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I might need the tax pros help here...and the landlords help...and well, all of your opinions!!
My new husband and I have decided to venture into first time home ownership in a kind of weird way. To give a quick background...
We are looking for a duplex to buy so we can rent out one unit and live in the other unit. We are doing this for financial security. Neither of us has a financially rewarding career and our income is not expected to dramatically increase anytime soon. I have a rental property that I collect income from, he is on the losing end of pursuing a dream to play sports his whole life.
Plan is to stay in our unit for at least 5 yrs and maybe move to a SFH when we have a kid or two and rent out both units...so we want to keep this place- hopefully forever.
So...we have found a place!! We both love it. Only drawback is...Both units are currently rented. We are investigating how long the lease is and if there is a kick out clause for change of ownership- but I am betting the place will be rented until this coming August.
So if we buy this place- we must buy it as an "Investment Property" in the mortgage paperwork which bumps our 5.5% primary residence interest rate to a 6.5% Investment Property rate for 30yrs fixed.
Once the leases have ended and we can move in- we are told we can refinance for a "primary residence" mortgage to get a better rate.
So here are the numbers assuming we put 40% down:
5.5%= $560 month mortgage bill
6.5% = $630.00 mortgage bill
Each unit collects $1000 a month...covering our entire mortgage, taxes and insurance either way.
Questions:
1. First time home owners tax credit- will I get it if we buy an "investment property?"...If not, will I get it if we refinance into a primary residence? How about if we refinance in August and the tax credit is slated to end in July 09?
2. Fully rented, the units create $2,000 income combined. Going from a 5.5 to a 6.5% interest rate is $100 a month difference. Will it be worthwhile for us to buy the property now and continue to live in FL but landlord in GA? On paper it looks like a heck of a deal.. But what "added" costs are involved here?
3. Depreciation/improvements write offs...I will be able to deduct depreciation from the whole building now for the year...but how bout if we make major improvements while the property is still an "investment property"? BB and I would like to redo our kitchen and add a back porch on...should we do all that after the renter has moved out and before we refinance it into a primary residence? Or does improvements/depreciation cancel each other out?
4. Will we be able to refinance? We are putting over 40% down...but I have heard nothing but cries of "we cant refinance!!" coming from the media.
5. We have 40% to put down...actually with our lack of income the bank is requiring this amount...this is only good for us in the long run- right? Putting down so much? We save ourselves the thousands in interest payments, and in this economy there is no where to invest the money to guarantee a higher return than our mortgage interest...and though it will be painful to lose all our "fix up" money and cash reserves...in the long run- putting as much as you can down is BETTER- right?
5. Is this a financially dumb move??
I appreciate anone/everyones input!!
My new husband and I have decided to venture into first time home ownership in a kind of weird way. To give a quick background...
We are looking for a duplex to buy so we can rent out one unit and live in the other unit. We are doing this for financial security. Neither of us has a financially rewarding career and our income is not expected to dramatically increase anytime soon. I have a rental property that I collect income from, he is on the losing end of pursuing a dream to play sports his whole life.
Plan is to stay in our unit for at least 5 yrs and maybe move to a SFH when we have a kid or two and rent out both units...so we want to keep this place- hopefully forever.
So...we have found a place!! We both love it. Only drawback is...Both units are currently rented. We are investigating how long the lease is and if there is a kick out clause for change of ownership- but I am betting the place will be rented until this coming August.
So if we buy this place- we must buy it as an "Investment Property" in the mortgage paperwork which bumps our 5.5% primary residence interest rate to a 6.5% Investment Property rate for 30yrs fixed.
Once the leases have ended and we can move in- we are told we can refinance for a "primary residence" mortgage to get a better rate.
So here are the numbers assuming we put 40% down:
5.5%= $560 month mortgage bill
6.5% = $630.00 mortgage bill
Each unit collects $1000 a month...covering our entire mortgage, taxes and insurance either way.
Questions:
1. First time home owners tax credit- will I get it if we buy an "investment property?"...If not, will I get it if we refinance into a primary residence? How about if we refinance in August and the tax credit is slated to end in July 09?
2. Fully rented, the units create $2,000 income combined. Going from a 5.5 to a 6.5% interest rate is $100 a month difference. Will it be worthwhile for us to buy the property now and continue to live in FL but landlord in GA? On paper it looks like a heck of a deal.. But what "added" costs are involved here?
3. Depreciation/improvements write offs...I will be able to deduct depreciation from the whole building now for the year...but how bout if we make major improvements while the property is still an "investment property"? BB and I would like to redo our kitchen and add a back porch on...should we do all that after the renter has moved out and before we refinance it into a primary residence? Or does improvements/depreciation cancel each other out?
4. Will we be able to refinance? We are putting over 40% down...but I have heard nothing but cries of "we cant refinance!!" coming from the media.
5. We have 40% to put down...actually with our lack of income the bank is requiring this amount...this is only good for us in the long run- right? Putting down so much? We save ourselves the thousands in interest payments, and in this economy there is no where to invest the money to guarantee a higher return than our mortgage interest...and though it will be painful to lose all our "fix up" money and cash reserves...in the long run- putting as much as you can down is BETTER- right?
5. Is this a financially dumb move??
I appreciate anone/everyones input!!
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