For the Real Estate educated s2ki members I think i'm finally ready to make the big step in buying a house. Currently, I have no savings what so ever because I lost a great deal of it in February, about $6k to be exact. I was going to use that money towards a house.

Current prices in the Anchorage, AK area are crazy. A 500sqft 1bd, 1bath condo with $200 association fees goes for above $100K. @6.5% interest that equals a little over $1000month mortgage. I take in about $2400month after taxes and owe about $150 a month in bills. Next march 2007 which is when my next car payment is due $380(i'm ahead on payments w/$13000 balance).

My realtor showed me this 0 down duplex and made me interested in it. Its going for $289k and currently has a 9month lease on the other side for $950month. Both sides have 2bedrooms and I suppose I could rent out the room on my side also for $400. I'd only be paying $950 out of my pocket minus expenses. It is a really decent place and I would have been sure to jump in it had I not lost my $6k in February. But it still has me thinking about it.

My plan is to stay in it until the next 12-24months and then sell it. Reap the equity to pay off my car and bike and then move into another cheaper single family home. Would anyone think that this is really risky with no cash buffer?(reference lost $6k) Should I stick with a condo? Please advise!

 

Well, it really all depends on what you lost the 6 grand on. If it was hookers and drugs, then cool. But if it was real estate, then forget it... that shit can be addictive.

 

If you're only planning on keeping it for 12-24 months, you may end up paying Capital Gains tax.
You also have two sets of transaction costs (buying and selling) within two years.
If real estate in your area is appreciating at a rate that makes that irrelevant, ok, but otherwise you're eating into your potential gains.

Here's a site with some real estate stats for Anchorage:
http://websrvr1.alaskarealestate.com/Consu...s.asp#Anchorage

Also think about other expenses, such as real estate taxes, maintenance, etc. You may be able to do without a busted appliance for a while, but your tenants won't.

What happens if you have no tenants for a month or two? Can you still pay the bills?

 

As an owner of 3 rental duplexes, I would only offer the advice to wait. If you had some money set aside in savings, great, but you mentioned you don't. The number of problems with rental properties are many. As mentioned, rent is often not paid, things break, and unforeseen problems always seem to arise at the least beneficial times. Replacing anything that may break will eat your profit, putting you in the hole every month. Tenants are never satisfied with what they have. They always want the littlest things fixed, and it all costs money. If you are doubting the purchase already, you have probably made up your own mind.

Just my thoughts.

 

there are a lot of risks to your cash flow.

you may not be able to find renters for months.

you may get a renter that you have to evict and trashes the place (meaning you are out many months rent and a full reconditioning).

since you have no cash, it is very risky.

it is hard to CONSISTENTLY make money when you only have 1-2 properties because of those things that will eat money each month. when you have many, you can spread the risk, though.

remember not to overpay. Here where I live in FL, you can buy a condo for $500K, but rent it out for...drum roll...$1500. You will NEVER make money doing that.

 

thanks for everyones input. i'm anxious to buy because house prices are appreciating in the area very fast as are interest rates. i'm worried that i won't be able to afford anything decent come next year.

i guess i have made my mind and am not going to pursue the duplex. i would only be putting myself into more debt and trouble.

 

Good deal but I say wait as well.