, but sq footage and comparable sales in the area.

I'm glad I'm hear a lot of option 1... I think thats what I truely want, but if i've learned anything about having a good marriage from those around me, what I want doesn't matter at all.

I also forget she'll have income as well.... so I would basically have to pay all the bills for 6-18 months, after that she will be working and can help pay for this or that.

Anyone want to speculate on what I would be making given the following:
work/interned with them for the past 2 years
position I was told I would get would be directly over 6 people (those 6 over-see 6 people each too)
as an intern have been making $18/hr
degree will be in Manufacturing Engineering (basically same as mechanical)

.... my guess, like i said, would be ~55k (before taxes).... which I could afford it, but honestly after taxes and assuming ~$2,000/mo. for mortgage/taxes/insurance/bills I really wouldn't have all that much "fun money"

Like I said, the payment would be $1583. Utility bills are not figured into your debt to income. At 55K per year your DTI on that would be 35%, which is getting up there. If you have other loans, you could quickly be out of the ballpark. I could live a little strapped for that in my backyard though.


No John, I am married. Just wishfull thinking.

I saw your $1685, but just figured $2000/mo to cover basic utilities

My only debt currently is:
$500 to best buy (still have 28 mo. w/o interest) -- not worried there, nor is it pressing/gaining interest
~12k school loans (but I've planned to add that to my home loan and pay it off before interest starts to pile up)

No other debt..... there could possibly be a wedding to pay for.... her father mentioned covering that, or just giving us a chunk of money to get us going

Then on paper, you are ok.

#1 is no good if you can't afford it or afford other things that you currently enjoy... equity is not real until the day you sell the property.

#2 is how my dad went from being the 11th son in a family of 12 boys and one girl who ate mac and cheese, spaghetti, and bologna for every meal to someone with an estate valued at over $20 million in less that forty years. He made a fortune buying, fixing up, and renting small apartments, mainly tri and fourplexes...

^ ARHHHHGGGG why did you have to go and say that....

Thats all I can really think about is the income opportunity there. Keeping these places rented is NOT an issue due to the one's I've looked at being sooo close to the campus.... there will constantly be be a new wave of renters coming through.

My logic is pick up a du/tri-plex to start.... live for free at worst while trying to save as much of my "normal" job money as possible.... after a year or two of that I would guess I could get close to paying of the rental in 3/4 years. Based off what I paid at school (similar size school / apartment styles) $300/rm would be no problem. After ~4 years of putting my normal job's money + rental income to paying it off - go and get another place of my own.... move out, have an extra 2bed unit to rent. Then I would be renting 8 bedrooms @ $300 = $2400/mo. which would cover the mortgage on a very nice house in the area (or another rental place if I want to do what your dad is doing)

Exactly...

Depending on who you believe, you might want to think about how you would live if you only made half of, or even a quarter of, what you think you will make. IMO times are going to very, very hard and having OPM is better than having nothing or being house poor and looking out at the water and not being able to use or have any toys.

A couple of things to think about with college kid rentals:

1. Upkeep, those damned college kids are hard on stuff, even more so if they are in the party crowd!
2. Vacancy, college kid rentals are often vacant for three months out of the year. This is often overlooked by investors/developers when considering college kids.

I can't stress enough what I see coming down the pipe as far as the economy... most of the stuff you see in the news about a recovery in 2011 is BS.

I would definitely be going the conservative route! What about option #3?

3. Your mom keeps the property and you just make the payments and live there... screw the $50K she owes her boyfriend...

So let me get this straight - your GF is against your mom's place on the lake because your buds drop in all the time (that won't last forever), but she's cool living in a 4-plex with a fresh bunch college kids every year and their puke parties every weekend for 4 years? Sounds like there's a little more to the story. Also don't expect to flip anything for a profit anytime soon. The last big boom/bust in real estate was the early 1980s this one happened in the late 2000s. This is about standard for these cycles - bottom line: don't expect any big real estate price increases for at least 10 years.

^ She doesn't like the four-plex idea for "us" .... but there would be about 2 years between my graduation and use getting married and full on living together.... which is where I would be there alone or with a buddy.... paying it off/saving... after they we get something together here or there.

@Sam - I agree its going to stay ugly for a while...
In college I've never had a lease that wasn't 12 months... they maybe empty, but we're still paying. I figure there is a certain amount of profiling one can do with renters though, especially if I'm just overseeing 2/3 units. Just make the rent cheap enough but still nice where a whole mess of people want them, and I can have the pick of the litter.... I can picture the World of Warcraft nerds or Bookworm girls now....

