How to make money building a house that the bank paid for

Spazyfool
Spazyfool

I'm tired of seeing people posting that "mortgages are just the bank fucking you" and "owning property is letting the jews win" and all this shit.
Here's how to own a house and make more money with the bank's money than the bank is making.

Find a decent vacant lot for ~$50k. There are lots around if you look online in your area, it doesn't have to be huge but the more you can get over a half acre, the better.
Now the bank will fund you to build a house on that lot, it's called a builder's mortgage. They give you money in increments based on what the final value of the house/lot will be. They have no problem with lending you $200k to build a house that would sell for $300k.
Their first payment has the cover the cost of the lot AND get your house to 40% completion, though, which is where most people struggle to get through. You'll probably need to borrow some money to get through this part, but don't worry, you'll get it back once the build is done. They are giving you the FULL cost to build the house in full, they're just lame about the increments they give it to you in, in order to cover their ass. They don't want to give you the first payment and have you go to Vegas and blow it, and all they can take from you is a vacant lot that isn't worth what they've given you already.

Build a decent house. As in, don't build a piece of shit. Spend some time looking at floorplans and decide on what you're able to afford square footage wise. I just recently built a 1750sq ft home with a fully finished basement for ~$230k. The monthly payment on our mortgage is ~$1150. Make sure your building contractor is including the price of a fully finished basement in the total cost. Two bedrooms, kitchen, bathroom, laundry room in the basement, and there are two sets of stairs to access the basement. One is from the garage, one is inside.
Two sets of stairs mean basement tenants never have to enter your actual house; they access the basement from the garage.

All urls found in this thread:
https://www.cibc.com/ca/mortgages/calculator/mortgage-payment.htm
http://www.realestate.com.au/rent/property-house-in-mildura,+vic+3500/list-1
Fried_Sushi
Fried_Sushi

Complete the house, and rent the basement out to either a couple or two separate people.
Price the rooms comparatively to what a dorm room costs at your nearest college/university if you're near one, and if you're not, make sure it's priced comparatively to other rented properties in your area. If shitty ass two bedroom apartments that are small in an apartment complex are being rented for $1000/mth, you can get more than that easily. You are offering a brand new, clean, never been lived in, LARGE two bedroom apartment.

Now, use their rent to pay your mortage off. Where I am, shitty fuckin dorm rooms are rented for around $600/mth. That makes renting the basement to two students EASY for $1200/mth, because it's the same price as a dorm but a hell of a lot nicer. We're close to a university, so that allows us to be a bit more choosy with who we want living there as well.

With the mortgage being $1150/mth and rent coming in at $1200/mth, any amount of money you are able to save is able to be chopped right off of your mortgage. My fiance and I budgeted ourselves around $1100/mth, so I know we are comfortable with giving that up. So we put that on top of the rent, and the mortgage gets paid of way faster.

By renting the basement out and also holding ourselves responsible for "paying" the mortgage ourselves as well, we are able to pay off a shitpile of the mortgage over the course of two years. The interest in the first year was around $6500, and we're aiming to pay off close to $28k. The second year we'll pay off a similar amount, but the interest will be less.

Need_TLC
Need_TLC

In two years time, we'll be able to sell a house that we initially paid $230k for, and have the mortgage paid down to ~$190k, for $300k.

That's $110k in our pockets, but we paid ~$55k into the mortgage on that. Now, we could have done that right off the hop (sold it), but the house value is still pretty much "brand new" after two years. Also, if you don't live in the house for at least a year (I think) you get taxed on all that. So you might as well live in the new house you just designed and built for a couple years.

So basically you start with fuck all, nothing, and go to SAVING ~$50k over the course of two years for living in a new house and renting the basement. You don't even have to sell it, if you stay there and continue doing that, you'll have the mortgage paid off in EIGHT YEARS. The bank gave you the money hoping it'd take 25.
Now, you don't have to pay the mortgage off that fast. If you're okay with giving the bank way more in interest, you can have your tenants pay the mortgage for you forever. You're still on the hook for property tax and utilities and all that, but not having a mortgage in a brand new house is pretty sweet.

