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  • Housing Options

    Hey guys, just looking for some opinions. I have pretty much made up my mind but somebody might have a nugget of wisedom. I'm looking for a rental property and have two options that I have found. A house built in 2004 and one in 1960. Both are 4 bedroom and about 1100 sq. foot and rent out for the same ($1600ish). They are both close to the college.

    The newer house would need minimal work to get ready to rent. A cleaning and maybe a couple walls painted. There is no garage and the lot is smaller. Its in a pretty ritzy neighbourhood. Asking price is pretty much going rate for that type of house.

    The older house hasn't ever been renovated and is in decent shape. The lot is huge. To bring it up to my standards a major renovation would be needed. The basement would have to be gutted and redone. While the basement was open it would be a ggod time to redo the upstairs kitchen (plumbing would be easy to move). The fireplace would be removed so I would have to pull the chimney so that means messing around patching the roof. Carpet would need to be replaced and the hardwood restored. I'm figuring $60,000 in renovations but you would probably build $20,000 in equity.


    The problem with renovations is they take time and where do you stop. The new house you can't gain any equity (maybe build a garage) but shouldn't have any hassles for awhile.


    Discuss....
    8
    2004 Ready to go
    87.50%
    7
    1960 Needing work
    12.50%
    1
    Last edited by 68 Valiant; March 29, 2012, 07:28 PM.

  • #2
    For starters, beware of lead paint and asbestos in the older house.
    Shelter animals make great pets

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    • #3
      Rental ? Why make it nice - the college kids will screw it up whether you like it or not. Take the one with the least amount of work needed - advertise - rent. Then look for #2 if you have the energy.
      Phil / Omaha

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      • #4
        I may have read that as you want to buy something to have as a rental property - income.

        Location ... I like older houses. 60's will definitely be a problem if they get on you for removing lead paint. Asbestos I don't remember being an issue, they still use cellulose fill which is what my 61 house had. The lead paint depends on the epa/neighborhood. I love a large yard, but renters may not. Water for the yard is getting expensive, maintenance on the yard is a mixed blessing. I sometimes like yardwork when it's nice, not so much when it's 110*. Sprinklers are a pain if you don't stay after them.

        See if you can find some demographics on the money movement - a lot of our bigger older neighborhoods are being consumed by gay community who is coming in and fixing up $$$ the houses, then you can't afford to live there any more cuz taxes blow through the roof. Please don't misunderstand my comment about the choices of the predominant buyers, it's a community thing that seems appeal to the folks buying them. I don't agree or disagree with their lifestyle and don't care. They are, however, really increasing the property values and I get a kick out of seeing the old neighborhoods renovated rather than slummed out into drug houses. That is never a bad thing.

        We had a neighborhood going to hell 20 years ago that is now 4x or 5x or more what the folks that moved in paid for the properties - and it's as it always has been with real estate. Location. The properties are close to downtown... $$$-$$$$. The houses were built 40's - 50's.

        My last house has doubled in value since when I bought it in 1990. Sister has it now and bitches about it being old - and you can't rent an apartment or live any cheaper. My current house is an 1985, and it's easier to maintain but it's day is coming where it will start wanting constant attention too. I have a neighbor (contractor) who removed his fireplace and it opened up the two 300' rooms into one BIG room. The roofing wasn't any worse than getting your decking replaced, which we do down here about every 20 years since the insurance pays for it. Any leaks at all and you'll want to replace it anyway. We tend to see about 5-8 years here on roofs before putting a second one on because of storm damage. At 10 or so, the insurance guys end up buying you a new one from hail or wind damage.
        Last edited by Beagle; March 29, 2012, 06:57 PM.
        Flying south, with a flock of bird dogs.

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        • #5
          Wiring is a big deal, the 1960 house probably uses Aluminum wire(fire hazard), where the 2004 house will use copper......From a Person that rents apartments I'd go with the 2004 and not have the headache's of remodeling a house and then having your tenants tear it apart...........
          Last edited by TC; March 29, 2012, 07:51 PM.

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          • #6
            Remodelling is a labor of love if you want to do it. It's rewarding if you get into that sort of thing. Aluminum wiring wasn't that common down here. Even with aluminum wiring, if you change all of the outlets or at least make sure they are tight, it works fine. My 1961 house is full of copper 12-2 with ground, the big thing being that there are no GFCI and a lot of the outlets are not grounded 3 wire outlets. Copper is $$ these days - TC has a point.

            I don't care for the quality of build in a lot of housing here built after the late 70's, maybe some time in the attic to see how it was put together will help you make a decision. My Fox and Jacobs 1961 tract house will outlive the house I'm in now. Better lumber, better built, more nails, less tacks and spindly staples. Hammers, not nail guns, and for the most part, even the stoners back then seem to have done a better job. I'm not impressed with my current house, but it looks pretty. Girls like that.
            Last edited by Beagle; March 29, 2012, 07:03 PM.
            Flying south, with a flock of bird dogs.