I know I mentioned to my mom taking over payments on what she has now.... and if I decide to go off somewhere else and she just sells it to get back what I've put in from the sale. She really didn't say yes or no to that.....

Real option 3 would be: spean 60-80k on a small starter home, put in some TLC and improvements, sit on it for a 5+ years and either upgrade or hopefully have it close to paid off and just keep saving

Option 4: Fiance's dad has a house that he has been trying to sell for like 2 years.... its not going to anytime soon either. Tell him instead of the wedding cash just knock of 25% from the house and we'll call it good.

.... bottom line, I really don't care... I REFUSE to rent.... I want my money to go somewhere.
and I would like it to be a sound investment - lakefront for 50% value - and if I don't take it now, I won't be on the lake for a looooong time
or rental with future income possibilities.

You first need to find out how much money you are making. Don't get to far ahead of yourself. If they have guaranteed you a job they should no problem telling you what the salary is going to be. It would be a pretty sad day to find out that they are just keeping you around then going to low ball you a salary offer and you find out that you can't afford the option you choose.

Financing a triplex or duplex may be trickier than a single dwelling home. You may need more money down to go that route.

I have about 20 rental units and they are pretty profitable but there is a lot of work involved. I have everything from completely remodeled very nice homes to utility paid low income apartments. My advice is goes as follows. If you want to make money and have the time to deal with all the work and people. Buy cheap stuff at least in my case it seems to be a much better income source. If you want less work buy something put in little work, pay huge taxes, high insurance and in the 3 years when you are ready to sell have a house that looks like it has been lived in by a renter for 3 years therefore needing to be at least somewhat remodeled.

RUN from college kids. I have done it and regretted it more than once. It seems that even good college kids have at least one bad friend. They bother neighbors. Fight with each other. Forget to pay rent. Don't worry about a water leak until they have a $200 water bill that they can't pay.

Like whoever's did you can get rich with them but you can also go crazy trying to keep up. There are months when things are going great then there are months when something bad happens and you all the sudden aren't making any money.

There is my huge warning but the next good deal on a property that I see I will probably try to buy.

The lake house seems like a great deal. Don't overlook it as a rental either.

Like John said, financing a rental house is a whole different animal than a primary residence. Your down payment will be a least 20%, and the interest rate will be at least a point to 2 points higher than owner occupied. You will have to show that you can cashflow the property yourself(which sounds like it wouldn't be a problem), and always plan on vacancy. If you are not a handyman I wouldn't even look at it. In the rental world(at least starting out) being able to fix large problems yourself can make or break you.

Agree with all #1

I am 35, married with 4 kids. We live in a very nice home in a neighborhood as well. If I had this opportunity early on in married life, we would have started in a much better situation.

Having a happy wife is key to marriage, but you TOO have to be happy. Your friends, your boat and your LIFE is in this home. Have a heart to heart with her and explain that. You may have to talk to your buds a bit, but they will understand if they are true buds. All good man. You have a great deal there. Take it and start a great life together. When you get my age you will look back and say it was the best thing you did.

Hope it works out

Just an FYI, assessed value is not market value. You should be more concerned with market value.

Originally Posted by sidekicknicholas

I saw your $1685, but just figured $2000/mo to cover basic utilities

My only debt currently is:
$500 to best buy (still have 28 mo. w/o interest) -- not worried there, nor is it pressing/gaining interest
~12k school loans (but I've planned to add that to my home loan and pay it off before interest starts to pile up)

No other debt..... there could possibly be a wedding to pay for.... her father mentioned covering that, or just giving us a chunk of money to get us going

whoa whoa whoa whoa - Nick - do NOT put your school loans into your home loan.. Absolutely not..

Option #1, all day, every day..

Option #2 is not for everyone and is a total pain in the ass for all.. Skip it.. The only reason you skip option #1 is because you are moving. Otheerwise it's a no brainer.

Buy the tri-plex first... Get it rented and cash flowing, then buy the lake house. Done.... Problem solved. You're ahead on every level. If your girl doesn't like having your friends around, then get a different girl.... Joking, but really?

If your girl doesn't like having your friends around, then get a different girl.... Joking, but really?

Haha, I know where she is coming from though.... they can be a bit much.

