Landlord pricing question
Q: How much can I legally charge a renter above the amount of my mortgage for living in a house that I am purchasing?
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A: To my knowledge, there is no maximum you can charge for rent - only market price (what a tenant is willing to pay & you accept) & the competition you have in competing for tenants ( avacant unit for several months can do more damage than just loss of income / cash flow!). There might be restrictions on some other things, like security deposit. In Michigan, you can only
charge 1 & 1/2 month rent for a security deposit (with some exceptions). Another restriction could be contained in the language of your mortgage. Read it over carefully to see if they require you to occupy, maintain the property - or both. For any legal issues you might wonder about, I recommend you contact a real estate attorney.
Home Rental Question
Q: Hello ~ and thanks for your expertise on the following! It’s a tough question I can’t seem to find an answer to. My husband and I are nearing retirement. In 1976 we purchased a 2-family home, renting one floor and living in the other. When our family grew, in 1991 we bought the single family “fixer-up” home right next door, and continue to rent both units of our original home (a main unit and a tiny unit we rent to my brother for next-to-nothing). We are considering selling the rental home (too much upkeep and we could sure use the cash). I know to avoid capital gains, we would need to move into our rental property and use it as our primary residence for at least 2 of 5 years prior to selling. Would it be possible to work out an arrangement with the current renters to “exchange” homes for two years, keeping the rent the same. The space in our current home and the rental home is comparable.
Is this legal and ethical? If so, what problems should we anticipate? Any suggestions would be greatly appreciated.
Thanks so much! (P.S. A few statistics…We have been depreciating the rental, but our mortgage on the rental is down to $58,000..we had refinanced in 1991 when we purchased our current home. Our current home is paid off, and if it’s possible to do what is proposed, we’d then sell our rental at the end of two years and move back to our current home). Hope this wasn’t too confusing!
A: While it appears to be a good idea to ’switch homes’ for 2 years, you should do an exercise that I call “lets pretend”. Take each possible scenario, write down all the details of each on separate pieces of paper, review to make sure no details were left out, then, analyze the outcome, possible pitfalls, & even what tax / capital gain issues you might encounter (consulting a tax advisor, Attorney & / or CPA would be advisable ! ) then sit back & look at ‘the whole picture’! The answer to your questions (& then some) should ‘jump right off the page’ & become a roadmap to follow as well as helping you make the right move. Keep in mind of any adjustments to your
taxes on the property by no longer being your principal residence as well as depreciation issues on both. An ounce of prevention, well thought out planning, will make your transition easier than if you just ‘jumped into’ a plan without future consideration.
Duplex Purchase Question
Q: Can I purchase a duplex in the state of Maryland, live in one 1/2 while renting out the other 1/2 of the property at the same time?
A: It happens more than you might think. Many people buy a multi family property to live in half when renting out the other. the savings can be tremendous! The long term results can also be good if the market is appreciating (where value grows) or at least (as in today’s real estate
market) cash flows . A particular investor I have been working with in Macomb county Michigan buys bank owned, government owned or foreclosed properties then does exactly just as you stated. He then lives there for about 2 years then moves on to another property. The first property is then rented on both sides. After 9 years now, he owns his 5th 2 family & plans on continuing this process & use it as a retirement strategy. There are some great deals on a new website for those looking for property in Michigan, Detroit metro area. Check it out at www.StealThatHouse.com
Rental Home Selling Questions
Q :I’m currently in the business of selling a house, and need questions answered promptly. The house I’m trying to sell, Is dated to the early 19th century and I’ve turned it into an apartment building. I’ve been unable to care for the property the past few months, so I’ve hired my nephew to help me take care of the building. Were doing fine, and every once in a while I go and check how things are, make sure the renters are taken care of, and needs met. The house is located on a main street in [tag]port huron[/tag]. I was wondering what I would need to know to [tag]sell the apartment building[/tag] myself. Do I need to know how much and how valued the building is? Any details should be accessed and posted correct?
I would like to know a true realtors opinion before I finalize a deal. Is there any way to get free quote on my house? [tag]What increases and decreases the buildings value[/tag]?Are they’re laws that need to be accessed before posting for sale? Do I need to clean up and fix the things wrong with the house, to increase the value, or can I sell as is? Are they’re ways to sell my apartment building for a maximum price? How can I get the most out of this sale? what would be the best way for me to go about moving or telling my[tag] tenants[/tag]? Do things like corners or parking area’s apply to help the value increase? Is a realtor really needed to sell an apartment, Is it possible to do myself?
A :To sell your (or most) buildings you should know the zoning as it applies to your property. Is it zoned to be a multi family? Can it (after you sell it), remain to be zoned that way or was it’grandfathered in’ possibly changing the zoning & future use? you should also know of the title history & any restrictions or requirements there. A[tag] title search[/tag], provided by a reputable title insurance company should disclose (discover) these. A helpful thing (marketing tool) you should know & be able to offer (to attract the buyer) is an enticing financing ([tag]mortgage[/tag]) program (or several if possible). How much (or how little) can the [tag]down payment[/tag] be? what will the monthly payments be & will the rents cover this cost? (is it generating a cash flow?)You will need to know how much the building is valued at - most importantly, what the market will (realistically) bring.Any seller (or prospective seller) can find out what increases &/or decreases the [tag]value of a property[/tag], what needs to be done (fixed up or just ‘prettied’ up) to obtain the highest & quickest sale price. Think about when someone sells a car. Do they show it dirty, full of stuff (pop cans / empty containers / wrappers / misc junk strewn about the inside (& trunk), windows that are hard to see out of, dented & scratched paint? I think you get the picture here! The obvious answer is ‘of course not’! - Then why do people expect this from a property they want to sell & expect top dollar? Even if it has a ‘discounted price’ most buyers would move on, especially in today’s market where there are 5 properties (minimum) for each buyer.So, you can get a ‘free quote’ and a REALTORS opinion with the same thing - a CMA (comparative market analysis) which are normally offered (complimentary) by most agents.All details should be assessed, but not necessarily posted. Posted items should be those that appear on a ’sellers disclosure statement’ of the property. This is usually required when or just prior to a purchaser making an offer. The way to get the most from the sale (& a maximum price) is to position it to do so. This includes a comprehensive marketing strategy. A good agent can show you a proposal of theirs (just ask). Remember though, you will (in any market) only get (in a sale price) what the market will bear! It is a common misconception that just because the assessor taxes us on a higher value or ‘I just had an appraisal’ done & it said the property is worth more that it is. IT IS NOT, it’s only what a willing buyer & willing seller agree on - what the market will bear!Finally, you do not need a REALTOR to sell a property, you can do it yourself. Keep in mind that, nationally, over 96% of properties sold are with the assistance of a REALTOR ! Ask yourself 2 things. Can I really afford to have only a 4% chance of selling (especially in this market). - Am I ever not available to answer a prospective buyer when they call to inquire? If not, isn’t your property ‘off the market’? even if for only that one inquiry? - it only takes one to buy! Lastly, In your 1st sentence, you said that you were in ‘the business’ of selling a house. Make sure you approach the whole thing as a business transaction, keep any greed or ego out of it! This is the biggest reason most ‘by owners’ fail. Feel free to visit this website, it has some helpful links & other things you will find helpful & interesting. www.GreatPriceHomes.com Best of luck in all you do!
