by Hope
I got a call this week from our landlord of two years. He has been a fantastic landlord. The minute I have reported anything amiss, he arranges for it to be fixed. Our A/C has gone out 3 times. He’s replaced the hot water heater. He’s repaired a hole in the roof. And he’s replaced the exterior wall of the laundry room that was rotting.
He has let us paint inside and out. Let me landscape as I desired. Has said nothing about the extra car in the driveway since History Buff moved in. I couldn’t ask for a better landlord.
Are You Ready to Buy?
But he is older. And he is ready to get out of the properly management business. And he has been since we moved in here.
This week his question was, “are you ready to buy your house?”
Umm, awkward silence. As I go into panic mode that we will once again face housing issues. And we are so happy here in our small home, with our small yard.
But thank goodness, he is not looking for us to move out. But he does want to sell this home (he’s been selling off most of his homes to his renters it seems.)
Needless to say, I haven’t even thought of buying a home. I am very happy having someone else pay for all the repairs. But I am going to have to put some thought into this.
And yes, I can hear the collective gasp from the BAD community as I mention this, even through the internet.
The Emotional Side of Things
Now the thought of buying, this particular house, is rolling around in my head. Coupled with the thought of having to move again if he decides to sell and I don’t buy.
Princess, Gymnast and I have moved almost 10 times since my marriage failed 12 years ago. I do not want to move again…until I move into the home I will die in. I’m very much over moving.
Rental homes are very hard to come by here. And they are all OLD. Even this one was built in the 50s and hasn’t been updated since. So finding another house here may be really hard. And I have promised Princess we will not move (out of this area) until she graduated high school…two years from this coming May.
The Numbers Side of Things
I asked the landlord what he was looking to get for this house…$89,000. (I know he purchased it for $25,000 12ish years ago from looking at the property records.) And that seems really high to me based on location and condition of the house.
Again, built in the 50s, no updates. It’s 3 good sized bedrooms (well, 2 good sized bedrooms,) large living room (we’ve got it split in two to be a fourth bedroom and living room,) 1 1/2 baths (all original,) and a large eat in kitchen (also all original.) It’s still got a fuse box. There’s no ventilation in the full bath so the ceiling is always moldy. (We have to wipe it down with bleach every couple of weeks.) The driveway is cracking. And so on…you get the point.
So I think there’s some negotiating room…IF I thought about buying.
The bottom line is that this could be my forever home. It’s small enough for me to manage on my own when the kids leave. It’s one story which is my MUST HAVE in a forever home. And the other changes I would want made…I could do over time – add a dishwasher, add an ice maker, add a disposal and so on.
I’m not considering buying this house right now. But later on in the year…maybe. And I would love to hear the BAD communities thoughts on this.
Where should I be in my debt journey to even consider this? What other things should I take into account? What other questions would you ask?
Hope is a creative, solutions-focused business manager helping clients grow their business and work more efficiently by leveraging expertise in project management, digital marketing, & tech solutions. She’s recently become an empty nester as her 5 foster/adoptive kids have spread their wings. She lives with her 5 dogs in a small town in NE Georgia and prefers the mountains to the beaches any day. She struggles with the travel bug and is doing her best to help each of her kids as their finish schooling and become independent (but it’s hard!) She has run her own consulting company for almost twenty years! Hope began sharing her journey with the BAD community in the Spring of 2015 and feels like she has finally in a place to really focus on making wise financial decisions.
Run away. Do not buy that money pit.
$89,000 for an entirely unimproved, 60+ year old house in a tiny rural Georgia town that does not have a robust job market is ridiculous. He is overvaluing it by at least 50%. Even if he bought it in at the start of the Great Recession as a foreclosure, housing in an area like that has not rebounded. It won’t appraise close to that and the bank won’t lend more than it is worth.
Not to mention, why wouldn’t you move somewhere you actually wanted to be?
As for a forever home–you’re in your early 40s as I recall. Someone mentioned what if your mom and dad need more help, but also what about when/if your children have kids? Do you want to be close to them to help? Will they be staying in this tiny town? What if they need to leave to find work or go to school and settle somewhere else? You have at least 30 years of life left, probably. Do you want to be living in a 90 year old, poorly maintained house? Do you reasonably think you can handle that amount of home repair, upgrading, and things breaking both financially and physically?
I feel your desire not to move but you can’t take this on now. All the things he hasn’t maintained will be yours to fix. I wouldn’t consider buying a house until you have the 20% down payment in cash.
