I just recently bought my first townhouse, using it as my primary residence. I'm going to rent out the two rooms upstairs, while taking the nearly-finished basement as my own room. After I get my taxes back from my first year's payments, I would like to buy another property so I can take advantage of the tax break on the mortgage interest for two properties. OR I can buy it, fix it up, and sell it again for a quick profit.
Any ideas? I don't want to be naive about these things.
2006-06-23 06:27:54 · 10 answers · asked by Michelle's boyfriend 2 in Business & Finance ➔ Renting & Real Estate
The above answers are all good, just keep in mind one other thing - it sometimes takes as much as 50% down to get financing on bare land, whereas you may be able to get an investment property for nothing, or maybe 10% down.
I really like the idea of moving into a place, fixing it up over 2 years, then selling with no capital gains. Also, you can move out of this property, rent it, and move into the next one - you'll have up to 3 more years to sell the one you moved out of (as a principal residence) before you have to pay taxes on the gains. Remember, though, you can only sell one principal residence every 2 years - meaning you can't sell two at a time to take all the gains tax-free and get a bigger home.
Good luck!
Sean
2006-06-23 07:05:51 · answer #1 · answered by trblmkr30 4 · 0⤊ 1⤋
Land is only a good investment if you plan on renting it or building on it. Trying to flip it wont' work unless you can get at a bare minimum, 10% more than you paid for it.
Also, you can only deduct the mortgage interest on your Schedule A on your primary residence. On any other rental properties it just goes as an expense against your passive income.
Buying rental property is a great way to build wealth. You get someone else to pay the mortgage, just make sure that you get enough in rent to cover all the costs. Don't lose money every month just to gain equity in a property. The tax laws have gotten tighter on passive losses and will likely get more so.
2006-06-23 06:42:13 · answer #2 · answered by Thrasher 5 · 0⤊ 0⤋
If you buy & resell the home in just a few years time, be careful. With closing costs on this house & your new home, realtor commissions, and other expenses you may not make much. Talk to a realtor to get a good idea of what your property is worth.
I'd take it slow when you do the rental. Renting can bring in money but it's a PITA. People who rent don't take care of things the way they would if they owned it. Expect to spend more in maintenance, painting, cleaning, etc than you would otherwise. Also don't be suprised if one trashes the place, bounces their rent check, or vanishes without warning. Not that all renters are bad, but do be prepared.
To buy the 2nd house you'll also need something for downpayment money if you expect to qualify for competitive financing.
Why not get the rooms rented and see how that goes? You may find you HATE renting to others, or you may love it. And in a year you can also reevaluate based on current market value of this home, mortgage rates, and the economy.
2006-06-23 06:35:25 · answer #3 · answered by Funchy 6 · 0⤊ 0⤋
The other answers are all good. I come froma mortgage background. One thing you may want to consider is that IF you live in a home for 2 years, then any profit from the sale of that home is tax-free (i.e. not gain from sale).
Thus you can do the "slow" flip. Each house you buy (MUCH better than townhouses) you live in for 2 years, fix it up to increase value, sell, and invest the profits in a NEW property.
2006-06-23 06:42:49 · answer #4 · answered by Info_Junkie 3 · 0⤊ 0⤋
Buying land is not a good investment unless you plan to build on it. If you do plan to build on it, it's probably the best option, depending on where that land is.
If you're going strictly house vs. townhouse, you're usually going to get the best return on a house, since with a townhouse you're at the mercy of the neighbors and the association that runs the building.
Buy the worst house on the best block. Make some improvements, and you'll never go wrong.
2006-06-23 06:33:32 · answer #5 · answered by Pete 3 · 0⤊ 0⤋
You could try house flipping. Thats when you buy a very cheap, run down house and fix it up and sell it for profit. (There's a show on TLC about it). A guy bought a house for $450,000 and sold it for $674,000...not bad for 4 months of work!
2006-06-23 06:32:22 · answer #6 · answered by Anonymous · 0⤊ 0⤋
I would say land. But if you can buy another place and fix it up yourself so it would't cost you alot then that's even better.
2006-06-23 06:30:15 · answer #7 · answered by Sunny 4 · 0⤊ 0⤋
buy some land and you know you wont have to worry about anything or anyone
2006-06-23 06:30:51 · answer #8 · answered by SPOILEDROTTEN516 1 · 0⤊ 0⤋
l would take a coarse at your local, you will end up in a crap shoot otherwise
2006-06-23 06:41:47 · answer #9 · answered by Anonymous · 0⤊ 0⤋
you can't go far wrong with property, unless you're an idiot!
2006-06-23 06:32:10 · answer #10 · answered by sirdaz_uk 3 · 0⤊ 0⤋