• filter:

Need some help with renting house and finance stuff

  • Page :
  • 1
  • Text Only
  • Search this Topic »
Voting History
rated:
So I have a situation that I need some advice on.  I own a small two bedroom ranch house with 2 car garage, large basement and 1 ˝ bath.  We owe $80,000 and its valued at $100,000.  Its on a dead end road on the outskirts of town.  Very close to everything.  My wife and I need to move to a new house this summer/fall.  We want to rent our current house out and buy a new one. 
 
So this is what’s going through my head.  We bring home a combined $50,000.  We have 2 vehicle loans and a house payment with $30,000 in cash.  I was going to pay off the vehicle loans which would wipe our cash out and then since the house is in my wife’s name I was going to take out a VA loan and buy the house from here for $100,000 which would give her about $20,000 in cash after.  Then we would buy another house with her VA loan in her and my name.  Then the only debt we would have is two houses and we would have a bit of money back in the bank?  With two mortgages and all our other bills we would break evenish every year if we couldn’t rent the house out.  I’m just trying to figure out how to work this out.
 

Member Summary
Most Recent Posts
Sell cars and pay off car loans
Buy cheaper cars for cash
Sell house (since you say you have to move anyway)
Rent a house o... (more)

meade18 (May. 15, 2017 @ 2:09p) |

Middle Americans are so cute. Our sbux baristas earn more than 50k and a 100 sq ft room rents for more than $1000. You ... (more)

middlemiester (May. 15, 2017 @ 2:57p) |

How much is your parents' basement costing you?

ZenNUTS (May. 15, 2017 @ 3:13p) |

Staff Summary
Thanks for visiting FatWallet.com. Join for free to remove this ad.

rated:
1. Are you sure the VA will loan you money to buy a house from your wife?
2. What is the interest rate on the cars and what is the point of wiping our your cash to pay them off?
3. Can you afford both house loans? Will you qualify for both house loans? Can you get a VA loan in your name and then another VA loan in joint name?
4. How much is the rent? Is it actually worth retaining that house?

This whole plan seems unnecessarily convoluted.

rated:
Not to mention all the fees that will be involved...

rated:
I wanted to pay the cars off because we dont make enough to pay for 2 cars and 2 houses. If we payed the cars off we would break even with 2 houses. Anyone have any suggestions?

rated:
So the house where you own $80K and it is worth $100K. If you buy from your wife (if it is allowed) - there will be closing cost involved and might add upto $2K or $3k .. so in the end, you may not get $20K to your wife - might end up being $17K or $18K after closing cost. Seems like waste of $2k or $3K just to free up some cash.

I'm not sure how bank would view this buying from wife deal - it is pretty clear what you're trying to do. You're trying to get some cash out of the house (similar to Home Equity line - except it is not HEL, but creating some weird sale transaction between husband and wife).


Why not leave the 1st house as is for now & simplify the matter.

1) Just buy a new house with VA loan
2) Rent the existing home

rated:
Sounds like a disaster and one mistake or life event and you are bring foreclosed on one of the houses.

rated:
If you try to buy a house from your wife, the loan underwriting procedures will be very tough. I doubt this will work plus as others have noted you will lose 1,000's in fees. Good luck!

rated:
why do you have to move? you make $50k and owe $30k on 2 cars (approx based on your mention that you'd be wiped out of savings if you paid off the cars). Can you afford to move? What if you can't rent the other house, can you afford 2 mortgages including maintenance to either house or car or if something happens medically?
Breaking even isn't comforting, sounds like your savings will still be the same, you should concentrate on increasing that?

rated:
Okay so what if we pay our vehicles off. Keep the loan as is on our current house (its not a VA loan btw) then buy another house (have to move for work) with a VA loan. We will saving a tiny bit each month with two mortgages. If we can rent it then we rent it. If not then we sell it. If cant sell then foreclose on it. Is that a better plan?

rated:
No. A better plan is to sell the existing house immediately, and don't pay off the cars. Leaving yourself with no money as you move into a new house is not smart. Also, what were you thinking borrowing 60% of your household income to buy cars? You are living above your means. I hope the rate is very low.

rated:
Yes I have made a few bad financial decisions. Thats why im talking to you guys now. As of right now we have 25% of our annual income going into retirement and we save about $5,000 a year for whatever. Then we bring home $50,000 after retirement and taxes are taken out. Granted the car purchase was a bad idea. Maybe it would be best to just sell but im not sure we can get what we owe on it.

rated:
benbiddlecom said:   Okay so what if we pay our vehicles off. Keep the loan as is on our current house (its not a VA loan btw) then buy another house (have to move for work) with a VA loan. We will saving a tiny bit each month with two mortgages. If we can rent it then we rent it. If not then we sell it. If cant sell then foreclose on it. Is that a better plan?

