Castles in the air, castles on the ground.
Jul. 2nd, 2007 03:29 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
rivkaMichael's birthmother paid us a quick visit this weekend. In the course of a day or two, huge changes were set in motion for us - an experience simultaneously exciting and dizzying.
She's in the position of needing to sell one of her real estate properties. If she doesn't buy another property within a certain number of days, she becomes responsible for paying taxes on the capital gains - which would be a huge hit. But she's trying to divest herself of her rental properties, so she doesn't want to buy another property in Oakland.
Enter us. We would certainly like to buy a house, but we don't have money for a down payment.
Our tentative plan is to use the money from Laura's sale to buy a house that's divided into 2-4 units (common in the downtown Baltimore neighborhoods where we'd like to live; think converted mansions). That way we'll have rent to cover a substantial portion (or perhaps all) of the mortgage payment, and we can slowly buy Laura out. She's suggested that she might be willing to charge us simple (rather than compound) interest, although I'm not sure if her financial planner would go for that.
If we can make this work - have a house that largely pays for itself - it would free us up in so many ways. Michael has thoughts about going back to school, for example, and then starting a small business. That would be much easier to do if we weren't struggling to meet a large mortgage. We'd have a lot more flexibility for balancing work and family. The tradeoff: we'd have to spend a fair amount of time being landlords, and we'd have to put some effort into learning how to do basic home repairs ourselves.
So far we're mostly looking in our current neighborhood, Mount Vernon, and in the neighborhood just to the northwest of us, Bolton Hill. The neighborhoods would actually take us down fairly different paths.
Bolton Hill is primarily a residential neighborhood - streets and streets of large, lovely townhouses built in the second half of the 19th century. It's a beautiful neighborhood with lots of trees, much quieter than where we're living now. We wouldn't have the experience we have now of being just a block or two away from lots of restaurants and shops. So far we're mostly looking at houses in the southern part of the neighborhood, perhaps a 10-15 minute walk from where we live now - so we'd still be within walking distance of a lot of stuff. We'd be a 25-minute walk from the library and church, instead of a 10-minute walk.
The houses we've found in Bolton Hill (this and this and this) are essentially set up as single-family homes with an apartment attached. They seem to have less of an apartment-house feel - at least, as far as I can tell from the listing and from walking by the houses. They look lovely and well-kept from the outside. Our portion of these houses would be large, and it would be fairly easy to convert back into a single-family home if someday we had the extra money and wanted the extra space. The flip side is that the rent from the apartments wouldn't cover more than about half the mortgage, so we'd still be making a substantial monthly payment.
We probably couldn't afford a house like that in Mount Vernon, where we're living now. (We can only really afford our rental because it's priced under the market.) In Mount Vernon, we'd be talking about a scruffier, larger property with more units. Instead of a "house with an apartment," we'd be looking at a "multi-unit building with owner's unit." Something like this or this. We'd be looking at blocks which are slightly more marginal, and houses that would probably need more upkeep (and perhaps some major work). We would keep the strong urban environment that we have now - close to shops, restaurants, buses, museums, the public library, and our church, but also close to drug dealing, crime, etc. Rent would probably cover almost the entire mortgage. The flip side to that: we'd have to be a lot more landlord-y.
It's all very exciting and very terrifying. We've got some big decisions to make about what we want our lives to look like over the next ten or fifteen years.
She's in the position of needing to sell one of her real estate properties. If she doesn't buy another property within a certain number of days, she becomes responsible for paying taxes on the capital gains - which would be a huge hit. But she's trying to divest herself of her rental properties, so she doesn't want to buy another property in Oakland.
Enter us. We would certainly like to buy a house, but we don't have money for a down payment.
Our tentative plan is to use the money from Laura's sale to buy a house that's divided into 2-4 units (common in the downtown Baltimore neighborhoods where we'd like to live; think converted mansions). That way we'll have rent to cover a substantial portion (or perhaps all) of the mortgage payment, and we can slowly buy Laura out. She's suggested that she might be willing to charge us simple (rather than compound) interest, although I'm not sure if her financial planner would go for that.
