Archive for September 2009
So the “other” bit of personal business that I mentioned in my previous post is, we bought a rental house. I’d been thinking about it ever since house prices started to decline, thinking that we’re due for some heavy inflation, and rising interest rates, and the stock market looked like a particularly hostile environment for any extra cash.
I’d been looking at listings online, but hadn’t really started pounding the pavement going to open houses, etc. Then this property a couple of blocks from our house came on the market, and everything just sort of fell into place. The price was a little higher than the range I’d been considering, but it was a good value, and I was feeling that the market was starting to bottom out.
The weird thing is, a friend of ours used to own this place back in the late 70’s/early 80’s, and we’ve been there for many social occasions. It was really weird to walk through the place after some 25+ years. Our friend was single when he lived there and, while not a wild & crazy wastrel, was still a single man in the 7os. So, since I just finished The Widows of Eastwick, and was reminded of their ringleader in The Witches of Eastwick, Darryl Van Horne, we’ve been telling ourselves that we’ve purchased the Van Horne mansion.
It’s been an interesting and educational experience. I’ve never before been through the whole real estate purchase cycle: offer, counter, accept, financing, inspection, contingencies, closing, escrow. We bought our residence from our landlady in 1975 on a land contract. Meaning, we didn’t deal with realtors, lenders, appraisers, etc. We just kept paying our landlady every month, only it was principal & interest, not rent.
One of the highlights was having the Van Horne mansion inspected. The inspector was a woman recommended by a realtor friend of ours, and turned out to be something of a character. She was real energetic and talked to herself as much as she talked to us. A refrain she repeated several times as she moved about the place was “I’m a raindrop. I’m a raindrop. Where am I going?” to figure out if we’d have flooding problems. (It’s only rained a couple of times since we made our offer, so the jury’s still out on how the place handles water).
You expect a cold shower from a real estate inspection, but there weren’t that many deficiencies that our inspector called out. A few things need to be fixed, but nothing that needs to be done before tenants move in. We couldn’t really get our seller to fund anything, because he had received several offers higher than ours, so we’ll chip away at these things as we are able.
Also, the financing was a little bit of an adventure, since I’m self-employed. Well, I’m an employee, but of a corporation that I own. So, I had to educate the lending underwriters about how I couldn’t really say I earned $xx per month, because I only write myself a paycheck when I collect my receivables. And that it’s actually safer to lend to me, because a client can fire me and I still have multiple sources of income, where if an employee’s employer fires him, he’s got bupkis.
So part of this process is a little social engineering. Our son will be our anchor tenant, meaning that he no longer resides in our house. This was another little angle - he was going to move out and rent somewhere this fall anyway. Since I was considering a rental investment, why should he be paying rent to someone else? Plus, we’ll now have an extra bedroom here. And it gives me an opportunity to collaborate with him on any projects there, which resonates with me on many levels.
It’s a bit of a culture shock for us, since we’ve never really had a mortgage payment in our lives besides our 70s-era payments to our old landlady. Rental cash flow will cover most of the payment, but it’s still gonna feel weird, opening my Quicken and seeing that lozenge of debt sitting there.
Oddly, as we’ve been over tweaking things, I’ve felt a couple times that I might like that place better than our current residence, that maybe we should move there and rent or sell our current residence. Hafta see how it plays out.