Selling/buying properties, new property found

Latestarter

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Now there's a good idea. Of course you could also subdivide to get the extra acreage for your property then rent out the house to generate additional monthly income... In virtually every instance I've encountered (unless the home is completely trashed, and even then...) the rent value of the property should end up being quite a bit higher than the monthly mortgage payments (PITI). Even with the costs associated with renting (repairs/upkeep/record keeping/etc.) you should be in the black every month, but if you choose to depreciate, you'll be in the red for tax purposes. I personally would not do this (depreciation) - speaking from past experience, as when you eventually sell the property you have a lot more taxable profit. But no matter how you look at it, the renter is paying off the mortgage for you. After a couple of years, you should be able to sell it at a slight profit... enough to cover the REA commission and you'll have added the extra acres to your homestead basically free of charge or with a small profit.
 

promiseacres

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Fyi Poll is a what if situation 1 of these options might happen or not.
Poll options :
1. Buy neighbors moduler which is 1484 sq ft, 3 bed, 2 bath home. a 3 car garage detached. Sits just north of our place on the dirt road. Would combine the 4 acres with our pasture and pens. Would be about 6 1/2 acres. Would have to move gates, chicken coop, play set, ect. Sell our current home with yard, about 1.45 acres
2. Buy neighbors property, sell her modelur with 0.75 acres. Leaves us with a u shaped 3.25 acres as hay field, that we add to our current 4 acres.
3. Get preapproval and get our house ready to sell then wait until we find a local property with a minimum of a liveable house on basement, a barn and shop or garage. Perferablly off the beaten path. (We have only seen 2 of these in 10 months we felt inclined to see in person.)
 

Bruce

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It all depends on the condition of the house, pricing and zoning. CAN you sell the neighbor's property and .75 acres???

Personally, I would give @Latestarter 's idea serious consideration depending on the price and condition of your neighbor's property. Believe me, moving all your cra.. STUFF is a royal PITA unless you are one of those people that lives in a totally uncluttered house and regularly get rid of everything you aren't using. You could rent the house with maybe .5 acres fenced to keep the largest amount of land available for your farm. It costs money to divide/combine land parcels, no need to rush that.

Unless there is another "boom and bust" real estate failure (which may not have even happened in your area), the neighbor's house and land will be worth more in 10 years than it is now and if it is easy enough to keep it rented for at least as much as you are spending on mortgage, taxes, insurance, repairs, you will be ahead. AND, if you can do whatever incidental repairs for problems that arise, living right next door is most beneficial. PLUS, living next door, you can easily keep an eye on the tenants. Then you can work on improving your current house and if you decide to move somewhere else in the future, you have 2 houses and 2 parcels you can sell, or keep as rentals.
 

farmerjan

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Is the modular on the place next door nice? Maybe consider buying it all and renting the house so that it could pay part/or all of the mortgage on the total purchase? Perhaps down the road someone that can take care of stuff for you if you go away; or as an investment in case you have an aging parent or whomever that would need a place to live in the future? That would give you the added hayfields, would keep the place intact for future sale if wanted/needed and rental money that would help pay the mortgage. My son bought about 75 acres of a farm but the guy didn't want to sell the house. Well, he still wasn't working so quickly went through what little he got above what he had to pay off on the mortgage, since now there was that much less collateral and couldn't make the payments again so we had to go through the whole thing and bought the house and 2 acres. It is rented at present and pays the whole mortgage, taxes, ins. on the house so he didn't take on another payment, on top of the farmland. Renting can be a pain, but this way the property will be more saleable in the future with the house once again part of it. There was a right of way to the land through the house piece and the well is on the house property with lifetime rights. Now, if he were to split it for any reason, he would insist on a new well for the farm property and a different entrance so the right of way could be terminated. Having the house just made sense even though we sure didn't need the extra payment; hence the rent.
 