If we can make this work - have a house that largely pays for itself - it would free us up in so many ways. Michael has thoughts about going back to school, for example, and then starting a small business. That would be much easier to do if we weren't struggling to meet a large mortgage. We'd have a lot more flexibility for balancing work and family. The tradeoff: we'd have to spend a fair amount of time being landlords, and we'd have to put some effort into learning how to do basic home repairs ourselves.
So far we're mostly looking in our current neighborhood, Mount Vernon, and in the neighborhood just to the northwest of us, Bolton Hill. The neighborhoods would actually take us down fairly different paths.
Bolton Hill is primarily a residential neighborhood - streets and streets of large, lovely townhouses built in the second half of the 19th century. It's a beautiful neighborhood with lots of trees, much quieter than where we're living now. We wouldn't have the experience we have now of being just a block or two away from lots of restaurants and shops. So far we're mostly looking at houses in the southern part of the neighborhood, perhaps a 10-15 minute walk from where we live now - so we'd still be within walking distance of a lot of stuff. We'd be a 25-minute walk from the library and church, instead of a 10-minute walk.
The houses we've found in Bolton Hill (this and this and this) are essentially set up as single-family homes with an apartment attached. They seem to have less of an apartment-house feel - at least, as far as I can tell from the listing and from walking by the houses. They look lovely and well-kept from the outside. Our portion of these houses would be large, and it would be fairly easy to convert back into a single-family home if someday we had the extra money and wanted the extra space. The flip side is that the rent from the apartments wouldn't cover more than about half the mortgage, so we'd still be making a substantial monthly payment.
We probably couldn't afford a house like that in Mount Vernon, where we're living now. (We can only really afford our rental because it's priced under the market.) In Mount Vernon, we'd be talking about a scruffier, larger property with more units. Instead of a "house with an apartment," we'd be looking at a "multi-unit building with owner's unit." Something like this or this. We'd be looking at blocks which are slightly more marginal, and houses that would probably need more upkeep (and perhaps some major work). We would keep the strong urban environment that we have now - close to shops, restaurants, buses, museums, the public library, and our church, but also close to drug dealing, crime, etc. Rent would probably cover almost the entire mortgage. The flip side to that: we'd have to be a lot more landlord-y.
It's all very exciting and very terrifying. We've got some big decisions to make about what we want our lives to look like over the next ten or fifteen years.
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no subject
Date: 2007-07-02 07:46 pm (UTC)How much time will you have to find a place? Because it sort of really needs to be the right place.
The first link in Bolton Hill has two 1 BR rental units plus one 2 BR for you, which might make more financial sense and be less burdensome than a larger building with more apartments.
no subject
Date: 2007-07-02 08:07 pm (UTC)http://en.wikipedia.org/wiki/1031_exchange
The Bolton Hill properties sound more appealing, even if they are more expensive.
no subject
Date: 2007-07-02 08:11 pm (UTC)She hasn't sold her place yet, so we have time. (That'll actually make things tricky if we find a place we love right away.)
That first house does look very nice, but much will depend on how big the 2BR is. If it's smallish, then the addition of another kid would make a 2BR awfully cramped.
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Date: 2007-07-02 07:52 pm (UTC)Yes, I can see how it would be. I think this is a great opportunity. I hope it works out well.
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Date: 2007-07-02 08:13 pm (UTC)Mount vernon multifamily units
Date: 2007-07-02 08:20 pm (UTC)Re: Mount vernon multifamily units
Date: 2007-07-02 08:22 pm (UTC)Re: Mount vernon multifamily units
Date: 2007-07-02 08:28 pm (UTC)no subject
Date: 2007-07-02 08:20 pm (UTC)no subject
Date: 2007-07-02 09:32 pm (UTC)Congratulations. Sounds fabulous. I have a friend in Montreal whose home ays for itself and the *freedom* is incredible.
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Date: 2007-07-02 11:09 pm (UTC)Hee! Alex's school is actually called "Bolton Hill Nursery School." And yeah, all three of the Bolton Hill properties are within a couple of blocks of nursery school.
