Real Estates Questions

[moe.ron]

Me and few friends are thinking about buying a couple houses around our old stomping ground. Now, I have a few questions for those in the knows:

1) How % would we expect to pay for downpayment on a mortgate?
2) What kind of taxes are we expected to pay?
3) Should we form a corporation?

We found a house that is about 1 mile from campus. Will that be too far. It is only a few blocks from the Elmwood Strip (a long stretch of coffee houses, bars, restaurants, etc.)

Here is the pic of the house we are looking at:



It is a two unit house with the agent asking for $289,999. We are trying to get a mortgage for around $350,000 so we can renovate the house.

[KillarneyRose]

Hi Moe.ron! That's a beautiful house, by the way As for your questions:

1) You usually put down either 5%, 10% or 20%. Generally, the more you put down, the lower the interest rate. Also, if you put down 20% or more, you won't have to pay something called "mortgage insurance" which is just what it sounds like, insurance so that if you default on the mortgage the company that made the loan can recoup its money.

2) The taxes all depend on the locality and perhaps the zoning. I do know they are based on the municipality's assessment of the property. This information is all public record so you could find out from your city government.

3) Hmmm, don't know anything about forming a corporation.

PS I am not sure, but I don't think you can borrow an amount over what the house is appraised at. Once again, that's something that benefits the mortgage company. If you defaulted on the loan but owed more than the house was worth, the mortgage company would lose that money.

PPS I plugged some numbers into a mortgage program for you and found that if you pay $290,000 with 10% down your mortgage amount will be $261,000. $261,000 at 6% interest (that's kind of high but just to give you an idea) over 30 years would be $1,565.00 per month before taxes and insurance.

Hope this helps a bit!

[moe.ron]

Thanks KR, about the insurance. What kind of insurance would you recomend we get?

Will we be able to get other loans so we can renovate the house?

Pretty much, what do we need to get started, beside the money.

[KillarneyRose]

Hi
Well, you'd definitely need homeowner's insurance and that would be up to you as to which company you would use. For example: AllState. The mortgage insurance itself is something your mortgage company takes care of (I think).

The only loan that comes to mind for renovating the house is a home equity loan but you couldn't get one of those until you've already paid off some of the mortgage. Some cities offer low-interest loans to renovate properties that are in less desirable areas in order to encourage people to buy there. Maybe that's something you could look into?

Your very first step would be to procure the services of a "buyer's agent". That is a real estate agent who is working specifically for you and has your best interests in mind. The agent who is listing the house (ie the person whose name is on the sign) is working for the sellers so is theoretically looking out for them, not you. There is no cost to you for a buyer's agent; he or she gets to split the commission with the listing agent. You can find a buyer's agent by calling any Realty company and explaining your situation.

Once you're hooked up with a buyer's agent, he or she should be knowledgable about where you go from there. I understand the process somewhat because Mr. KR and I sold our old house and bought a new one within the past few months. But I didn't really pay a lot of attention to the financial end of things. I do know there are *insane* amounts of paperwork, though!

[moe.ron]

Thank you very much KR. I just talked to couple of the people on AIM. We decided that we're better off buying cheaper properties. Same distance from campus, but the cost much cheaper, like $29,000 cheaper.

[lauralaylin]

Keep in mind that there are mortgages out there that don't require a down payment. That's what I'm doing right now, and our interest rate is still very low. I've never heard of a place that demands money down. It shouldn't matter to the people who are selling it, unless another offer comes in with cash.

[madmax]

Originally posted by moe.ron
Thank you very much KR. I just talked to couple of the people on AIM. We decided that we're better off buying cheaper properties. Same distance from campus, but the cost much cheaper, like $29,000 cheaper.

Why are you better off buying a cheaper property? Just because it is cheaper doesn't mean it is a better deal. You also have to look at the revenue the property produces.

How many tenants would each property hold?
What is the rent at each property?
Are both properties in the same condition?

[moe.ron]

Originally posted by madmax
Why are you better off buying a cheaper property? Just because it is cheaper doesn't mean it is a better deal. You also have to look at the revenue the property produces.

How many tenants would each property hold?
What is the rent at each property?
Are both properties in the same condition?

The previous house, we see, is too valuable for college students occupation. As for the house we're looking at, it is actually closer to the campus then the expensive one. The only difference is that the expensive house is in the neighbourhood in front of the college and the other one is in the back of the college.

How many tenants would each property hold?
Both houses has 6 bedrooms.

What is the rent at each property?
The rent will not be that different. The avg. rent, last time I checked, is around $300 to $500 per person per month.

Are both properties in the same condition?
Obviously not, but I would cringe if that house went through one year of college wear and tear.