exctiting times at our house-new house build

[momz]

DH and I are meeting with the sales rep this evening to consider building a new home.
http://www.yourarborhome.com/floor-plans/wellen/
Hopefully, this link will work.

This home can be built on our lot for a price starting at $167K. We currently have a home that is smaller at 1600ish square feet, is worth about $140k and we owe $38K on the mortgage.
We are considering keeping our current home as an investment property. I expect we could get at least $1300/month in rent. If we put all of that towards the mortgage on the rental property, that mortgage would be paid off in 3-4 years. We would seek the advice of a property management company and would most likely have it managed as opposed to trying to do that ourselves. So, the rent would be reduced by the amount that would need to be paid to the property management company.

Please share your thoughts, both encouraging and discouraging about this plan. There is risk involved. But, we have a large enough income to cover 2 mortgages for a time in the even that is would be necessary.

 

[whoopsiedoodle]

If you can make it work then go for it! We own 3 rental properties and are will be building on our property in the spring. We don't use a property management company and it can get a little busy sometimes but we also have connections to handymen, landscapers, etc. Since we don't use a property management we put part of the rent into an account for repairs. We make sure there is at least $5000 in that account at all times and the rest gets throw at the mortgage.

 

[momz]

Good advice to have a hefty emergency fund dedicated to the rental property. The house to be rented has new furnace and AC, a new water heater and a new dishwasher. Older appliances include the stove and fridge. Don't know if we will leave the washer and dryer or take them with us. Also, the roof is the original and is 15 years old.

considering the roof age and the fact that we are new to this, I think we should have a larger emergency fund rather than a smaller one.

 

[barkley]

it's exciting but stressful (been there/done that). if you do decide to do it-take 'baby pictures' of the progress (fun to look at down the line-also helpful if you need to see what is where underneath the sheetrock).

one thing I will suggest-think of EVERYTHING you might want to do down the line and consider the cost of having at least some portions done during construction vs. after the fact. it can be MUCH less expensive to have certain things done during the building process vs. after the fact (when walls have to be opened/concrete jackhammered or new poured)-

extra outlets (esp. outside-and if you do Christmas lights one near the roof ideally with a designated switch inside to turn it on/off)
wiring for hot tub/generator
extra hose bibs
outdoor concrete slabs (for patio, storage unit.....)...


the house looks nice from the pictures-I've never lived in a 2 story that had the laundry upstairs but those I've known who did opted to have the builders do something with the flooring so that a drain hole was installed in the floor (hidden by the units) that connected to a pipe in the walls-that way if there was an issue with the washer leaking or overflowing-rather than it seeping into the floor and then damaging the ceiling below (as well as adjacent floors in the upstairs) it all safely drained until a repair could be made-it might be something to look into.

 

[Mackenzie Click-Mickelson]

Cute house you picked!

We had our house built (it is the first house my husband and I have owned period). We started the process in October of 2013. We toured to our metro's Parade of Homes which is about 2 weeks long-saw hundreds of homes in all different price points in both states (I live on the border of KS and MO on the KS side). We found where we wanted to live through the Parade of Homes actually.

We met with 2 builders and ended up going with the second builder. We signed the paperwork at the end of Jan 2014 and they started building in late Feb/early March due to our climate. The home was officially complete a few days into Sep 2014. Our builder said start to finish it's about a 7 month process in KS for them and a 6 month process in the MO (where they are actually based out of) as my state has a stricter building permit process. It also meant that our house was slightly more expense in our state than the neighboring state due to that.

Completely agree with reviewing what you may need to spend the money on now versus later. The largest adjustment we made was the gas fireplace that came with our home we moved to the middle of the main level (and it became a double-sided fireplace) nstead of being up against the wall of the great/family room to help create a separation as every new home in my are is open-concept which is too open for my husband and I's taste.

Here in my area just about all 2 story homes that are new build will have the laundry upstairs. 1 Story homes or 1 1/2 story homes will typically have them on the main level (as opposed to the basement) because the master bedroom is on the main level in those house plans. Our house is a 2-story with laundry upstairs. We put in a drain in our laundry room as well but we didn't think about that until we toured the home of my husband's co worker who had just completed his home.

