Investing in new construction, selling old property, a good idea? Wondering if anyone here has made an e ...
Investing in new construction, selling old property, a good idea?
Wondering if anyone here has ever made a new construction
Investments, what were the advantages, what were the disadvantages? how
A lot was your expected operating expenses compared to actual operating
expense.
My situation:
Looking for a little tip, I bought a little house over
A year ago for $ 184,000 without cash through a VA loan,
The house has since gained $ 20,000 worth valued tax, and I bet
I added about $ 10,000 in DIY enhancements and updates
House. My mortgage is $ 1175 / MU and it leases for $ 1800.00 / MU property
Management comes around $ 120.00 / mo
Soon I expect a number of large ticket items to fail within 5 years
Eg HVAC, refridgerator, washing machine, garbage disposal and as HVAC
The original heating system for the house 2004 was built (I admit, it is
Not high quality construction or)
I am currently looking into purchasing a new construction house
To be completed in early spring
Investing in new construction, selling old property, good idea?
Wondering if anyone here has ever done new construction
investments, what were the benefits, what were the drawbacks? How
much was your expected operating expense vs actual operating
expense.
My situation:
Looking for a little advice, I bought a house a little over a
year ago for $ 184,000 with no cash down through a VA loan, the
house has since earned $ 20,000 in tax assessed value, and I wager
I've added about $ 10,000 in DIY improvements and updates to the
home. My mortgage is $ 1175 / mo and it rents for $ 1800.00 / mo property
management comes in around $ 120.00 / mo
Soon I expect multiple big ticket items to fail within 5 years
eg HVAC, refridgerator, washer, garbage disposal as the HVAC and
heating system are original to the 2004 built home (I admit, it is
not high quality construction either)
I am currently looking into purchasing a new construction home
that would be completed in the early spring timeframe, in a good
area with great growth potential. The city is Norfolk, VA and the
town government is subsidizing new construction quite heavily, I'd
give the area a medium crime rating and expect it to be completely
gentrified within a decade. Cost for new build comes in at
$ 280-325,000 with a rental potential of 2400-2600 with an estimated
increase of 3% YoY.
Property is a 4BR 2.5B house with unfinished attic that I plan
to finish myself with an incremental budget of $ 10,000 USD over the
next year, planning to rent out the 3 rooms for $ 650 / mo per room
($ 1950 / mo total) and use the custom attic as an airbnb, judging by
area estimates I can probably expect $ 80.00 / d for 15 / 30 days of the
month occupancy, resulting in $ 1200 / mo income and $ 14,000 / yr,
conservatively (house is close-ish to beach, I have good% data
supporting this theory) this runs $ 37,800 / yr revenue, $ 25,000 net
income after accounting for tax and utility expenses + a 4% vacancy
permit and a little wiggle room for unforeseen circumstances or
additions to the house (I am assuming a $ 300,000 mortgage payment
for these calculations) Thats with me living in one of the
rooms.
Currently I'm house hacking the first house, and renting it out
in full while I am gone for 1850 / mo while paying utilities, not
being managed just inhabited by friends so I'm probably making
around $ 200-300 / mo in profit excluding operating costs. When I'm
living there I have a negative cashflow (to be expected) of - $ 350
excluding taxes and repairs, I write these off because I've been
upgrading the house so much I am not currently paying taxes on the
income. The numbers for me living in the newer house are way
better, at + $ 850.00 / mo and + $ 10,200 / yr for a house I am living
.
So MY QUESTION HERE (sorry for the text wall and numbers) is if
I should sell the first property, which has a probable gain of
$ 25,000 (exempt from capital gains) from the sale, and will most
probably require many repairs soon, has a negative or barely
breakeven cashflow over time assuming 50% operating costs for
repairs (imminent) and the property is located next to a train
station, far less desirable land than the property I am looking at,
which is in a desirable and growing area, that is coincidentally
closer to work for me.
SHOULD I SELL? If I sell the current house I can reduce my
mortgage on the new property and increase my cash flow, I'd be
counting on lower operating costs due to the brand new
construction, new appliances HVAC etc. when I Ivetably move out
of the property (2-3 year timeframe) I am thinking the current
house I have is quite risky to keep even with the rising market
value, I don't think it would be able to sustain a $ 2000 or
$ 2200 / mo rent to keep up with 1% of its value simply because it is
in a high crime area, but I could definately sell it for
$ 225,000k
I could technically finance the new construction with $ 0 down
but my mortgage payments would be like $ 1900 / mo and I am a little
uncomfortable with that prospect longterm for renting it after I
move out.
Constructive criticism on my numbers / plan or advice would be
appreciated, I am a little unsure of what the risk of selling the
first house and buying a new one, or keeping the first house,
renting it, buying the next one and executing my current plan is, I
Don't believe the first house will be profitable in the near term
Because of repairs, I am somewhat unable to manage the property
without a PM because of work so I can't really take the do it
myself approach. Looking for some analysis, thanks!
EDIT: I should mention I am capable of putting an additional
$ 30k down in cash for the new construction, but I would prefer to
keep it, that money is up for debt / advice on this investment
submitted by / u / WallStreetBoobs
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Sun, 23 Jun 2019 07: 57: 56 + 0000
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Investing in new construction, selling old property, good idea?
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