Before I started workin 8-4 (too early for them) ... They would wake us up every morning, and honestly not really leave until sundown. Alone/Girly time was few and far between, which isn't fair to her..... but it is just a matter of locking the door.

My though is they'll eventually have girlfriends/a wife of their own and have that priority ..... but then again these guys with girls is a trainwreck.

Originally Posted by psudy

Like John said, financing a rental house is a whole different animal than a primary residence. Your down payment will be a least 20%, and the interest rate will be at least a point to 2 points higher than owner occupied. You will have to show that you can cashflow the property yourself(which sounds like it wouldn't be a problem), and always plan on vacancy. If you are not a handyman I wouldn't even look at it. In the rental world(at least starting out) being able to fix large problems yourself can make or break you.

THIS IS NOT TRUE! Well sort of, he will occupy one of the units and therefore can qualify for most first time buyer programs, including FHA... I just had a buyer do this...

I forgot that he was going to live in one of them. I don't do FHA, but for our investors(BB&T, & FHLB) you would still require 25% down and have 6 months in reserve at closing. and depending on location, you could have difficulty with comps.

Yeah, don't roll your student loans into a home loan.

Even if it is owner-occupied, wouldn't Nick still be responsible for tax on the rent he charges? If you go with the triplex option, as someone mentioned, be prepared for the headaches of dealing with renters.

A lot of posts, but I'm not sure if I read this:

What about the tax incentives for Option 1? Should a new loan be gotten so to release mom and also secure the tax incentives for Nick?

Is the house actually worth $350 or is it worth a real $180 today? When buying real estate, or anything else for that matter, never give more than it's worth unless it's your kid.

Does your GF know how rare an opportunity it is to be able to acquire property like this at such a young age? Unless you move away, this will be a family home that your family will always want to be at and your kids will always want to be and come back to. Yes, you'll have guests a lot, but knowing where your kids are is awesome!

In hindsight, and looking at your second option, I wish I had purchased rental property when I was young, however, I am not sure if I could have handled it. My marriage too for that matter. A friend of mine had several properties and he finally sold all of them due to the headaches associated with them. Nobody has good credit, you roll the dice when you get a new tenant, they can trash the place or just not pay. Heck, my friend actually thought that the folks (all being different) that installed new carpet, fixtures and cabinets came back the same night and stole them! He actually thought he bought his own toilet back once. He also said that people are not all the same. For you, it may be normal to do the dishes and take out the dog. For others, it could be "normal" to just let the garbage and old food scraps pile up in the house, as well as the dogdoo. It is this type of information that turned me off. I take my work, my property, my place, personal. I'm not sure how I would have been able to take seeing my place trashed and then having to just "throw" some paint on to rent the place out again.

There is no better time for a first time home buyer to buy. When I bought my first house, the interest rate was 10.5%!

My first place had an interest rate of 13%! It was in 1981.

Is the house actually worth $350 or is it worth a real $180 today

I wouldn't say it is worth $350k, but my guess is that if she listed it at ~250k it wouldn't last long.... I believe on average a normal sized lot on the water is going for 140K+

Only two houses that I've noticed in the last two years have sold under 200k.... I have a pretty good grasp on values and what ismoving (or not moving) since my Uncle and Dad own real estate businesses in our town.

Originally Posted by wake77

Yeah, don't roll your student loans into a home loan.

Even if it is owner-occupied, wouldn't Nick still be responsible for tax on the rent he charges? If you go with the triplex option, as someone mentioned, be prepared for the headaches of dealing with renters.

He would have to list the rent as income on the properties, but you can easily offset the income with expenses on rentals.

Buying a house is the biggest scam of the century! It's totally overrated. The house you own and live in is a liablility. I honestly believe if I would have stayed in my first apartment and invested all the money I have put in my last two houses my net worth would be 2-3 times what it is now. Houses drain you. Don't let anyone tell you its a good investment.

With that said, it would be hard to turn down a location like that! But on the flip side, how many months per year is that lake frozen in Wisconsin? Maybe your goal should be to move further south!

but you can easily offset the income with expenses on rentals.

.... already thinking about how to write off a car

how many months per year is that lake frozen in Wisconsin? Maybe your goal should be to move further south!

