Buying or Selling a Home/Buying a house that will increase in value
Hello Mr Dick Dennis
Hey I I'm 21 and I live in an apartment and I want to buy a house and rent out some of the rooms help pay for it and 5-10 years down the road sell it and make a profit off of it. Can you tell how to find houses that will raise in value and what resources I can use to help me with predicting home prices. And what time of the year is best for buying homes? I live in northern Indiana. Also what do I need to keep in mind when renting out rooms? do I need to claim rent as income? Can I expect the money I get from rent to cover most to all my home/tax expenses? Do I need to file as a business? And where can I go to get more information and advice?
Any advice will be taken under critical thought. Thanks for your help and have a great day!
Naturally, Jo, you need funds for a down payment, which means at least 20% of the purchase price if you want your lender to give you favorable interest rates. You can also buy your property with only 3˝ percent down payment with FHA. You should sit down with your bank or mortgage broker and have him/her explain your responsibilities in owning a property, especially one that will supposedly bring you an income. This means you have to have good credit and decent income to help your lender give you good lending rates.
When you collect rent as a landlord, Jo, you are in business. Period. And you should regard anything and everything you do is to sustain and grow that business. Plus you have to file your IRS return each year and declare a depreciation rate on your rental property which the IRS prefers you use. Notice I am suggesting you set up "your business" because that's what you're involved in. Therefore, like any other business, you should consult with a CPA or other business consultant who will advise you what you should do. And you should become very knowledgeable in your state's landlord/tenant laws.
Now that you'll be busy with all that, now you have to go out and become very familiar with the single-family homes in the area that you favor . . . and where your funds will fit in as you decide what kind of property you want.
Do not buy the best house on the block . . . or the neighborhood. If you want to make money as a real estate owner you'll make money when you BUY, not when you SELL. Therefore you may want to consider buying a house that is a fix-up, maybe a foreclosure. This will help you buy the house at the right price. You've got a lot of reading and homework to do . . . if you want to do this the right way. There's some very good books out there from which to learn how to be a landlord. You might even want to consider a duplex, triplex and four-unit property, giving you a place to live and be close to your tenants.
I could virtually write you a book right here, but obviously it would take too long. You should get out there and do it the right way. As long as you buy the property right, you can be assured you will make a profit with it within five to ten years. But you gotta work. It's not going to be easy. I do wish you well.