We enlarged our patio and added an extra outlet outside in the front so we now have 2 for front of house for X-mas lights, and extra outlet in the closet (moreso for ironing, etc) and an extra outlet in the garage (for a deep freezer). We also swapped out two windows in our great/family room for crank out windows so we can get nice airflow as we don't have a ceiling fan there (though nearly all windows in our house are able to be opened).

We moved our sink from by the window to the island in the kitchen. This meant by code our dishwasher had to go there as well. It was fine by us as they had to enlarge our island by a foot to do so (now we have a larger island at a low cost).

Oh a good thing to do is talk with the builder as to whether a change you want or not is going to cost you something. There were several changes that the builder authorized that didn't cost us anything (like extending a wall a teensy bit) because to them the added cost was negligible. We also did other changes as well.

Don't forget to take a breather. We've been told our building process was pretty easy compared to the norm but we still did have some stressors.

 

[CAFarmerGirl]

I will channel Dave Ramsey....would you borrow money to buy a rental? If not, sell your current house.

 

[barkley]

I will channel Dave Ramsey....would you borrow money to buy a rental? If not, sell your current house.

on the same channel-

which sounds better-having to deal with a property manager, expenses of potential damage or HEAVY DUTY wear and tear on your home/it's appliances/landscaping............ OR selling it, taking what sounds like would amount to a net amount close to $95,000 and putting it into the mortgage on the new home?

even if you weren't planning on spending another penny on a down payment for the new place (which I doubt since you are talking of buying it while holding on to the old place)-that's still a mortgage of only $72,000. I speak from personal experience when I say that a mortgage of that size can be paid off SO FAST!!!! we put down a very large down payment on our current home and the original loan was for roughly a little over twice what you would be looking at-with current interest rates and the absence of pmi payments our monthly payment was quite low-low enough that we managed to pay off a 15 year note in about 7 years.

in addition to talking to a property manage, talk to a tax consultant. find out the additional costs to you to hold on to the other property (beyond the property manager, reserve fund, higher insurance for it being a rental)-things like taxation of rental property income, and capital gains taxes if you decide a few years down the line to see that property. also find out if your current loan will so much as permit you to transition into a rental-many home loans are strictly for owner occupied so you would have to seek out new financing for the remaining balance on the mortgage (and pay the associated fees that go along with it).


do what will make you comfortable both in the short and long term.

 

[tvguy]

Good advice to have a hefty emergency fund dedicated to the rental property. The house to be rented has new furnace and AC, a new water heater and a new dishwasher. Older appliances include the stove and fridge. Don't know if we will leave the washer and dryer or take them with us. Also, the roof is the original and is 15 years old.

considering the roof age and the fact that we are new to this, I think we should have a larger emergency fund rather than a smaller one.

That was exactly what put us off keeping my MIL's house and my mom's house as rentals when we inherited them. I have enough trouble keeping up with repairs on one house, and those repairs are often things I can fix when I want or when I can afford it. If you are landlord, in many places, by law there are time frames that things have to be fixed in. One of my co-workers laid out $7,500 for an emergency sewer line repair on his rental last Friday. As you might expect the legal time line for sanitary repairs is very short. Plumber arrived at noon and worked straight through until 430 am the next morning to get things back in order.

 

[barkley]

even having a property management company is no guarantee of not having to put out big bucks on preventable repairs.

a friend had tens upon tens of thousands of dollars in damage done to her rental b/c the property management company was not really doing the inspections/background checks they were contracted to do. granted-in the end the company had to pay for the damages BUT it was a good year to 18 months of fighting with them to honor their contract-all the while w/no rental income coming in, legal fees to pay fighting the management company BEFORE the actual repairs could even begin (which at that point due to more damage due to delayed repairs-ate up at least another 6 months).

she came close to losing the rental property as well as her owner occupied.

 

[supersnoop]

DH and I are meeting with the sales rep this evening to consider building a new home.
http://www.yourarborhome.com/floor-plans/wellen/
Hopefully, this link will work.

This home can be built on our lot for a price starting at $167K. We currently have a home that is smaller at 1600ish square feet, is worth about $140k and we owe $38K on the mortgage.
We are considering keeping our current home as an investment property. I expect we could get at least $1300/month in rent. If we put all of that towards the mortgage on the rental property, that mortgage would be paid off in 3-4 years. We would seek the advice of a property management company and would most likely have it managed as opposed to trying to do that ourselves. So, the rent would be reduced by the amount that would need to be paid to the property management company.