This would be taking on more debt, not blogging away debt. Still, you would need to save at least 20% if bank financed. Would he consider a seller financed sale? Maybe the payments could end up at or lower than current rent. The payments would go directly to him, not a bank, not the same application process. You would need a strong sales contract with your own best interest in mind. You would absolutely need a buyer’s agent real estate professional, plus a real estate attorney, plus an independent building inspection, especially in Georgia. Know that, in Georgia, if he lists the house, any “ready, willing, and able” buyer can purchase that house, and you would have a new landlord, which could go well or badly for you; you’ve pretty much been put on notice. You for sure need to consider general maintenance costs, which you might want to budget at 50% of new payment. “Are you ready to buy?” 1) Research rental options, not assuming. 2) Consider seller financing. 3) Use an online calculator to determine real numbers for a purchase, considering interest on the high side. 4) Decide if right now you want to take on the biggest debt that most people have in their lives.
Also, you would be responsible for all property taxes, and the like, that the landlord currently pays. There may be latent issues, legal or otherwise, that also come into play.
I have a friend who was totally screwed financially in a seller-financed mortgage. If you can’t get bank financing that is a sign that you shouldn’t be buying.
I don’t agree. No one said Hope couldn’t/can’t get bank financing. It’s not for everyone (and likely is not for Hope), which is why I suggested a real estate lawyer and buyer’s agent for someone doing this. I held a GA r.e. license until I moved away, and I know that there are various solutions and scenarios out there. Traditional bank financing is not always the way to go. Sorry about your friend, though.
It really is a stretch to buy a house unless you have zero debt, a six month emergency fund, cash savings for a 20% down payment and are already contributing 15% of your income to a retirement plan. And it is also a bad idea to become emotionally attached to a particular house when you are buying. There are dozens of houses just as good as that one, the odds that it is the best deal you can get are tiny. Teenagers move while in high school all the time and learn to deal with it. Obviously the promise you made didn’t include you having to buy the house.
It sounds like a money pit. Where would the money come from?
Absolutely not. The house is over priced, and hasn’t been maintained. That house is probably going to need tens of thousands in work. And god knows what deeper issues a home inspection would uncover (ALWAYS get a home inspection before buying). Certain code violations will prohibit the sale of the home until they are fixed. My family just sold a mostly-original 1950s home belonging to my grnadparents, and there were a bunch of things that had to be done.
I also question whether you’ll even be able to get a mortgage.
It surely cannot be the only rental in that school district. I grew up in an town of 800, and there was more than one rental:
I think you should look at other rentals before you even consider buying. You might find something that will work. I honestly don’t think You are in the financial position to buy.
I understand not wanting to move again but buying a house–any house– right now is not a good idea for you. That’s a huge debt burden that you can’t assume right now! You’ve only started to dig yourself out of debt; you need to put down the shovel.
Also, didn’t you say you don’t even really like this town? What if your daughter moves across the country for college? What if your Mom’s health declines to the point your Dad asks you to be closer to them to see her more often/help out? What if you miss your younger son so much you begin to think of moving closer to where he is once your daughter graduates and starts college? What if you buy the house and there’s something awful that happens with it buy you don’t have any savings for repairs? Buying this house will take away a lot of flexibility.
Curious – why the tie to THAT area? As a child, we moved around a LOT – I hated it to but I think Princess would understand if the factors were laid out and discussed. From what you have indicated, the house sounds overpriced (negotiating aside) and a bit of a potential money pit – others are right, all those expenses become yours.
But, what then is the tie to this area? You have a BF now – long term, where might the two of you see yourselves? (Plan for you, but I am also thinking more broadly for you). What about buying a small piece of land and a modular home? Moving to the next town over or closer to a more suburban area with ore resources for you and the kids?
Remember when ashley was going to buy a house and everyone said “don’t buy the house it doesn’t matter if your mom is giving you a down payment you can’t afford it!” And she bought the house? And then she couldn’t afford it? And ran up thousands of dollars I’m credit card debt for furnishings and repairs? And everything imploded? Please learn from that example. You cannot afford to purchase. Home right now. Or this year.
Do. Not. Buy. This. House.
I am a professional home inspector and from the few things you’ve listed, it’s clear this would be the worst decision you’ve made in years.
Don’t give any more mental energy to even considering it and focus on where you go next. I get that you don’t *want* to move, but you don’t have that luxury in this situation.
Also, the fact that your list of “one day upgrades” starts with a dishwasher and includes a disposal, but doesn’t have a simple exhaust vent for the moldy bathroom shows that you have completely improper priorities. PLEASE think about the health and future of your family (like living without mold and rot and massive debts) more than conveniences (like a dishwasher, or spending a week moving, or skipping out on health insurance).
And the rotting walls…probably got an active termite infestation. Probably needs a new roof, too.