Nude_Bikergirl
Nude_Bikergirl

Here's the numbers because I know people will try to say that it's bullshit. You need to make enough money in order to support an $1,100 mortgage payment, that's it. If you can make the mortgage payment, the bank is happy to give you the money and rape you on interest over many years.
Those of you paying rent probably pay close to that already.
My bank is CIBC so I used their mortgage calculator for reference.2.79% on a two year fixed rate
https://www.cibc.com/ca/mortgages/calculator/mortgage-payment.htm
First year
$230,000 + $6417 interest = $236,417 owed
Payment is $1,064/mth = $12,768 per year
1200 in rent x 12 months = $14,400 per year
You are paying $1,100 per month = $13,200 per year
So you're paying off $27600 total minus the interest per year

Which means, after the first year, you owe $208,319
2nd $208,319
3rd $186,028
4th $163,112
5th $139,551
6th $115,329

So now you've lived in your house for five years. The bank will make ~$3200 off of you in interest the following year.

7th $90,426
8th $64,823
9th $38,501
10th $11,440

And obviously the entire mortgage is paid off in the 10th year. Paying a brand new house off in 10 years is not fucking common for young people to accomplish. If you can manage to get the bank to loan you the money when you're 20, you could own the house in full by the time you are 30. That's nuts.

Lord_Tryzalot
Lord_Tryzalot

So, to round this all up, the bank lent you $230,000 with the intent of you taking 25 fucking years to pay it off. This amounts to them raping you in interest because you took so damn long to pay it.

You paid the entire thing off in 10 years, and you were under zero pressure the entire time because, if something were to happen in that time and you were in need of money, your mortgage for that month was already paid regardless. You don't even have to be frugal with your savings, this is assuming that you're holding yourself obligated to pay for your own mortgage and that's IT.

Now, you own a house that costed $230,000 to build.
The bank made ~$34,480 in interest.
You own a house that can be sold for $300,000+ easily, and now you are making $1200/mth right into your pocket if you don't want to kick your tenants out and take the basement back for yourself. My municipality just raised my property taxes and my house was appraised at $400,000+. You can make a lot of money doing this if you do it properly.

You borrowed money from the bank... and you made a lot more money with it than the bank did, as well as got yourself a new house to live in, and worry-free mortgage payments for a decade. Oh, and you own a house in 10 years, and that's by holding yourself to the bare minimum of paying your own mortgage and having tenants. If you can save more than that, you could have it paid off faster.

Gigastrength
Gigastrength

If you can make this work, good on you. But it isn't 2007 anymore, I don't know many 20 year olds around here that could safely qualify for a reasonable loan for that amount.

PackManBrainlure
PackManBrainlure

@Gigastrength

If you can't do it when you're 20 then plan on doing it when you're 25. You don't need to have an amazing job to qualify for a lower end mortgage

ZeroReborn
ZeroReborn

@PackManBrainlure
it's just as easy as asking for a loan and buying some land, right?

BunnyJinx
BunnyJinx

@ZeroReborn

The bank literally has a thing called a builder's mortgage where you tell them the lot you want to build on and get your house plan approve and they fund the entire thing.

If you showed them a lot for $100k and drawings for a house that a GC told you would be $250k, the bank looks at it like a $350k mortgage.

So, in a sense, yes it is as easy as asking for a loan TO buy some land. And build a house on it.

