Friday, March 24, 2017

Equity Shuffle

It's been a very busy month and I haven't made the time to sit down and sort out my thoughts until now. 

Old Plan:
Nephew goes off to college in May.
Mother moves in to my Tucson house after I turn my carport in to an apartment for her.

But the more we thought about that, the more we decided that it wasn't ideal since my mother would be bored and dependent on me for things that she can do herself now like go to church, see her friends, go to doctor appointments, etc...  The only thing that made sense was for me to move to her retirement town which is 45 minutes away.  Safer streets, less traffic, familiar routines. 

New Plan:
Nephew goes off to college in May.
Fix up Tucson house to sell and mother sells her house.
Move to my property temporarily.
Buy a house with mother near mother's current location.

I wasn't sure if I was even allowed to move to her town because it is mostly 55 and older housing.  But, only one person in the household needs to be 55 and older so, yes, we can live there together.  Then, I needed to figure out if there were regulations for pets.  I have heard of homeowner's associations limiting pets to only 2 and I currently have 3 dogs and 2 foster dogs.  I narrowed down the area that would work for both of us and the HOA does not have a pet limit so I'm good there as long as their barking doesn't annoy the neighbors.  Now I am watching homes for sale.  I have identified around 40 that have a large yard, as in more than .2 of an acre lot.  They aren't for sale but maybe one of them will be by the time we are ready to buy.

And, to kick off this plan, I bought another house.  This one is an investment.  Since the house that I live in now would only get around $850/m for rent, I decided to buy a small house and rent it out to my tenant who is at my property in my mobile home for $600/m.  He wants running water and accessibility to public transportation, and I want my mobile home back because I plan to move there temporarily and store more of my stuff there after I make it pest-proof. 

Here's a little more explanation:  I am emotionally invested in my Tucson house.  I have toiled in the yard, fostered loads of dogs and puppies in it, housed my parents and nephew, visited with other family and friends.  I don't want to rent it out and see other people change it.  I want to sell it and never go back.  Plus, the house is worth around $160K and I don't want to keep a mortgage on it so having that much money tied up in it does not work for my plan.

So, I took out a home equity line of credit for $70K and looked around for something small.  Something that I would never live in and not get attached to it.  But I have to back up again because I didn't start with the HELOC idea.  I started just looking for some place for my tenant to move to.  It was hard to find a place because he has two dogs and it is difficult to find someone else a place to live.  Then I had the bright idea to look for something to buy.  It would be win-win.  I would keep a paying tenant and he would have a better place to live than my mobile home.  The houses that I found in the areas that weren't either crime-ridden or way far out from civilization were all fixer-uppers and not able to be financed traditionally.  Thus, the HELOC.

It took a month to apply for the HELOC and get the money.  I was watching two houses but on the day my funds were available, both houses had multiple offers.  I scoured the listings again, asked my tenant about areas that he wanted to avoid, and checked for their crime rating.  I found this little two bedroom, one bath house close to downtown and a block from the bus stop.  I went out to look at it asap.  My realtor said that the house was probably still available because it had a tenant.  We couldn't see inside but I wanted to put in an offer anyway.  The realtor wrote the offer up contingent on seeing the inside and there being no major issues.  Then we waited for the tenant to leave, and waited, and waited.  Finally he moved out and the inside was dirty with a few water hose leaks, cockroaches and some termites.  My realtor made a list of things to be fixed and we waited some more.  The closing day was getting close so I offered to take the house as-is for $1,000 off the price.  The seller agreed and we proceeded with the sale for $64K.  It's been a week now and my handyman has been painting and repairing.  It's been treated for cockroaches and termites and all the junk is gone.  We are focusing on the inside first so that my tenant can move in the first of the month.   

Needs some stucco repair.

Dirty but functional.

Water leaks and clogged drains.

I don't want to know what was living in the couch.
Now you are caught up with my plans and rental house adventure.  When I sell my Tucson house I will pay off the rest of the mortgage and the HELOC and have some leftover to put down on the house with my mother.  I will also have 2 paid-off rentals giving me income.  That's pretty awesome.


Corrie said...

Wow! So exciting! I love seeing all your plans come together!

Practical Parsimony said...

Good plans. I just am amazed you are catering so to the renter. Most landlords would announce the place was being sold and give the renter a time to leave. You are very nice to him.

philo said...

Whew! Finally another post.

You're in the wrong job, Daizy. After the dust has settled, why not wrap up your current job (something you've wanted to do) and become a financial planner.

Kim said...

That is very kind of you to consider the needs of your current renter. I'm assuming this new property will appeal to new renters when this one moves out? So you'll have the property with the trailer & "tiny house", house near your mom, and 2 rentals? You're going to be real estate tycoon:). Once you have the properties paid off, will the rental income allow you to quit the day job?

Lizzie@her MFW Homeworld said...

wow, i took my eye off you just for a second!!
Well done you!

thisisbeth said...

You are amazing and inspiring. Thank you!

Dave said...

You are turning into a little real estate tycoon LOL! We need a scorecard to keep track of all of your properties.

Stephanie said...

I think that's a great solution. I'm sure you've thought about this, but how far is your mom's town from work? Or are you planning to retire when the two of you buy a house?

Done By Forty said...

We've used equity in our house to make some moves before, too. It's a pretty cool thing.

And two paid for rentals?! That's some income, for sure. Well done.

Best of luck with these transactions in the coming months, and I hope the perfect home comes up in the area you're looking for for you and your mom.

Daizy said...

Thanks, Corrie. They are certainly a work in progress. I never really know how they will turn out until they are done.

Daizy said...

I saw it more as a win-win idea. I get to keep getting paid and he gets better living conditions. Hopefully it will continue to be a favorable arrangement.

Daizy said...

Haha, I was thinking more like starting my own house flipping business. I like finding ugly houses with potential. Having a good handyman is the key!

Daizy said...

I have a few ideas if my tenant leaves and if those fail, just sell it. I was even talking to my handyman about how easy it would be to add another bathroom and bedroom to make it a 3 bed, 2 bath. Possibilities!

Daizy said...

Oh, and I could live on the income IF I was living in my tiny house and I had an adequate emergency fund and maintenance funds for the houses.

Daizy said...

Hehe...Always scheming. And yet my weekend goals are still to just stay home and take a nap!

Daizy said...

Thanks, Beth. It was scary to make the decision and go forward with such a high dollar plan. I'm such a novice at this real estate investing thing.

Daizy said...

Haha, maybe I should change my blog description to a girl, 2 rentals, 1 house, a tiny house, and 5 dogs. But I'd have to change it again when I move in with my mother.

Daizy said...

Good question! My work is halfway between our current houses so the drive will be around the same. Two of my coworkers live there already.

Daizy said...

Thank you! Another house came on the market today in that neighborhood but it isn't "the one". The houses are all custom though so it is fun to see the pictures. Using equity was scary! I kept thinking, 'am I crazy for doing this?' I haven't paid my first payment yet. I may have some regrets. My mortgage payment plan has been destroyed. It will take a while before I sell my house and finally see the end goal when the mortgage disappears, until I buy another house, of course.

Anonymous said...

I have always thought rental income would be a leg of your retirement. How exciting

Big Sis said...

Remind me at tax time to remind you about interest tracing. It will help you taxwise.