Yeah, winter is pretty rough. Wakeboard season is like Late April - September. Ice from early Nov/Dec - March.

what will your lake access/boat sitiuation be like if you take option #2??
are you trying to get rich or would you rather wakeboard all the time??
take #1 and start locking the doors.
55K sounds about right but, you better confirm.
I've lived on a lake now for about 3 years and don't think I could ever NOT live waterfront...

dude..

lake house/lot..

dont be dumb.

Okay, let me be the voice of reason here.

Don't buy the lake house. Don't buy any house. Yes, I know it's a good deal. Yes, I know interest rates are at an all time low. That being said, I don't think it is in your best interest for a number of reasons.

First, you should do a budget. Nobody here can tell you that you can or can't afford it without you doing a line item budget. Trust me, it will be the best thing you can do for helping you make a decision. You need to know how much money you'll have left (if any) over each month, and then you can determine if that is acceptable to you. So take a conservative monthly salary and then start plugging in numbers for mortgage, taxes, home/car/boat insurance, debt payments, 401K/retirement, utilities, upgrades, car payments/repairs, boat maintenace, car/boat gas, cell phone, cable/satellite, home internet, personal items, food, clothing, going out money, etc. There are just so many small items that really add up and this doesn't include unforeseen stuff like major home/car repairs or losing your job.

Outside of income vs. expenses, I think there are some other things that would have you steer clear of buying the house. One being that I think it would be a great gesture (and sounds like best for your mom) to sell it and be able to pay off her debts. Also, you now have an emotional attachment if you buy this property. What if circumstances change in 3 months...is your mom going to be cool with you selling it and keeping the profits over the great deal she gave you on the house? Will she be ok with you selling it soon? She might be fine on both fronts, but just trying to look ahead at potential conflict/stress you could come upon in the future.

Lastly, the idea that you are throwing away money by renting is probably one of the greatest misconceptions in our country...this being from a home owner that has rented previously. Most people would be surprised if they did the numbers on their home purchase and subsequent sell to realize they don't came out as far ahead as they think. If you truly add up all the costs of home ownership as compared to renting (say an apartment)...updates and upgrade expenses, lawn care, property taxes, repairs, house and lawn equipment, seller commissions, etc. home ownership suddenly doesn't look like as good of an investment as it appears.

So that is my $.02. Like I said, don't make a decision until you have done an itemized budget. The last thing you want to do is be 25 and completely strapped and not able to travel, buy things you want for yourself, go out to eat, put gas in the boat, etc. I've heard it said that if you get the big 3 right, then you can create a lot of margin in your life...those being the house, cars, and possibly kid's education.

So renting (even an apartment) is not a bad or wrong choice. Being newly married and not having to do yard work or be stressed about paying the mortgage will be great joy to your life my friend!


* One thing I need clarification on...how does your mom pay her boyfriend back if she isn't getting money from the sell? I thought you were just trying to take over payments? I apologize if you addressed this already.

For the payment thing.... I would be placed on her current loan for the place (80k) and then have to get a seperate loan, or increase the loan to cover the rest of the house cost

Oh, one thing I meant to ask was what is your future wife's job situation going to be? Assuming she has something stable and able to provide some extra income, then that can change things a lot. $200K mortgage at 55K salary is going to be very tight. If she is able to help out financially and you can pay down some of that debt, then that would be a big help.

I know this might be a long way off but it could affect decisions today...are you having kids and will she stay home afterwards? Obviously if she wants to stay home, then that creates an issue when you go down to one income. Sure, your salary might (and is probably going to) go up but you just never know by how much and when.

Just additional thoughts in order to make a good decision!

I'm guessing she'll be in the 35k-45k range .... her sister just got a job with the same degree and got a job in our town and is making 38k (i think thats what she said). She has a pretty good in - her father co-works and is VP of a paper coating company.... she has worked there for the last 3+ summers.... odds are they'll offer her some sort of PR/marketing job.

I usually just cut her out of the equation ... if I can afford it alone good, then her money is just icing on the cake

... looks like I got another job offer today too, another town.... so who knows.

#1 hands down

Regardless of your intention, a "home" or an "investment," the lake house wins hands down. You start with $170k in equity from day one. Live there for 10 years and you'll likely have close to a 1/2 mill in equity. You won't get that from the rental and you don't have to deal with drunks, parties, or broken crap. The lake house is a complete NO-BRAINER.
Also, duplex,triplex w/e can be put anywhere. You can't move a lake, and they aren't making anymore land around that lake anytime soon. Unless you live in UAE. lol