Spamalot
Spamalot

Cool except rent is around $300 for a 3 bedroom house here and land anywhere worth living will be around $250k

Bidwell
Bidwell

@Spamalot

are you serious? you can rent a three bedroom house for $300? that makes absolutely no sense at all

massdebater
massdebater

@Spamalot
Actually now that I look into it, 3750sq ft for about 60k

Inmate
Inmate

@Bidwell
The house I'm in now is 3 large bedrooms with a shed larger than the house for $250 p/w

Rural Australia tho, town of about 50k, about 5 minutes out of town

hairygrape
hairygrape

@massdebater
@Inmate

holy mother fuck that is cheap dude

This is moreso designed for people that have a hard time becoming the owner of a house. If you can buy a decent house for $60k just buy one now and pay it off as fast as you can lol

Techpill
Techpill

@hairygrape
Not a house, just land.

This house was around $270k I believe and is on really shoddy foundation but like I said there's a huge shed and it's on about 10 acres.

Skullbone
Skullbone

@Techpill
why is your rent so cheap if your price ranges are the same then?

Emberburn
Emberburn

@Skullbone
Demand I guess, only 20 million people here and most live in the large cities where rent is expensive.

Evilember
Evilember

@Emberburn
well that's the exact same situation as canada but I still don't understand how your rent costs would be less than the mortgage payments

the owner would be losing money lol

WebTool
WebTool

@Evilember
The people I know who own property specifically for renting didn't make their money in property.

StonedTime
StonedTime

@WebTool
but why is the cost to rent less than the cost of the mortgage

DeathDog
DeathDog

@StonedTime
I have no idea, I know basically nothing about owning a home here. No property tax?

PurpleCharger
PurpleCharger

@Spazyfool
I am interested in doing this. Could you add some additional details?
I would imagine things like researching rental prices beforehand would be valuable.
Also, how long does the entire venture generally take?

Evil_kitten
Evil_kitten

@DeathDog
The guy is being polite by asking you those questions in stead of straight up calling you out for being completely fucking full of shit. Every time you answer one of his questions you reveal the extent of your own fucktardedness

takes2long
takes2long

@Evil_kitten
http://www.realestate.com.au/rent/property-house-in-mildura,+vic+3500/list-1

PurpleCharger
PurpleCharger

@PurpleCharger

Definitely do some research on rental costs in the area you are considering first. If you're within driving distance of a college or university, that's obviously a huge bonus.

I would say allowing six months should be a safe bet, but you'd have to work that out with the GC. They should be able to give you a solid timeframe for what stages will be complete at what time. It shouldn't take any more than five or six months for sure, though.

@takes2long
per week

important words

Lord_Tryzalot
Lord_Tryzalot

@StonedTime
but why is the cost to rent less than the cost of the mortgage
This happens in any area undergoing speculation or where building new houses doesn't make economic sense due to a surplus of old homes.

People speculating on real estate are expecting to make their profit by selling the property at a higher price than they acquired/built for.

In places with a surplus of old homes, like most rural areas and many non-booming cities, people will rent out at low prices when they just can't find buyers at any reasonable price.

Decent tenants provide other value than just paying rent. They also maintain the home in various ways. Unoccupied housing deteriorates rapidly. So you can rent a house out for a couple hundred dollars, or sell it at $20,000, or just watch it crumble away anyway.

In a lot of places, it makes far more sense to rent than to own. It's not at all normal to be able to pay your mortgage on a newly-built property with rental income.

farquit
farquit

@PurpleCharger
per week
There are still whole houses on there renting for the equivalent of ~$500/month American.

lostmypassword
lostmypassword

@BunnyJinx
where do you get the land though?

SniperGod
SniperGod

@lostmypassword
You buy it. The bank gives you the cost of the land and the build combined if you don't already own the lot.

Harmless_Venom
Harmless_Venom

@Lord_Tryzalot
It's not at all normal to be able to pay your mortgage on a newly-built property with rental income.

It's definitely normal for a 1750sq ft apartment to rent for a comparable amount to a modest mortgage dude.

TurtleCat
TurtleCat

This gets posted a lot, so here screencapped.

Funny thing is OP never gives supporting documents to prove they actually did it and to show how it works.