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Date: 2007-07-02 10:00 pm (UTC)1. Do you and Michael have a good relationship with Laura, and has it been a stable kind of relationship? Borrowing money from family can get ugly if tensions blow up.
2. How much space do you anticipate needing, say, five years down the road? Is there the possibility of a second child in the future?
3. How handy are you guys? Do you think you could do the simpler maintenance work yourselves? More importantly, how happy would you be spending a fair chunk of your non-work time in painting and simple repairs?
4. How big a problem would the neighbourhood drawbacks (crime etc) of Mount Vernon be? Can you see yourselves living in your current neighbourhood longterm? Local schools?
Basically, I think it's a terrific idea if Laura isn't the type to use her financial help as emotional leverage (which I'm presuming she isn't, if you're considering it), and if you don't mind doing a fair bit of the scut work yourselves. I'd go for the bigger property in the less expensive, more convenient neighbourhood if it were me. I love being close to everything, it's more likely to be a diverse neighbourhood, and you'll have a smaller monthly payment. Plus, a bigger property in a gentrifying neighbourhood is probably a better longterm investment than a smaller one in an already-gentrified neighbourhood. but I don't live in Mount Vernon, so I don't know how bad the crime rate, noise issues etc are.
BTW, you don't have to give me the answers to the above nosy questions. I'd just recommend asking yourselves those questions before you make a decision.
no subject
Date: 2007-07-03 02:47 am (UTC)Heh. I'm an adopted child, she's my birth mother, and we only made contact about eight years ago. We've had some struggles getting to any sort of stable state, but it seems to be pretty good now, and likely to remain so, I think. She feels it would be a great thing for her to be able to "help you guys before I'm dead", as she puts it, and she's a big believer in passing on good karma; a good friend of hers helped her get started in the landlording business lo these many years ago, and she wants to help us.
2. How much space do you anticipate needing, say, five years down the road? We may well need a little more space than a two-bedroom place could provide us, as family expansion would put pressure on us. That's a big argument for picking the Bolton Hill places -- we can expand those much more easily, and they're likely to just be bigger in the first place.
3. How handy are you guys? Do you think you could do the simpler maintenance work yourselves? More importantly, how happy would you be spending a fair chunk of your non-work time in painting and simple repairs? I'm game to learn more about it, although experience has shown me how limited my skills currently are. I feel certain that with some classes and some practice that I could do well at basic tasks, though. Depending on just how much time we're talking about, I think spending time doing that would actually be very satisfying to me -- I love the satisfaction I get from fixing something and seeing it working correctly.
4. How big a problem would the neighbourhood drawbacks (crime etc) of Mount Vernon be? Can you see yourselves living in your current neighbourhood longterm? We can deal with the crime issue, although I confess that I hadn't realized how much property crime was going on close to our house until I looked at the BPD's website. We have learned some of the basic cautions necessary to be city-dwellers, and we're OK with that. I'm a little less sanguine about being east of our current location, as the traffic will be heavier and I suspect we'll have more of the problems that come with that -- noise, random crime, and so on. I'm actually a little excited about the opportunity to get to spruce up someplace, though I may be due for a big dose of reality once the estimates start rolling in.
no subject
Date: 2007-07-03 07:09 am (UTC)Of course I don't know you, and you might be fine with all of these tasks. I just see where I could fall for wishful thinking instead of reality, and want to advise against the fantasy. Some advice you might be able to use: Check craigslist for a handyman... there's a bunch of them, I am sure. See if you can find one who will barter with you for whatever you can do in exchange for teaching you stuff. My brother is a home repairs guy as well as a fine carpenter, and he barters for drum lessons for his son. Alas, he doesn't live in Maryland any more, but you might be able to find someone like him.
K. [I do know how to repair the hole punched in the wall, and can solve the broken lightbulb, but things go bad for me after that]
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Date: 2007-07-03 05:11 pm (UTC)We do still have a lot to learn, but he's not a total babe in the woods.
