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+--- Thread: Arksansas - Where it's a crime to not pay rent. (/Thread-Arksansas-Where-it-s-a-crime-to-not-pay-rent)
RE: Arksansas - Where it's a crime to not pay rent. - dfrecore - 01-15-2019
Yeah, the whole scenario is nuts.
And just an FYI, my daughter's 17yo friend just got a job here at In-N-Out Burger working the cash register, she's going to be making $14/hr. She could easily make $16,000, save up every penny (lives with her parents since she's still in HS), do that all the way through college and save $72k. That's a pretty nice down payment for a college student. I think she could afford a house in CA or just about anywhere with that kind of cash. So obviously it's not impossible to buy a house here. And this scenario is similar to the one you used - she'd be on welfare (parents paying living expenses and college), have "roommates" (sibling and parents) and do it for 4 1/2 years or so.
I'm still not going to recommend that she move to Arkansas and buy a house after she saves up that first $16k though.
RE: Arksansas - Where it's a crime to not pay rent. - sanantone - 01-15-2019
Also, the poverty line for one person is $12,490. I think the poverty line is more appropriate for places like Arkansas than it is for places like New Jersey, parts of California, the DMV area, etc. However, the only states that are assigned a higher poverty line are Alaska and Hawaii. Being in poverty does not mean that you're homeless or don't own a house. Homeless people are actually excluded from poverty surveys.
https://aspe.hhs.gov/poverty-guidelines
RE: Arksansas - Where it's a crime to not pay rent. - videogamesrock - 01-15-2019
(01-15-2019, 05:30 PM)sanantone Wrote:(01-15-2019, 05:28 PM)videogamesrock Wrote: No, I won't be able to show you that most people in poverty own 90k homes. What I did do is use 2nd-grade mathematics to show you that it is very possible for people who make $16k a year to own a 90k home. Whether they choose to do so or not is their freedom to choose.
1. You didn't include all living costs.
2. You suggested government assistance.
3. A lot of people can save for a house just about anywhere if they lived with other people for years and received government assistance.
I'm assuming this person is also supposed to save for retirement and have an emergency fund? I guess they can get free clothes from a church or charity. After buying a house, this person wouldn't have extra money for decades. That sounds like a low quality of life to me. I'd rather rent.
Still don't get it eh? It's ok... I didn't suggest gov assistance, I said it was an option for health insurance, most people just don't sign up for it at an early age or get it through work.
Yes cut back on instant gratification, and make major cutbacks. Drive a beater for a few years, don't buy high-end clothes, have roommates for a few years and enjoy a house anyone can afford at 16k a year. As your income goes up, so will you consumption of higher quality goods and less dependency on roommates. My example of 16k was extreme, as the median income in Little Rock is north of 45k, it is an example of more opportunity with making less.
Remember, renting that same house would run you $1050 a month instead of the $500 a month through ownership.
RE: Arksansas - Where it's a crime to not pay rent. - sanantone - 01-15-2019
(01-15-2019, 08:34 PM)videogamesrock Wrote:(01-15-2019, 05:30 PM)sanantone Wrote:(01-15-2019, 05:28 PM)videogamesrock Wrote: No, I won't be able to show you that most people in poverty own 90k homes. What I did do is use 2nd-grade mathematics to show you that it is very possible for people who make $16k a year to own a 90k home. Whether they choose to do so or not is their freedom to choose.
1. You didn't include all living costs.
2. You suggested government assistance.
3. A lot of people can save for a house just about anywhere if they lived with other people for years and received government assistance.
I'm assuming this person is also supposed to save for retirement and have an emergency fund? I guess they can get free clothes from a church or charity. After buying a house, this person wouldn't have extra money for decades. That sounds like a low quality of life to me. I'd rather rent.
Still don't get it eh? It's ok... I didn't suggest gov assistance, I said it was an option for health insurance, most people just don't sign up for it at an early age or get it through work.
Yes cut back on instant gratification, and make major cutbacks. Drive a beater for a few years, don't buy high-end clothes, have roommates for a few years and enjoy a house anyone can afford at 16k a year. As your income goes up, so will you consumption of higher quality goods and less dependency on roommates. My example of 16k was extreme, as the median income in Little Rock is north of 45k, it is an example of more opportunity with making less.
Remember, renting that same house would run you $1050 a month instead of the $500 a month through ownership.
Even buying a beater requires saving money.
Two states with similar income to cost-of-living ratios can have different rates of poverty. Arkansas just happens to have a relatively high rate of poverty. I think most would agree that someone making $12,490 is impoverished.
At least in Texas, the rent on a house that's only worth $90k would be a lot lower than $1050, but that wasn't the point. I'd rather rent in an area where I can make more money than to be house poor in a poor state. In other words, I'd rather have more discretionary income.
Edit: The median rent in Arkansas is a little over $700, and the median home cost is over $120k. I doubt people are paying $1050 for a home that's only worth $90k unless they're stupid.