TechHater
TechHater

@TurtleCat
yeah here's my bank info check for yourself

Spamalot
Spamalot

@Harmless_Venom
It's definitely normal for a 1750sq ft apartment to rent for a comparable amount to a modest mortgage dude.
Now we're comparing apples and oranges: large (and luxurious?) apartments for rent vs. houses, presumably in different areas.

I was talking about being able to buy or build a house and rent it out for more than the mortgage payment. That's not normal. That's finding money laying around on the ground.

Anyway, apartments are in a whole different category of housing. You have to maintain a house you live in, and they're normally located in low-density areas, which means poor transit service and nothing within walking distance.

I pay the USD equivalent of $260/month for a furnished bachelor apartment (I live in a Canadian city), with heat, water, and parking included (I pay my own electricity and internet). I pay no separate property taxes, and put 0 hours per year into maintenance of the building or grounds and 0 dollars into any repair that crops up, it's all done for me with my fixed rent payment. It's on a quiet residential street with only local traffic, but half a block away is a commercial strip with a supermarket, pharmacy, convenience store, two fast food places, and a bus stop all at that first intersection I come to. The next 2 blocks are full of nice restaurants, boutiques, specialty stores, gyms, bars, and night clubs (the live music scene is spectacular). A two-minute bus ride or 10-minute walk takes me to a major bus hub. Five-minute walks in two other directions take me to public parks, one full of beautiful gardens and fountains and the other has a large and well-equipped playground for children.

Apartment buildings enable high population density, which has many advantages of efficiency and convenience. Don't try and tell me that renting is for suckers.

happy_sad
happy_sad

@Spamalot
will you own a house in full when you're in your 30's?

SomethingNew
SomethingNew

I live in a college town that also happens to be on the Boston subway system but I can't remember ever seeing an empty plot of land.

Skullbone
Skullbone

@TechHater
I've posted my shit in the past. It isn't that hard to black out stuff you don't want seen.

TalkBomber
TalkBomber

@happy_sad
Do I want to? If I want to, is there any reason not to live in my cheap apartment and invest my money so it grows with compound interest, rather than fighting the compound interest on a debt?

Never mind mortgage interest, are upkeep, repairs, property taxes, heat, and water for a house even going to cost less than $3120/year? How about when you factor in the value of your time and your transportation costs, for maintaining the house and living in a less convenient area where you need to do more driving?

TurtleCat
TurtleCat

@TalkBomber
Do I want to?

so no, you won't

Ignoramus
Ignoramus

@Skullbone
nice house.
Pick up your mail.
Kelly C. Glew

Illusionz
Illusionz

@TurtleCat
so no, you won't
I suppose just pretending to have won the argument by willfully misinterpreting what other people say is always an option, on the internet.

The world's changing. I'm thinking of buying a small farm with an old house on it eventually, set up some solar panels and remote-control tractors. Build a tiny house / campsite as guest accomodations and as a place to shelter when I want to do renovations. Set up an insulated, CO2-enriched, in-ground vertical farm to grow vegetables in the winter (I have some ideas I'd like to explore about concentrator heliostats and silica gel hohlraums for low-cost insulated vertical farming).

But I probably won't ever give up the convenience of a rental apartment in a dense neighborhood. I'm certainly not going to do it just so I can go deep into debt on a house that the job opportunities might move away from.

Sir_Gallonhead
Sir_Gallonhead

didn't check dates.

You must be Robert C Kost.

Looks like you made 30k off this house man. Nice.

5mileys
5mileys

@Spazyfool
This isn't a bad way to do real estate desu but how much time does this shit take?

Firespawn
Firespawn

@Illusionz
sounds fun actually

also sounds expensive and I personally wouldn't bother with solar for a few more years at the very least

and to each his own, I suppose. I would never live in an apartment in a dense neighborhood. that sounds fucking shitty.