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Date: 2007-07-04 03:13 pm (UTC)Best of luck finding a wonderful place, and in having it all work out. I briefly owned a house-with-rental, and had to do some work on the apartment. The results were functional, even though the process was pure comedy.
K.
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Date: 2007-07-02 10:16 pm (UTC)no subject
Date: 2007-07-02 11:07 pm (UTC)no subject
Date: 2007-07-03 03:27 am (UTC)no subject
Date: 2007-07-03 05:13 pm (UTC)no subject
Date: 2007-07-03 07:44 pm (UTC)There's two problems here: 1) she would have to separate the rental part legally from the unit you're living in, and 2) she will only own 1/3 of that separated part which will almost certainly be less value than the building she's selling, so she'll have to pay taxes on the building she's selling. With a Starker, you must buy up, and you can't take any "boot" out -- so no cash or other real property out of the deal.
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Date: 2007-07-03 03:35 am (UTC)Now, it's possible she plans to pay the taxes and just isn't really talking to you about it.
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Date: 2007-07-02 10:38 pm (UTC)It just occurs to me that house-hunting with child must bring a whole host of challenges - somewhere for her to play out, school districts and all that...
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Date: 2007-07-02 11:11 pm (UTC)no subject
Date: 2007-07-03 04:32 am (UTC)Well, I hope you find a fabulous place to live and we volunteer painting and spackling help should you need it. Also, Tamsin has oven window polishing experience. :)
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Date: 2007-07-03 06:20 pm (UTC)Oh, how fascinating. We should definitely compare notes at some point. (Expect some more journal posts about this from me, now that I seem to have come out of the closet.)
We didn't move to inner-city Baltimore to be in a good school district, obviously - instead I had a progressive private school picked out well before I even got pregnant. But somewhere along the line, encountering my actual child and how much she learns in her everyday life, I became very skeptical about the whole concept of school.
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Date: 2007-07-03 06:41 pm (UTC)Anyway--I look forward to your further posts on the schooling! I think I probably forgot to thank you for all your help with the vaccination info... I realized later that there were very few shots we weren't planning to get (for some reason, I was under the impression that there were 40 zillion jabs to consider and there really weren't)... but then these articles come out all the time about "Are vaccinations really SAFE?!?!?" (the latest one I saw was from CNN, the bastards...) and I think I was just kinda whirling in the scandalous scandal of it all. Thanks for helping me break my orbit! :)
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Date: 2007-07-03 07:30 pm (UTC)no subject
Date: 2007-07-03 12:58 am (UTC)-J
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Date: 2007-07-03 01:15 am (UTC)no subject
Date: 2007-07-03 07:16 am (UTC)K.
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Date: 2007-07-03 07:55 pm (UTC)Still, the reason she's getting out from under the properties in California is because the planner sat down with her, showed her the numbers, and said, "If you don't want to go broke, here's what you need to do. Stop spending so much on unnecessary expenses, sell those properties, and have X amount available to sustain you for the future." If he can't be convinced that she's going to get a reasonable return on the money (both in terms of yield and when to expect to see it), he'll have reason to advise her against it. If she's getting other less tangible benefits out of it, she may decide to do it anyway, but...
If she can't be reasonably sure of some level of financial security, I don't think any of us want her to do this. However, unless there are some complications that haven't yet presented themselves, the numbers seem like they may indeed work out if we can find the right place.
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Date: 2007-07-03 01:45 pm (UTC)I'm saying this to suggest the approximate price range of hiring someone who can plumb and electric and fix to be on call which you need to figure into the rent you'd be charging, until you get good at that stuff yourselves.
Also, our apartment was originally two apartments, and we have four bedrooms. It's possible to convert things interestingly.
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Date: 2007-07-03 06:21 pm (UTC)I've had your solution tucked away in the back of my mind ever since you first posted about it, yes. We looked at a house today in which something like that might be possible.
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Date: 2007-07-03 07:33 pm (UTC)(And I will consider a new keyboard.)
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Date: 2007-07-03 08:08 pm (UTC)no subject
Date: 2007-07-03 08:14 pm (UTC)