Need quick 2nd home advice (rental property)

[ShawnQ]

Long story short - I'm active USCG, living near Galveston.
I'm in a canal-community and love it. There are very few rental homes in the area. We got lucky and jumped on a rental when I got orders to Galveston, sight unseen. Rented it for a year, and ended up buying the 2nd year.

Due to the fact that there are very few rentals, I had considered a smaller investment home in the same canal front community...but kind of put it off just because 'time isn't right'.

Well, a great deal sort of fell into my lap. I'm not a DFW Baller like most of ya'll. I'm an enlisted military man. My Wife is a health professional who does well, but we are acting like she's making pennies to finish off her school loans in a hurry. With that said, we can easily afford the mortgage on a 2nd home if we decided to.

My questions are income tax, 2nd home mortgage rates/methods, etc. Our current home is a primary residence/homestead, on a VA with a great rate. I know you can't get a 2nd VA loan. So, what should I look at for financing? Do you play it differently when it's a 2nd home?

I won't lie - I'm a rookie when it comes to income properties. This home is cheap enough to take the risk, as I can rent it to the current long term tenant, or there is a list of other people always looking for rentals in the home. I would eventually fix it up a bit and flip it, most likely...but in the meantime renting would be no issue.

I'm just short on time to research it...as it will sell quick and we have first shot (and a non-competitive shot if we take it - we want it, it's ours, well under value).

Any quick advice is appreciated.

[Frank]

I would check with an area agent familiar with homes there and rentals find out their experience. How much is typical rent? How quickly are rentals picked up?

Check with your bank about mortgage options. It will at least get you thinking in the ballpark.

Keep receipts and log all miles driven to the rental property for all repairs. Come tax time you will be able to deduct depreciation, all expenses on repairs and some improvements, your mileage for time spent traveling to perform repairs, as well as insurance and mortgage interest just as you do for your homestead.

Personally I hired a management company to list and prescreen all potential tenants and handle all the paper work and set the rental price. It was worth it to me. I still clear about $200 a month for now.

[03mustangdude]

15-25% down is standard for rental property.

[ShawnQ]

Thanks for the info. Rent is typically about 500 more than what the mortgage would cost us.

I'll chat with my bank tomorrow.
As for taxes, the house is right across the canal - travel would be minimal

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[dblack1]

I have to put 20% down. Rates on 15yr are about 1% higher than average primary res loan. I have found a new bank that will do a fixed in house for 15. I currently have 3 or 5 year balloons on my property. I have one I am about to finance when the rehab is complete and I'm looking at near a 4.9 fixed 15 year financing 80% of appraised price. I know it isn't a option for all but I've had tremendous success buying them outright, fixing, and financing. I actually put a little money in my pocket on the last one (appraised for 29% more than I had in it total) instead of giving up 20%.

[2011GT]

So what happens when you get orders to move to a different base? You will have two homes. Long distance land lording. Not a good thing.

[ShawnQ]

So what happens when you get orders to move to a different base? You will have two homes. Long distance land lording. Not a good thing.

This is my last station...if I move it won't be far, & it won't be on orders. It will be my discretion

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[lowthreeohz]

So what happens when you get orders to move to a different base? You will have two homes. Long distance land lording. Not a good thing.

property mgmt company. i think they typically want 10% of rental price, well worth it - especially if he's making 500/mo over the mortgage.

[Forever_frost]

property mgmt company. i think they typically want 10% of rental price, well worth it - especially if he's making 500/mo over the mortgage.

This is the smartest. They'll keep an eye on things, make sure you get your rent and take a lot of hassle out of it for you. I went through one to get my place when I was stationed at Hood and my exwife had to school me on what exactly they do because she worked for one.

[mschmoyer]

Maybe I've just bought too much into what Mr. Ramsey has to say on these things, but I couldn't imagine going that far into debt (risk) on rental properties while being in debt. You say you were on pennies saving to pay off student loans but going so much further into debt seems to directly contradict that goal.

Also, houses come and go. There's always one for sale and there's always a "good deal". It's just a matter of patience.

[lowthreeohz]

Maybe I've just bought too much into what Mr. Ramsey has to say on these things, but I couldn't imagine going that far into debt (risk) on rental properties while being in debt. You say you were on pennies saving to pay off student loans but going so much further into debt seems to directly contradict that goal.

Also, houses come and go. There's always one for sale and there's always a "good deal". It's just a matter of patience.

He said they're acting poorer than they are to pay off her student loans quicker.

[ShawnQ]

Maybe I've just bought too much into what Mr. Ramsey has to say on these things, but I couldn't imagine going that far into debt (risk) on rental properties while being in debt. You say you were on pennies saving to pay off student loans but going so much further into debt seems to directly contradict that goal.

Also, houses come and go. There's always one for sale and there's always a "good deal". It's just a matter of patience.

My common sense has me thinking this way also.

Houses do come and go.

I may just split it with a family member. Much less financial burden. Buy them out later

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[2011GT]

Maybe I've just bought too much into what Mr. Ramsey has to say on these things, but I couldn't imagine going that far into debt (risk) on rental properties while being in debt. You say you were on pennies saving to pay off student loans but going so much further into debt seems to directly contradict that goal.

Also, houses come and go. There's always one for sale and there's always a "good deal". It's just a matter of patience.

< also a Dave Ramsey nut swinger. I've paid off over 30k in debt last year. It's awesome.

[dblack1]

Maybe I've just bought too much into what Mr. Ramsey has to say on these things, but I couldn't imagine going that far into debt (risk) on rental properties while being in debt. You say you were on pennies saving to pay off student loans but going so much further into debt seems to directly contradict that goal.

Also, houses come and go. There's always one for sale and there's always a "good deal". It's just a matter of patience.

Dave is a goober. Scared money don't make no money, never has or will.

Using leverage is best, something happens walk away and start over. This is good debt, its not like financing a 100k boat or car. People take on debt to buy stupid things like Iphones, vacations, etc. Debt to produce a cash flow or income is a fantastic idea. You don't get wealthy with inflation by saving pennies.

[bcoop]

Dave is great at what he does. Getting the gutless, irresponsible masses to get out of debt. But you will never become wealthy if you follow his advice.


Without all the details (purchase price, comps, current tenant plans, etc) it's hard to say whether you should pull the trigger or not. My current house will be a rental property here soon. I'll be hiring a managment company to deal with all of the shit for me. To me it's worth it to pay their fee, rather than worry/stress myself over it. My goal with this rental though, is to build wealth and post retirement income. This one will bankroll another, then another, then another, etc.