Is it complicated to apply for a second mortgage if I already have one?

Can you give some tips on how to deal with lenders?

Thanks and congratulations for the post,

Marianna

I think renting out rooms in your house is a great technique. If renters are added to a house and it is handled in a subtle way (e.g., no additional cars visible from the street), and without any disturbance to the heighborhood, you probably won’t have any trouble. However, there can be neighborhood regulations or city zoning laws that might create roadblocks.

There’s a good book entitled “Creating an Accessory Apartment: for every homeowner who wants to turn extra space into extra income,” by Patrick Hare & Jolene Ostler, that describes how to add an an apartment onto an existing house. It also has some good detail on how to make new renters blend in and not call attention to the changes.

Is there any problem if you live in the mortgaged property AND rent out the other bedrooms? I know someone who did this, he was effectively living in the house for free right off the bat, and as rents advanced he came out further and further ahead every month.

Good point. You should plan to live in a house at least one year before renting it out.

I agree that investing in REITs reduces your risk. However, like other stock-type companies you don’t control the investment, instead you relinquish control of your money to a fund manager. Your only decision is when to buy or sell. I prefer to be in control. I want to be the one to decide when to buy, improve and sell my properties. And, I think in the long run, the more you control your investments the more money you stand to make.

Also, when you own the properties, you learn about all aspects of the business and in the process you become more self-sufficient and develop life-coping skills that can help you deal with unexpected turns down the road.

Keep in mind most mortgage comapny language states you intend to live in the property for a least a year (some companies the language says two years); if you state to the mortgage company that it’s owner occupied them rent the property, that’s what they call loan fraud (it’s a felony in most places). You may want to investigate the mortgage company policy up front, save yourself a headache down the road.

I would disagree that those two methods are the “safest” however, both involve concentrating your assets into one property which can be risky if you make a mistake (pay too much) or if the situation changes ie interest rates shoot up and the house value goes down.

I would suggest that REITs (Real Estate Investment Trusts) are a safer (and possibly better) way to invest in real estate because they are diversified and you can choose how much you want to invest. With houses you are limited to investing a lot of money unless you have find financial partners.

Mike