In my article “The Smartest, Most Easily Achievable Way to Get Into Multifamily Investing,” I make the argument that duplexes might be the perfect 90-day goal to get you started with apartment building investing and keep you on track to your goal of financial freedom. If you read that article, you’re probably wondering, “How do I go about buying my first duplex?” So here is your checklist to buy your first duplex in the next 90 days.
The 90-Day Checklist to Buy Your First Duplex
Here’s what you’re going to do in the first four weeks:
Week 1: Educate yourself.
During this week, you’re going to complete a course or seminar or read all that you can about single family house (SFH) and apartment building investing. While investing in duplexes is less complex than larger multifamily (MF), you should still know about finding and analyzing duplexes, raising money, and property management.
Week 2: Determine your investing area.
Decide where you’re going to look. Because good duplexes are more readily available, there’s a good chance you can invest closer to home.
Related: An FHA-Financed Duplex is an Ideal First Investment Property: Here’s Why
Week 3: Analyze 5 deals.
Here are the steps I recommend to analyze and track your duplexes:
- Go to realtor.com or loopnet and get the listings of 5 duplexes. Make sure you get the number of bedrooms, square footage, and the rent they’re currently getting from the listing broker. If they can supply you with expenses, that’s even better but not required.
- Create a spreadsheet where you can track your deals side by side. Include the asking price, your offer price, number of units, square footage, and rental income.
- For each duplex, create a simple profit and loss summary. Use the rental income supplied by the listing or real estate agent and assume you’ll have 10% vacancy per year. For expenses, you can use the realtor.com figures (towards the bottom of the listing) to calculate your real estate taxes, insurance, and mortgage payment. I suggest purchasing a home warranty plan ($450 per year) that has a $100 deductible. Then budget $100 per month for repairs (the larger items should be taken care of by the home warranty).
Then answer these questions for each deal to determine if the deal is good:
- Are the current rents at market or is there a chance to raise them? Find out by going to rentometer.com, which will give you the median rent for similar properties in that area.
- What’s the current or after repair value (ARV)? What is the value of comparable properties? Are you getting a deal or overpaying? If you’re renovating the property, what is the ARV?
- What is the cash on cash return? Compare the cash flow of one duplex to the cash flow of another. Does it meet your minimum return? Focus on the deals with the highest cash on cash return (but at least 10%).
Week 4: Create your “Sample Deal Package” and start raising money.
If you’ve followed me for any length of time, you know that I strongly suggest that you learn how to raise money to fund your deals.
In this step, you create your “Sample Deal Package,” which looks and feels like the same document you give investors when you have a deal under contract EXCEPT that you don’t actually have it under contract.
So in the first four weeks, you laid the groundwork for what’s next: You educated yourself, finalized your investing geography, created your deal analysis and tracking sheet, and crafted your Sample Deal Package.
For the next 60 days, you’re going to focus on two activities:
Activity #1: Schedule One Investor Meeting Per Week
Using the Sample Deal Package you developed previously, reach out to your sphere of influence and schedule meetings with people who might be interested in investing in your first duplex deal.
I’ve written extensively here on the Bigger Pockets about raising money, so please see these articles for more details:
- The # 1 Secret to Raising Money to Invest in Apartment Buildings
- How to Find Investors To Fund Your Real Estate Deals
- A Step-by-Step Guide to Ace Your First Investor Meeting
- How to Structure Syndicated Investor Deals: What Investors Are Looking For
If you follow this step, you’ll have eight meetings, and at least one of those will agree to fund your first duplex.
If you have your own funds for the first deal, great! But I still want you to start the money raising process now so that you have the funds for the next deal.
Activity #2: Make 5 Offers Per Week
Continue adding deals to your offer tracking spreadsheet and make offers as you go along. If you make five offers per week (not hard to do), that’s 40 offers in 60 days and your goal is to get just ONE accepted (also a reasonable goal).
That’s it! Your 90-day plan to buying your first duplex.
DISCLAIMER: I realize that duplexes are not technically multifamily, but so what? It’s a step in the right direction. I have also simplified the process somewhat, so don’t flame me for skipping some of the details — I can only cover so much in one article. My main goal was to OPEN YOUR EYES and SHIFT YOUR MIND to the possibilities. I also want you to get started with apartment building investing, and this is a great way to do it.
So if you thought that you needed tons of cash, experience, or time to get into apartment building investing, then I got news for you: YOU DON’T! Instead of giving up on that first 20+ unit deal, do a duplex deal. Once you have that under your belt, either do another one or shoot for something a little bigger.
Either way, you’re in the game and on the path to achieving your financial goals with real estate investing!
Any questions about this process?
Let me know how you’re progressing with a comment!
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.