Hope, I think this is not a good investment for you. It sounds like it needs a lot of work and that as work is done more issues will come up. Could it be that your landlord is wanting to sell because he can no longer do the repairs himself and it costs him more to have then done than he makes from rent each month (on this and all of his properties). It is also possible that he can sell the home with tenant agreement in place so you won’t have to move, you will just have a different landlord. I would think this way even without knowing your financial history. It is not a good investment and I know that you will be provided another place to live by the Great Provider if this is necessary.
What’s your current rent payment? Do you pay your own utilities? How much are the property taxes? I think the numbers will determine if it makes sense to buy or not. If you bought for $90k your mortgage payment (principal and interest) would be approximately $500 per month depending on the rate you qualify for. You would likely need to add a bit for pmi (assumption that you would use fha). The comments regarding do you want to stay in this area long term are good ones. If you don’t, then absolutely don’t buy. But if you want to stay, like the house, can get it at a fair or better price (likely less than the 89k) then it might make sense.
One of the first things you might do is head to your county real estate website and type in your address to see what your county has assessed the house at.
The second thing I would suggest is doing a soft pull in your credit record shortly. In order to qualify for an actual mortgage using FHA they usually want to see a 670 or better. You’ll want to make sure your items you paid off like computers or medical debt reflect their actual status. You might even wait a month or so if you pay your taxes and the money owed to rental so you can make sure they are handled properly. I think even with your credit record prettier you might still have some problems since you have only been self employed for a year. When we got our mortgage they looked at 2 years and asked about difference in income between those 2. They were super picky about bank records. I second the person above who said do not buy without a home inspection. You need to know if the roof will need to be replaced, the furnace, the water heater and find out if there are problems like termites. If these problems exist you need to negotiate those things into your price or ask your landlord to fix them. If you go the FHA route they’ll require him or you to fix certain things before they give you a loan. A loan underwritten by Fed’s would require 3.5% down payment and could be at a thirty year term making your cost probably pretty similar to your rental payment. However, you as a homeowner then get to be responsible for things like a roof or h eating and cooling issues. The usual is to consider a 2 to 4% margin for the price of your home as a house repair fund. In the case of a $90,000 home you would make an $1800 to $3600 home repair category($150 to $300 a month to home repair). Most homes require a seven year commitment for you to break even when you factor in closing costs (from both ends)so be very careful if you aren’t sure if this location is where you want to stay and if you think you might want to move closer to your family again.
I hate moving and so I totally get where you are coming from but, buying this house would be like buying a new car because you don’t want to put gas in the old one. If he had not come to you, you would not be looking to buy a home right now. Just wait and get what you want on your own timeline. Put yourself and your long term needs/goals first.
I’d agree with the others that it sounds as if the house is not a good investment at this point for you and that the landlord has it overvalued and it needs many repairs.
Honestly, I’d let him list it, it may not sell (overvalued) and you can live there while it is listed (again, this may be a longer process). It might actually take a year or more . At that point, you can find another place to live. He may not actually list it if you are not going to buy it.
When is your lease up? I think your lease has to be honored, even if he sells the house.
I think it would be worth it to do a quick real estate tour (online) to see what other 100K houses look like in the area for comparison.
Princess has two years of school left, right? I agree with the others – don’t tie yourself to this location with a money pit of a house. Instead, start browsing for other rentals and let any local contacts know you might be in the market for a new rental if your current one becomes no longer available. Getting a house ready to list, sell and transfer takes time, so it’s not like you’ll have to move out tomorrow. Plus, it’s possible the house will be purchased by another investor who would love to have a tenant already in place.
If anything, now is a great time to make sure you have cash in a savings account to cover first and last month’s rent or a security deposit at a new place, moving expenses and possibly a more expensive rental rate in the event a new place costs more in rent, utilities, etc.
Treat this as a great opportunity to plan in advance!
Hope, I just recently sold my mom’s house which was in the same era. There were many things that needed to be done/upgraded due to codes today. You need to also consider that it most probably needs a new roof (leaks can be patched but that indicates a bigger problem). The foundation needs to be checked. Is the wiring up to code” . What about the plumbing-is it copper (common in that era) and rotting in ours-do some googling to find out what your state requires now. How old is the furnace? Hot water heater? Very important…has the house been tested for radon and is testing and correcting an issue in your area. It is here in NY and you can not sell a home without testing and correction if necessary. You have an awful lot to consider and many of these items are very, very expensive to correct. Take it from someone who has been there.
Hope,
This isn’t your dream home and you have a lot of debt to pay for.
If you need to move, you will find another rental.
Stay focused, you are on the right path.
Good luck!
I don’t understand why people are being so polite.