Why are you set on making this a rental?

How much will it rent for? If it's not $1100 or more, don't keep it.

You don't have much equity here.....and VA loans have a lot of fees and bad junk in them. I'd avoid them if at all possible. A lot of that $20k is going to get eaten up. Plus I don't think underwriters will see this as an arms-length purchase. You are really trying to do a 100% cash out refi. Good luck.

Is $50k your take home, after tax? So really like $75k gross?

rated:
Ah, the initial post was misleading then, as 50k after taxes and 25% retirement is much better than straight 50k. What is the interest rate on the car loans? What is the value of the cars?

Regardless, if you are moving to a new house, don't get rid of all your cash paying off the loans. Maybe sell the cars if you can get a cheaper replacement, but don't just pay them off. If the rate sucks, refinance them.

 

rated:
Leave the 30k alone - invest risk/age appropriate.  Rent out the house and use the rent to pay the mortgage.  It sounds as if you want to retain the house as you may or may not return.   Rent a cheap apartment in the new location and live frugal pay off the cars.

rated:
50k take home. Car loan is 20k and 9k about 2.5% interest on both of them. I want a rental because I want to start building a better retirement and wealth. Figured a good way is to rent property since we have to move anyway. Also around my area im not sure I can rent it out for more than $1000 a month.

rated:
I think you'd be stretching yourself way too thin. One extended vacancy or bad tenant and you'd be in trouble. I'd sell the house.

rated:
Have you ever done a VA loan? Unless you're disabled there is a funding fee, which will come straight out of the proceeds. Then, unless your wife is also a veteran, she isn't going to be able to get the 2nd VA loan with the first one outstanding.

rated:
We are both veterans. Seems like the best option is to attempt to sell the house.

rated:
Cronkk said:   50k take home. Car loan is 20k and 9k about 2.5% interest on both of them. I want a rental because I want to start building a better retirement and wealth. Figured a good way is to rent property since we have to move anyway. Also around my area im not sure I can rent it out for more than $1000 a month.
  

my thought is:
  - Don't pay off the car, and get into situation with very little money.  Worst thing that can happen to you know - you default on something, but still have $30K to fall back.
  - Don't go the selling from your wife to you deal - it sounds strange and bank will be concerned about this.  Plus you'll lose money on fees/refinance - and will only net about $17K or so.
  -  Before jumping into owing 2 house - just save up enough so you'll have say 6 months of living expense, in case you can't rent it.  So 6 months worth of both mortage being paid, car payment made, living cost etc.   Just to have enough cushion.
 

rated:
If you want to keep the current house as a rental and buy another house you'd have to qualify for 2 loans. All of this is based on your ability to get 2 loans. So I think reasonable first step is to see if you can qualify for 2 mortgages based on your income and debts. If you can't qualify for 2 loans then that nixes the whole plan. If you can qualify for 2 loans then just keep your current house with its current loan as is and then buy a 2nd house with a new loan.

I would not empty my bank account to get a new home and a rental investment property.

rated:
Not sure how much your "new" house is going to cost or whether you qualify for both mortgages.
I don't think paying off your cars makes the most sense.

If the market rent makes renting this an attractive option, I'd consider stop contributing to the retirement account for a period to time to cover the 2nd mortgage. I'd also consider selling the more expensive car and buying a cheap beater, which would put you with only a $9K loan.

Once you get a tenant, go back to contributing to the retirement. Id try and keep much of that $30K in the bank to have as a safty net if/when your tenant is not there.

rated:
Cronkk said:   50k take home. Car loan is 20k and 9k about 2.5% interest on both of them. I want a rental because I want to start building a better retirement and wealth. Figured a good way is to rent property since we have to move anyway. Also around my area im not sure I can rent it out for more than $1000 a month.
  
You have all the right goals! That should be stated. Diversifying yourself across asset classes, generating forms of passive incomes, these are steps in the right direction.

A few a my thoughts:

1. Do you actually want to be a landlord? Have you actually spent time considering this idea? With the right property and tenants it's like free money. With the wrong property or the wrong tenants it's quite the migraine.