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            • #7
              Originally posted by 70chevyC-10 View Post
              Rental ? Why make it nice - the college kids will screw it up whether you like it or not. Take the one with the least amount of work needed - advertise - rent. Then look for #2 if you have the energy.
              I think its my OCD that thinks the place has to be primo. I try always over complicate things... Your right that it will get banged up to some degree. I guess a third option would be slap on some paint throw down some new carpet and accept less rent. Then when I wanted to sell do the reno's and cash the equity in.
              Last edited by 68 Valiant; March 29, 2012, 07:29 PM.

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              • #8
                you could be the next section 8 king ............like tubbed slumlord bwahahahahaha

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                • #9
                  Go with the newer one with small yard for rental. Pay the water if you want a nice yard.

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                  • #10
                    Originally posted by Cyclone03 View Post
                    Go with the newer one with small yard for rental. Pay the water if you want a nice yard.
                    I was thinking more along the lines that a big yard holds a big garage. Then rent the garage out also. There is a lot of people with too many toys around here that need something like that. Ex) A friend has 2 quads, A side by side, a boat, an old limo, a 5th wheel, 2 trucks and is a renter. I'm sure it would be in demand.

                    Even if I do get the house with the smaller lot I would want to build a garage with a separate power meter eventually.
                    Last edited by 68 Valiant; March 29, 2012, 07:51 PM.

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                    • #11
                      I assume there is a large difference in purchase price between the two?

                      Based on this assumption, your rental property will be a depreciable capital item. Your yearly depreciation will be based on purchase price.

                      This is the neat part. The IRs auditors looking for red flags will be using the yearly depreciation amount in their calculations. See, you can lose money on the renting dealio on a yearly basis, IF the loss is equal to or less than the depreciation amount.

                      Well, you can lose as much money as you want, but if you lose MORE than the depreciation amount it raises a red flag. I also assume you do NOT like audits?

                      So essentially I'm saying that the more expensive property will have more depreciation allocated to it up front, and you can also start renting it right away so it can make its own payments too.

                      Whereas the fixerupper has neither of these benefits......... although the renovations you put in WILL increase the capital amount and hence the depreciable amount, FOR PARTS ONLY. You will NOT be able to use the value of your time for this increase. You could use the value of someone elses time to increase this amount, but as of this year you are legally required to 1099 everyone you hire to work on your rental over a certain amount, which is fairly small.

                      Hope this helps! (Been renting out for 10 years now...)
                      Of all the paths you take in life - make sure a few of them are dirt.

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                      • #12
                        I would be looking at return on investment...with the market like it is, I say get the house thats ready to go.
                        If you can leave two black stripes from the exit of one corner to the braking zone of the next, you have enough horsepower. - Mark Donohue

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                        • #13
                          I have both, the newer house is the way to go because prospective renters are fickle and like newer houses. Newer houses are not without problems, but likely fewer problems than an older house.

                          Having a big yard is great if you plan on maintaining it and you want to build a building for your storage purposes.

                          My shop is on the property of our 60's rental house. There's a turn around drive so it's easy to tell the tenants "that driveway is yours, this one is mine" but - if you have two different folks renting two different buildings on the same property - you could be asking for trouble with differences of opinion between the two folks - especially if the outbuilding will be a work shop, not just storage.

                          Your location near a college must be driving up the rental - I'd love to get more than $1 per square foot, we're closer to 80 - 90 cents per foot per month around here and that's better than we got a few years ago.
                          There's always something new to learn.

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                          • #14
                            Originally posted by TC View Post
                            Wiring is a big deal, the 1960 house probably uses Aluminum wire(fire hazard), where the 2004 house will use copper......From a Person that rents apartments I'd go with the 2004 and not have the headache's of remodeling a house and then having your tenants tear it apart...........
                            around here at least you don't normally see houses from the 60's (or at least the early 60's) with aluminum wiring, that is more of a 1970's house thing (though it could be different in other areas). I'm partial to old houses if they have been well kept, but I did just buy a newer one, it's only 50 years old this time.......

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                            • #15
                              Good point on the taxes and depreciation, Stiney, it might be a little different in Canada but not much. That's actually something I'll have to study up on when I go back to work.

                              Its a little different market where I live, Joe, but I agree with the principle of your statement. Slow times economically in Alberta would be considered a boom most other places. Judging by the amount of equipment moving off the fences Alberta is entering another boom. Hell even the rig I use to work on is getting re-certified and that thing has issues!lol

                              I think the college is just an extra bonus. Rental prices seem pretty even across town. There are more wanted than offering ads posted on Kijiji (Canada's Craigslist but way better) so that is a good sign.

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