Please share your thoughts, both encouraging and discouraging about this plan. There is risk involved. But, we have a large enough income to cover 2 mortgages for a time in the even that is would be necessary.

How much did you pay for the house to begin with? If all that equity was in cash, would you invest it in a rental property? A general rule of thumb is that you want the rent to be 1% of the value, and you're a little short ($140k house = $1,400/month rent). Do you plan to sell in the future? Your tax basis is the price you paid for the house originally. If you live in the house for 2 of the previous 5 years before you sell, then the profit is not taxable, but if you don't live in the house for that time period, you'll pay tax on the profit based on what you originally paid for the house, no matter how long ago that was.

 

[HeyIt'sMe]

I see Arbor Homes is a Central Indiana builder. Hello fellow Hoosier. We live in Westfield.

 

[disykat]

I like the house plan. I do have to nitpick on one thing though. I think I'd want the 2nd floor bathroom extended into that odd little space in the master. Then add a window on the other side or make the window that's there larger. I'm not sure what your family size is but it doesn't make sense to me to have 3 bedrooms sharing that tiny bath. I'd want to extend the vanity. It kind of looks like they planned the back of the 2nd floor around the windows and not what makes sense.

 

[momz]

Update: we signed a contract today for the build!

But, we also decided to sell our house. However, because we don't want to end up in a rental, we have decided to delay putting our current house on the market until the new one is done.

So, we will apply for the mortgage on the new home while continuing to pay our current mortgage. We could potentially end up needing to pay both mortgages for a time, but with the rate of home sales in this area, I have confidence we won't be in that position for long. Our lender told me there are not enough homes on the market compared to buyers looking for one. He said the homes are selling on average in about two weeks from the time they are put up for sale.

Not certain yet of our timeline. A lot depends on the weather. If the footers can't be poured by the end of October, then we will have to wait until spring. But, even if the footers are in place, further construction may not take place until warm weather returns. Our initial closing time fame is April, but could be as early as February.

 

[momz]

I see Arbor Homes is a Central Indiana builder. Hello fellow Hoosier. We live in Westfield.

Yup! southsider here.

I like the house plan. I do have to nitpick on one thing though. I think I'd want the 2nd floor bathroom extended into that odd little space in the master. Then add a window on the other side or make the window that's there larger. I'm not sure what your family size is but it doesn't make sense to me to have 3 bedrooms sharing that tiny bath. I'd want to extend the vanity. It kind of looks like they planned the back of the 2nd floor around the windows and not what makes sense.

Oh yes, I absolutely agree! I don't know why it is designed that way, what a waste of space. We are extending that bathroom. Will have a tub/shower combo and toilet with a door separating the vanity area where there will be a double sink vanity. We are sliding that window down so it will be in the master bedroom.

We are also adding a third bay to the garage, making the single Windows n the family room into double Windows, and a few other changes.

 

[kydisneyfans]

Update: we signed a contract today for the build!

But, we also decided to sell our house. However, because we don't want to end up in a rental, we have decided to delay putting our current house on the market until the new one is done.

So, we will apply for the mortgage on the new home while continuing to pay our current mortgage. We could potentially end up needing to pay both mortgages for a time, but with the rate of home sales in this area, I have confidence we won't be in that position for long. Our lender told me there are not enough homes on the market compared to buyers looking for one. He said the homes are selling on average in about two weeks from the time they are put up for sale.

Not certain yet of our timeline. A lot depends on the weather. If the footers can't be poured by the end of October, then we will have to wait until spring. But, even if the footers are in place, further construction may not take place until warm weather returns. Our initial closing time fame is April, but could be as early as February.

Not far from the same window we have here in KY. Contract was signed, our onsite meeting is in 2 weeks. Groundbreak by Oct 1, goal is in sometime in April. It is a very rural area, so weather will be a factor. We are also keeping our current home off the market until 15-30 days before we close. There are homes here being sold before the sign hits the yard. The last model as our current home that sold had 3 bidders and the price increased by $10,000 over the asking price. We have a few large employers hiring, and a surrounding county raised minimum wage so many smaller businesses are relocating here to save on costs.