Expert: Brian Bocchieri - 7/18/2009

Question
Dear Expert

    I never owned property before. I just have been using master card for over 15 years. I know I have good credit because I was never negligent on paying my bills or my monthly rent checks, and I never had any debt problems because I am a money saver. I do not know my credit score, for I never applied to purchase any house or property before. I think my score is fine. The U.S. Department of Defense had to check my credit in order to grant me my security clearance, which I was qualified to receive. If I buy something, I will be first time property buyer. At this time I am working overseas.  I do not know when I am going back to the states because it is up to the company that I work for, but I can have up to 2 weeks vacation time every year, so I can make a trip for one week or two to visit every year.

    I am 33 years old single financial security seeker, who likes to plan to build a solid financial future before starting a family. I want to transform some old limiting patterns and choose new and more creative options. When I return to America, I will be going back to my mother's house located in Michigan. Before or after my arrival to the states, I will need to embark on something different to start moving forward and get settled. I will need to do something that can provide me with stable income, but I do not feel comfortable to buy property.  My mother bought a ranch house 15 years ago for $144,000. She spent another $12,000 for basement remodeling and she was trying to sell this house for the past 8 years, but she still cannot get any buyers even after reducing her original price to $120 thousand; however, if my project can generate nice profit, I might consider doing one of the following ideas:   

    Renting or buying a ranch house and finding some roommates who can help me with expenses, or getting a duplex home and living in first floor while putting other tenants upstairs, so I can receive monthly rent from them, or buying a property and putting it under section 8, or condo, or motel, or apartment building, or any other idea that can guarantee a successful and stable monthly income flow. I also like to invest in real estate and stock market, but I do not have any experience in all of these projects.

    Is there will be a big difference whether I start the project next year versus if I start it 2 or 3 or 5 years from now? Is the difference advantage or disadvantage?  I do not have a specific area in mind, but I will need an area where it can help me generate profit as soon as this project is ready for work. Please send me any ideas you may have, so we can think together to produce good results.

Thanks for being a volunteer to help.

Answer
Congratulations Karam;

You are thinking in the right direction as to get your finances in order before you start your family I commend you for that.  

As you well know Michigan is a very tough market and has been for a while I can only see it getting worse due to the automakers problems.  I am sure there are pockets of the area that may be decent but I am not that familiar with Michigan.   If you are looking to relocate you will need to do your research to find areas that are holding value that you may want to live in.

As for what to buy the more units you have the more stabile the renting income becomes.  For instance if you have a 2 unit building and one tenant moves out you are 50% vacant if you have a 10 unit building and one tenant moves out you are 10% vacant so your instead of needing to come up with 50% of the shortfall you will need to come up with 10%.   This is  a big step if you have not owned any properties before so do your homework.  

A couple of issues here if you are purchasing a duplex there is the $8000.00 tax credit for 1st time home buyer which you will qualify for but it needs to be purchased in 2009. (check the info on the plan there are income restrictions ).  If you are purchasing 5 units or more that deal qualifies as a commercial deal and the funding becomes based on the income of the property and not so much on you personal.   I will caution you the commercial loans are not so easy to get anymore.

So to sum up I can tell you are a cautious person and I would advise you to continue your cautious nature.  Purchase a nice duplex in a solid neighborhood fix it up a bit and rent it out.  Once you understand the business a bit more you can move up to larger deals.

I hope this has helped
Wishing you all the best

Brian Bocchieri