Latestarter

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I turned my first home into a rental property when I bought my 2nd. And then turned the 2nd into a rental when I bought my 3rd. I was at a severe disadvantage as I was active duty Navy, a single parent with 3 very young kids, and a long distance landlord. Despite all that I did NOT lose money in the process, just gained a lot of aggravation... Primarily due to being a long distance landlord. It really sux having to drive 600+ miles whenever something goes wrong or to try and show the property to potential tenants.

If you remember at the beginning of this journal I REALLY wanted to buy that property in KY that had the 2 homes on it. Even though both were manufactured homes, I could have paid the entire PITI bill (covering both) with the rent I would have received from the one smaller home. I'm still a little bummed that I missed out on that opportunity. There were several properties down here that had acreage and multiple homes, but all of them were single wide trailers and most were trash.

Just as an aside, I once heard that 80% of the richest people in the world became that way through real estate... Hope your choice works out for you and you find the ideal situation!
 

promiseacres

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Zoning is ag. House is in good condition. We "might" rent it But our agent does not reccommend it. Rents around here are not very high. When we rented this place we paid $650 / month. Agent felt it was high and our payments are about $20 higher. When I heard it was available I wanted my Dad to buy it as his eyes are not good, ect. But he doesn't want to tie us down. If he was interested in rented it I would definitely keep it. It's a possibility.
 

Mini Horses

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As I read this you -- You are saying buy & move INTO the neighbors property (3 gar garage for DH shop), then subdivide your current house, retaining pastures. Correct?

If that is correct, most would depend on how much more you like the neighbor's house. If the only move is a chicken coop and some small sheds......may be a good option. You would have TWO mortgages for a while. Moving is a hassle but, it's close & wouldn't involve a lot of packing since you could trailer between both homes.

I would consider renting one out before I went to cost of sub dividing. In my area, some division are NOT possible due to zoning & expense is a real consideration, often more than a lot would bring if no house.
 

Bruce

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Zoning is ag. House is in good condition. We "might" rent it But our agent does not reccommend it. Rents around here are not very high. When we rented this place we paid $650 / month. Agent felt it was high and our payments are about $20 higher. When I heard it was available I wanted my Dad to buy it as his eyes are not good, ect. But he doesn't want to tie us down. If he was interested in rented it I would definitely keep it. It's a possibility.

And zoned ag, they would allow you to create a .75 acre parcel?? Doesn't sound very "ag" to me.

QUALIFYING THE FOLLOWING - I am NOT an accountant or tax professional!

I would talk to an accountant over the REA with regard to renting the place out. There are tax advantages to rental property the REA may not be aware of. For instance ANY MONEY you spend on improving or repairing the rental is tax deductible even if it is done in preparation to rent it out. Need a new roof? Deductible. Even a replaced toilet seat. Nothing you do to your primary residence is deductible. And if at some point in the future you decide to move into the place next door after it is all fixed up, you don't have to "give back" the deducted expenses. I have NO idea if there is a time constraint between deducting the business expenses and making it your primary home. There SHOULD be, but tax laws being the convoluted mess that they are, maybe that was overlooked.

And there may be other things. At the moment in Vermont, if you replace YOUR refrigerator with a new Energy Star version, you can get a $50 rebate. If you replace a refrigerator in a rental, it is $250. Likely because they want to lower electric usage and a lot of people who are renting a house out don't really care how much it costs the tenants to keep their food cold. But for $250, they might.
 

Bossroo

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Most improvements that one makes to a property for the previous 6 months are deductible if it is done to get the property ready for sale. All other improvements are depreciated or capitalized over the leangth of the expected useful life of the item.
 

promiseacres

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Well doesn't look like we can buy the next door neighbor's property . But we are now preapproved... if the right place becomes available. Have put feelers out, have had 2 responses. Neither perfect and both more than we want to spend.... not sure what to think.:hu In any case we need to finish the roof, ect. I am prepared to wait but keep looking. Husband wants to just stay here and build... :oops:
 
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