@5mileys
If you read my posts I clearly described how long it takes

Sir_Gallonhead
Sir_Gallonhead

@Sir_Gallonhead
guy literally posts his address on Veeky Forums

Boy_vs_Girl
Boy_vs_Girl

@Spazyfool
Just saw you on /pol/

Soft_member
Soft_member

@Boy_vs_Girl
sup familia

cum2soon
cum2soon

@Firespawn
Not time to sit around and wait, but how much you have to put in, getting the loans, what you have to look at while the house is being built, how long it takes to screen through tenants and extra work, etc.

kizzmybutt
kizzmybutt

@cum2soon
The entire build process took about six months. From when we found the lot we liked, to when we moved in.

Fuzzy_Logic
Fuzzy_Logic

@Ignoramus
It is't mine. It was a deal that fell through because the agents company wanted it for themselves.

Soft_member
Soft_member

@Sir_Gallonhead
Leave him alone he's actually doing us good.

WebTool
WebTool

@Spazyfool
Ok what are the risks that you encountered. If it was easy everyone would do this.

Inmate
Inmate

I want to do this but am super poor? How much would the down payment be for something like this? If you need $50,000 to buy land and $100,000 to build a house how much would the down payment for that be?

Booteefool
Booteefool

@Boy_vs_Girl
@Soft_member
/pol/ thread, if anyone wants it.
/pol/thread/87220374#p87220374

askme
askme

@Inmate
Do you live in the city?

Firespawn
Firespawn

@Spazyfool
@Fried_Sushi
@Need_TLC
@Nude_Bikergirl
@Lord_Tryzalot
What I'd suggest next, if your scenario did actually play out as planned, is to buy a 2nd home (same deal as 1st) after approx 4-6 years, when the 1st homes mortgage is quite a bit paid down. You will then also rent out the 1st homes main house as well as the basement, which might lead to an extra $1500 p/m which is even well beyond what you were contributing, so you'll pay it off quicker.

Meanwhile, you're living in your 2nd home, with tenants in the basement paying your 2nd mortgage.

At that rate, after about 2 years you can buy the 3rd home.

You're looking to retire with entirely passive income in about 10 years from start to finish.

But that's the problem... it's not THAT simple... or if they were, do it man

cum2soon
cum2soon

@Skullbone
Another Auscunt here.

Rural Aussie land is raw as fuck. Not even greenfield.
Its rarely fully serviced by public utilities, and some places you have to go as far as land clearing and fencing and all permits involved yourself.
Building costs are premium because tradesmen usually have to either travel hours or stay in the area.
It gets even more expensive if you have to build a road into the property too.

w8t4u
w8t4u

@askme
What if I do?
I'm @SomethingNew

I don't have the funds for this now but in a few years I might. I just don't think there are any empty plots in this city.

Carnalpleasure
Carnalpleasure

@kizzmybutt
Also I'm going to add a disclaimer on this entire thread.

If you do what OP says, makes sure you have a sizeable financial buffer. On paper OP's plan does work and generate profit, but the weaklink isn't his own efforts, its the stability of the builder and market themselves.
Property development is a huge interlinked web, where developers, financers and builders are all in essence stakeholders of projects. If one of them goes broke during the project, or during another unrelated project, or a completely unrelated developer goes broke on a completely unrelated huge project the builder has owed income in, then your house will not get finished as per the building scope. You will incur bank holding costs, you will incur legal costs fighting and overcoming hurdles, you will incur council pressure permit wise for having a prolonged building site sitting in their street for 2 years plus.

The profit with these projects is there because it's risky shit. All your figures may stack, and the projects looks great on paper, but things do and will inevitably go wrong, you need a sizeable chunk of cash reserves for this contingency. These are not the type of projects to ever do highly leveraged.

massdebater
massdebater

@Skullbone
Are you confusing Australians citing weekly rental figures with your monthly rental figure?

PurpleCharger
PurpleCharger

@BunnyJinx

A bank will not give you 100% loan to cost for a project, they will ask you to put in some equity. Once the construction period is over, the bank will then have the property appraised and then offer permanent financing at 75% of the appraised value. The risk is that if the house comes in lower than the construction cost, you have to come up with money at closing to pay the loan down.

