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Larry: |
It’s going to be good and a relatively easy way to make some money. |
| Barry: | What’s the magic formula you have discovered? |
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Larry: |
A couple of us pool some of our money and we buy a house in an area we all like. We can rent the house for the periods when we are not using it, and one of us can live there most of the other time. |
| Barry: | Sounds great. How much will you have to borrow to buy the house using a first mortgage? Will you each be a registered owner of the property and if so, will you have joint or separate liability for the loan, and will the ownership make you residents of the area in which the house is located? |
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Larry: |
We don’t know yet. |
| Barry: | What will be the monthly payments on the mortgage and what will be the taxes on the property? Also, will the regulations in the area or relevant homeowners association allow short-term rental of the property? |
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Larry: |
We don’t know yet. |
| Barry: | What will be the monthly payments on the mortgage and what will be the taxes on the property? Also, will the regulations in the area or relevant homeowners association allow short-term rental of the property? |
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Larry: |
We don’t know yet. |
| Barry: | How will you furnish the house and what improvements are you like to want? Who is going to make these decisions? |
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Larry: |
We don’t know yet. |
| Barry: | What will be the cost of fire and liability insurance? How much will it cost to maintain the house and grounds. If you can rent the house will the rental include cleaning services and what will it cost for the periodic clearing of the home? |
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Larry: |
We don’t know yet. |
| Barry: | What will be the method and cost of getting renters and what will be the liabilities for the homeowners, if there are personal injury accidents? |
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Larry: |
We don’t know yet. |
| Barry: | What happens if home values in the area decline, and if the revenues from renting are not sufficient to make the monthly mortgage payments and other costs of ownership? |
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Larry: |
We don’t know yet. |
| Barry: | Sounds great, and it is possible that all the questions posed can be answered positively. However, a lot of work must be done by someone and fully understood by all involved. The real estate agents involved are likely to be positive about any transaction in which they have an interest. A local attorney should probably be retained by the group considering the purchase and rental of the property. It also could be very informative to have contact and in-depth conversations with homeowners in the area who currently offer their homes for short-term rentals. |
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Larry: |
I know that you’re right in asking these questions and that we need to do a lot of thinking about the possible problems of the downside, as well as the benefits of the upside. We certainly like the area and the prospect of both being all together and investing our money wisely, but do not want to risk fracturing our personal relationships or financial future. |
| Barry: | Then do the work. |
Arthur Lipper, Chairman arthurlipper@gmial.com
British Far East Holdings Ltd.