2. You should really do some research into finding out what rent would be for your current house. If you are still not sure that it would fetch $1k/month than you might not be in the best market for renting. I grew up in a  small town in Iowa where there were people would often try to rent their home before selling but would eventually end up selling because nobody wanted to rent. The American Dream and all that.

3. It's possible that with the other advice given (don't sell your first house, just do a cash-out refi if necessary or get a 2nd loan; consider selling your expensive car and buying a cheaper one) that your plan might just need a bit more time. You stated that you have to move soon, what is driving that? Can it wait until you've built up some more savings?

Good luck and keep asking questions! I'm a vet too and this forum has helped my knowledge, confidence, and net worth increase substantially over the years.

rated:
Closing costs depend heavily on location-- in my area, closing on a $100,000 house purchase can be $8k or so

Don't do a transaction on the current home, because you'd need to finance it as an investment property rather than a primary residence. That usually requires 20 or 25% down and a higher interest rate. Claiming that you'd still be living there would be committing occupancy fraud.

rated:
I'll just agree with most here, selling the house to you is going to incur transaction costs making it to costly to do what you want. It's my opinion you can't afford your cars and do what you want to do. Sell them and buy 3-5k vehicles in cash. If you still want to move and buy another house you should be in a much better debt to income ratio to do so.

Does anyone else feel like this is attempting to take advantage of the VA loan process?

rated:
taylor0987 said:   Closing costs depend heavily on location-- in my area, closing on a $100,000 house purchase can be $8k or so

Don't do a transaction on the current home, because you'd need to finance it as an investment property rather than a primary residence. That usually requires 20 or 25% down and a higher interest rate. Claiming that you'd still be living there would be committing residency fraud.

  

yes almost forgot about it - as soon as bank finds out you're planning to rent it out (if you tell them) - they will treat it as investment property and that'll have higher than usual mortgage rate.  Obviously you could not mention that - just say i'm staying for now (which would be true - as you wont move until or if you find a new house).

 

rated:
Sell cars and pay off car loans
Buy cheaper cars for cash
Sell house (since you say you have to move anyway)
Rent a house or apartment where ever you move and build up your savings
Contribute pre-tax $$ from your salary to your retirement
Buy a house when you have down payment and emergency fund saved and a high enough income that your mortgage payment (including prop tax and insurance) is 25% or less of your salary
Don't take on any other debt

rated:
BradisBrad said:   Cronkk said:   50k take home. Car loan is 20k and 9k about 2.5% interest on both of them. I want a rental because I want to start building a better retirement and wealth. Figured a good way is to rent property since we have to move anyway. Also around my area im not sure I can rent it out for more than $1000 a month.
  
You have all the right goals! That should be stated. Diversifying yourself across asset classes, generating forms of passive incomes, these are steps in the right direction.

A few a my thoughts:

1. Do you actually want to be a landlord? Have you actually spent time considering this idea? With the right property and tenants it's like free money. With the wrong property or the wrong tenants it's quite the migraine.

2. You should really do some research into finding out what rent would be for your current house. If you are still not sure that it would fetch $1k/month than you might not be in the best market for renting. I grew up in a  small town in Iowa where there were people would often try to rent their home before selling but would eventually end up selling because nobody wanted to rent. The American Dream and all that.

3. It's possible that with the other advice given (don't sell your first house, just do a cash-out refi if necessary or get a 2nd loan; consider selling your expensive car and buying a cheaper one) that your plan might just need a bit more time. You stated that you have to move soon, what is driving that? Can it wait until you've built up some more savings?

Good luck and keep asking questions! I'm a vet too and this forum has helped my knowledge, confidence, and net worth increase substantially over the years.


Middle Americans are so cute. Our sbux baristas earn more than 50k and a 100 sq ft room rents for more than $1000. You guys would be eaten alive here.

rated:
middlemiester said:   
Middle Americans are so cute. Our sbux baristas earn more than 50k and a 100 sq ft room rents for more than $1000. You guys would be eaten alive here.

  How much is your parents' basement costing you?

  • Quick Reply:  Have something quick to contribute? Just reply below and you're done! hide Quick Reply
     
    Click here for full-featured reply.


Disclaimer: By providing links to other sites, FatWallet.com does not guarantee, approve or endorse the information or products available at these sites, nor does a link indicate any association with or endorsement by the linked site to FatWallet.com.

Thanks for visiting FatWallet.com. Join for free to remove this ad.

While FatWallet makes every effort to post correct information, offers are subject to change without notice.
Some exclusions may apply based upon merchant policies.
© 1999-2017