Bidwell
Bidwell

@Spazyfool
land for ~50k
over half an acre
20000 square feet
50k

house for 300k

I live in cali bay area. It is impossible to buy 20000 square feet of LAND for twice the value of your entire home.

Enjoy your equity getting eaten by inflation.

5mileys
5mileys

@PurpleCharger
I explained everything you just said in the OP

CodeBuns
CodeBuns

@5mileys
I wouldn't give your plan more than a 50% chance of succeeding. You could take your $55k to the casino and double it in five minutes with a nearly 50% chance of succeeding and no work.

You put in $55k, you get nothing at all for 6 months. Then if everything goes perfectly with the permits and contractors, you can move into the house, and are on the hook for property taxes, utilities, maintenance, repairs, and mortage payments. So you look for tenants. You're assuming 100% occupancy and full rent collection, and no damage.

Tenants are not the rent fairy. It's not *their* house. They don't know about owning a house. They break things, and they expect you to fix them promptly, and pay for the fix. And the rent payment is their outlay, not their income. Some day, they might not have it, or they might really need to spend it on something else. Think evictions of problem tenants are simple? Hah!

And you're not getting to "live in a $300,000 house". You're getting to live in half of a $300,000 house, but you have to maintain and pay taxes on the whole thing. You have to find and deal with tenants. You don't have the peace, privacy, or freedom of living in your own house, rather you're essentially living in an apartment, as the building caretaker.

While it's possible to default on a mortgage, so you're not completely on the hook for the full $250,000, it would be very easy for you to not only lose your investment, but to end up spending tens of thousands of additional dollars, and thousands of hours of labor, before having to default.

The casino's both easier and safer.

Need_TLC
Need_TLC

bump

RavySnake
RavySnake

@TurtleCat
This. OP has posted this a lot, known troll.

Fuzzy_Logic
Fuzzy_Logic

@farquit
In some areas, yes. Here in california, a fucking studio apartment in Simi Valley costs around 1k a month.

FastChef
FastChef

@5mileys
They give you money in increments based on what the final value of the house/lot will be. They have no problem with lending you $200k to build a house that would sell for $300k.

How will they know how much the house will sell for prior to completion and appraisal? No bank will commit to permanent financing without an appraisal. You're just throwing out assumptions. So back to my point, you're fucked if the appraised value comes back lower and you have to put in additional equity to pay down the loan.

Fuzzy_Logic
Fuzzy_Logic

@Spazyfool
this is going to sound like a stupid question, but am serious -

What if basements dont exist in your area? I live in houston tx, I've literally -never- been inside a basement in my entire life because i've never actually seen one before.

your rules require basement as a piece of the puzzle to be successful. Do i replace that with a shed? "fully furnished attic"? more land?

farquit
farquit

OP's "trick" can be applied in any multi-bedroom living situation and doesn't have to be a "build from scratch" scenario, at least I'm fairly certain it can.

I made friends with a family of rich jews a few years back. The father is a multi-millionaire. When his kids graduated college he bought two new homes in full, one for each of them to live in for free.

The agreement is he bought the houses, the boys "own" the one they live in and will become official owners when dad kicks the bucket, they live in them and rent out the spare bedrooms (i believe its 3 spares each) and dad collects the rent. In return they handle all the workload such as repairs, finding tenants, etc.

The dad set a firm price for how much he wants on each house in rental payments, if the boys can get tenants for higher rent they get to keep the difference.

if I bought a house for 200k and i have two tenants paying 1k a month each, thats 24k a year, meaning in 8.3 years the house is paid off (ignoring other things as they arise, repairs, taxes, etc)

but ontop of that his sons also live there, so theres an entire other bill (granted not "his") being covered during that process as well

just make sure youre in an area with high rental prices and you're pretty cush

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