This is a TERRIBLE idea. You cannot afford this. You do not have any proper savings. You still have debts. You don’t have a deposit. This is all round a terrible idea. TERRIBLE. IDEA.
Look for another rental. Explain to Princess. She’ll understand. Find something decent and preferably as cheap or cheaper than what you’re in.
I’m mind blown this is even being considered. If you can’t even make payments on your student loan how can you afford buy a house?
Yeah, it’s a terrible idea to buy this run-down house, but if he wants $89k for a 50 year old house in rural Georgia, then he’s likely dreaming. Even if he lists it on MLS, no one is going to offer anywhere near that. So what I’m saying is, even though he wants to sell, it doesn’t mean a sale will actually occur. If you’re only planning on being there another 24 months, then I’d just wait this one out.
Hope
Please consider the pros and cons of buying this current home you are living in. I am going to agree with some other folks who have posted their thoughts.
Your student loan is still in deferment. You are trying to expand your business goals. You still have a lot of debt to pay for. There’s the issue of health insurance that needs to be addressed. There’s unplanned costs to buying an older home or any home for example. What happens when you have a home inspection and find out the extent of the repairs that need to be taken care of? There could be multiple issues with broken pipes, mold as one poster suggested, roof repairs, major costs to buy hot water heaters, and furnace repairs. There could be “pests” in the ceiling and walls due to possible leaks. Can we even address any issues with flooring, windows, indoor wiring, and making sure that the standards are up to code?
How would you pay for these things after getting the home inspection and finding out that you would be responsible for these repairs if the owner sells the house “as is”.
How much furthur in debt are you going to go to ensure that your kids “do not have to move”, “can have a great time with their friends”, “ensuring that the kids have everything they want”, and understanding that these things are what’s going to prevent you from paying your debts and increasing your overall debt balances.
I would not want to see you buy this home. I think it is a terrible idea to buy a house that you are renting because you promised Princess that you would not move for the next two years. Princess is not going to be paying your debts, rent mortgage, and other costs associated with home ownership.
You stated that you were in “panic mode” about your facing a housing crises. That is a sign that you should never make a decision base don your emotions to buy a home that could need thousands of dollars of work. Please rework your budget and begin looking for less expensive rentals in your area.
Another thought- if the home is overpriced and in bad repair it might take 2 years to even sell. Be looking for other rentals to be on the safe side but you may not even have to move for another two years.
Everybody says this is a bad idea. If Hope buys this house, I will not be surprised. She has always been able to justify anything. I am watching many house flipping shows. There are several issues with old houses like termites, leakages, asbestos and etc. Those people pour thousands of dollars. I do not know the area but 89,000 for an old house with all sorts of issues seems like too much money.
Lead paint is another thing that might be lurking. LIke asbestos, it’s not necessarily bad unless it’s chipping or you want to remove it, then it becomes a nightmare.
Please don’t give another thought to buying this house. Look for other rentals in the area. In two years you may want to move and then you would be stuck with a house to sell or rent out. Home ownership comes with lots of expenses. Our basement (also in Georgia) has been leaking for almost a year when it rains. We just spent almost $10,000 to fix it. Definitely not something we expected. Just one example of a repair other than typical roof, hot water heater or HVAC. Like others said the landlord may not be able to sell so you may get to stay the next two years. We are on your side Hope. Keep paying off your debts and then start saving for a house. There are millions out there – don’t be emotionally tied to this one.
themotivatedmother.com
I followed this blog years ago when it was someone else writing. I believe she eventually became debt free. It’s so nice to see it’s still active. I recently started blogging my debt journey, and am trying to find other personal finance blogs that are active for my sidebar list. I can’t believe people are advising against buying the house! I would say the same thing, but wow, 20 years ago when we were kids, the advice was homeownership no matter what!!!
I love reading PF blogs. I Pick Up Pennies is a good one. Congrats on starting to blog!
This is a horrible idea. I bet Hope buys it though. She can JUSTIFY ANYTHING!!!
Just in case you need another opinion — do not do it!! You’ve come this far to throw it away and go backwards due to a leaking roof, HVAC issue, surprise tax bill, ANYTHING can happen.
Don’t do this. I agree with the other poster who brought up Ashley. Go reread her story.
Just a reminder that if you have a current lease any new owners must uphold the lease until the end date. A new owner cannot break the lease even if they are intending it to be their primary residence. If anyone asks you to leave voluntarily before the lease is up you should be compensated and get it in writing!
Also, if the house is put it for sale you have to allow showings with adequate notice. You do not have to leave during any showings. Nor are you required to do any upkeep or cleaning.
Laws vary by state, and by rental agreement. Hope, you should pull out your contract and review your rights and responsibilities.