RE: Arksansas - Where it's a crime to not pay rent. - videogamesrock - 01-15-2019
https://www.zillow.com/homedetails/3422-Arapaho-Trl-Little-Rock-AR-72209/322415_zpid/
That’s really markets I’m into. All of my rental rent for double the mortgage.
RE: Arksansas - Where it's a crime to not pay rent. - dfrecore - 01-16-2019
(01-15-2019, 08:34 PM)videogamesrock Wrote: Remember, renting that same house would run you $1050 a month instead of the $500 a month through ownership.
If you think that it's hard to qualify for a mortgage making $16k/yr, imagine trying to qualify for one on a rental property for that amount. You'd need a larger down payment (typically 20%) and great credit - which I doubt someone who makes $16k has.
Your scenario just keeps getting worse.
RE: Arksansas - Where it's a crime to not pay rent. - sanantone - 01-16-2019
(01-15-2019, 10:17 PM)videogamesrock Wrote: https://www.zillow.com/homedetails/3422-Arapaho-Trl-Little-Rock-AR-72209/322415_zpid/
That’s really markets I’m into. All of my rental rent for double the mortgage.
I checked Realtor.com yesterday, and I found rentals for less than $800 in San Antonio. That house you showed in AR sold for $50k in 2018. Are you trying to say that it's expensive to rent in AR?
RE: Arksansas - Where it's a crime to not pay rent. - sanantone - 01-16-2019
This is an $80k house in Little Rock for rent for $700.
https://www.zillow.com/homedetails/19-Alameda-Dr-Little-Rock-AR-72204/351425_zpid/
RE: Arksansas - Where it's a crime to not pay rent. - videogamesrock - 01-16-2019
(01-16-2019, 03:46 AM)dfrecore Wrote:(01-15-2019, 08:34 PM)videogamesrock Wrote: Remember, renting that same house would run you $1050 a month instead of the $500 a month through ownership.
If you think that it's hard to qualify for a mortgage making $16k/yr, imagine trying to qualify for one on a rental property for that amount. You'd need a larger down payment (typically 20%) and great credit - which I doubt someone who makes $16k has.
Your scenario just keeps getting worse.
It's easier to qualify for the mortgage than a rental property at that income rate. Lenders only require a 35-45% income above the commitments. You're getting too hung up with the dollar amount.
In this case, to qualify for the $1000 rent it would need two renters as the landlord requires a 3 times income to payment ratio.
My tenants are usually 2+ people.
(01-16-2019, 10:16 AM)sanantone Wrote: This is an $80k house in Little Rock for rent for $700.
https://www.zillow.com/homedetails/19-Alameda-Dr-Little-Rock-AR-72204/351425_zpid/
The price probably reflects the interior of the house and condition. I get warry when the LL doesn't post pictures with it.
Attached is a Little Rock home that we are looking at buying. The price is $107k which is slightly high by about 7k, but it was recently rehabbed, so it does have a new AC, furnace, hot water heater, HVAC system. I've also included the proforma too in case you were interested. Homes with these upgrades and that are recently updated will generally command a rent that is 1% per month of the entire value of the home. This is why investing in places like Little Rock is fantastic, and your tenants will always make 3 times the rent amount. But it would be more advantageous to buy it yourself vs becoming a renter.
My recommendation is that someone who is sixteen should get an $8 an hour job, work 15 hours a week for the three years in high school, then have enough for a DP. ($18,720) that type of economic freedom won't be available in places like CA.
Now before you, nitpick the proforma I've attached. You can have the seller pay for the closing costs which is common, the DP is 25% not 20% in the example, and origination fees are also negotiable.
Another great option for the 18-year-old who makes 16k a year is to buy this as a rental ($8x40hrs). The lender will take into consideration in the loan application 75% of the income the rental will generate as additional income before they even own it. So your 16k annual income plus 75% of $995 makes your application income $24,995.
Using that 75% formula that 18-year-old can literally ride that rent income as additional income for up to ten financed properties.
Also, view the ten-year projection on this rental, you'll see how annual rent increases will increase monthly income giving you more to reinvest in even more properties.
--------------------
This discussion has been very helpful as I do have a meeting with a California and a Washington investor who is going 1/3 on this house or a similar house next week. The questions and conversations we are going to have will be very similar to what we had here.
RE: Arksansas - Where it's a crime to not pay rent. - davewill - 01-16-2019
I can verify that buying a rental is becoming a popular gateway to home ownership for young folks. We helped my oldest son buy a rental a few years ago by lending him part of the DP and letting him live at home. He's been breaking even on it while it's appreciated by $100K. He just moved to NY to take a new job, and he's renting a room from a young guy who bought a duplex. The guy is living in one unit with two roommates and he's rehabbing the other unit to rent out as a whole.
When my son's ready to settle down and live in his own place, he'll be able to do so, even in CA.