Personal Finance

I'm going crazy! First time homebuyer...

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  • Jun 26th, 2005 3:12 am
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[OP]
Deal Addict
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Jan 25, 2004
2275 posts
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Ottawa

I'm going crazy! First time homebuyer...

Well, as some of you know from my earlier posts, came close to buying a duplex. Got outbid at the last minute. I found out quick in this market, houses do NOT last long.

Anyways, I think I'm crazy. Here is my situation.

Gross income is only $37,000 a year, and have about $11000 down payment. I'm looking for a 3 bedroom house so I can rent out the other two rooms at $300 a month per room.

Am I crazy for even thinking about looking at houses in the $150,000 range? I also want to start my own home based business once I do get a house, but I have no idea how successful I'll be at this. Also, the town I'm situated in will eventually be getting a 4 lane highway built to it, connecting it to a major city.

I'm unsure how I feel about the real estate market right now. Any substantial rise in interest rates will pretty much kill the bubble.
7 replies
Deal Expert
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Jun 14, 2003
23140 posts
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Konowl wrote: Am I crazy for even thinking about looking at houses in the $150,000 range? I also want to start my own home based business once I do get a house, but I have no idea how successful I'll be at this. Also, the town I'm situated in will eventually be getting a 4 lane highway built to it, connecting it to a major city.
It all depends on where it is. Which city?
[OP]
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Jan 25, 2004
2275 posts
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Ottawa
I already have the rooms rented.

It's in a town called Carleton Place, half an hour west of Ottawa.

I'm talking more about the logistics of purchasing a property with what I make etc, not the feasability of renting. There is VERY little available to rent locally.
Deal Addict
Jan 1, 2005
1654 posts
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Calgary
For $150k property value with $11k down payment, your mortgage pmt will be approx $908/ month (assuming $2000 prop tax, 6% interest). Less $600 rental income, you will need to pay $308 from your own pocket plus utilities ...

If you use it for you home base business and you make profit on it, you can deduct portion of utilities, property tax, .. etc

To answer your question, if you don't mind sharing your house with other people (renters), and sure to have stable rental income stream, it sounds like a good idea.
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Mar 8, 2002
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Ottawa
Have you been pre-approved for a mortgage, and if so, for what amount? (price of the house minus down payment). This will determine what you can afford. Most lending institutions will take into consideration your utilities and property taxes before approving you. Some banks will even include the property tax in your mortgage payments and remit the money to the municipality on your behalf.

What the lenders will NOT take into consideration is the possibility of rising interest rates. If interest rates go up a couple of points when it's time to renew your mortgage in 5 years, will you still be able to afford it?

Lenders will not give you any credit for income gained by renting out rooms. After all, there is no guarantee that your tenants will pay, despite whatever leases you have signed.

Also consider the cost of maintaining the home. Roofs have to be replaced about every 20-25 years. Are the windows in good shape and air tight? What about the systems in the house like heating, cooling, plumbing, electrical? Are they in need of upgrading or replacement? How is the home heated - electric, gas, oil, and what is the annual heating cost?
Sr. Member
Feb 2, 2003
843 posts
1 upvote
There's probably gona be issues if you have a homebase business while renting, bylaws can be a bich
[OP]
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Jan 25, 2004
2275 posts
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Ottawa
sumfunny wrote:There's probably gona be issues if you have a homebase business while renting, bylaws can be a bich
Seriously? Weird. Even if it's more of a "on the job" kind of business using the home as a "home base"?

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