First Purchase!

41 Replies

My wife and I made our first real estate move and purchased our first property ever!

I've been reading and getting my book smarts, but we both agreed that at some point we were just going to have to go for it and started learning via the school of experience. Thus, we decided to purchase a duplex near the University of Nevada, Reno. My wife works at the university so it's a great location for her and not a bad commute (by bike) for me to work. We plan to live in one unit and rent out a bedroom in that unit, and then rent out the entire other unit. The property is two 3-bed, 1-bath units. We've got an FHA loan, and took advantage of a Nevada Rural (??? Reno is definitely not rural but it qualifies...) Grant program that allows you to take a large "gift" towards closing costs and purchase price for a quarter point of interest over the life of the loan.

The property was in pretty good condition, and the land underneath it is really valuable. We bought it on MLS so we paid market value, but were okay with that going into the deal since we both wanted a place we would be okay living with for the next few years while getting some actual experience property managing and being land lords.

One prospect I'm REALLY excited about is the property is on a corner lot with a very large unused areas. Because of code in the City of Reno, I highly doubt there is any "developable" land left due to density restrictions and set-back requirements, however... I don't see any reason an attractive tiny house on wheels couldn't effectively make this property a triplex. I'll need to investigate that more, but it's an exciting thought.

We're already learning so much by actually owning the property, and my wife turns out to be a badass property manager (which is awesome, and I had no idea would be the case). I'm getting a lot more familiar with the financial side and comparing my pro forma to reality so I can get better at analyzing deals. When it comes time to start picking up purely investment properties, I think this duplex will have given us a little more knowledge and a little more experience that will be super beneficial.

It's been a lot of work no doubt to learn- spent 12 hours at the computer on one of the days this weekend to properly get all of our accounts set up and start tracking everything in our personal finance software- but it's well worth the effort. I see it as cost of admission to get in the game!

Rock on!

@Wesley Pittman

Sounds like you are rocking it!  I love tiny houses too and am intrigued by your triplex idea.  

But don''t give up on the idea of development until you actual check with the city...they are fairly easy to work with and you may be surprised about your options.

@Hersh M.

Sure. I don't mind sharing numbers at all.

Purchase price: $275,000

Amount financed: $270,000 @ 4.5% with FHA assumable loan

Estimated repairs: $10,000

Current total rents: $2,050

As I stated before, the deal is barely acceptable- certainly not an investor's dream. Current rents leave barely anything to set aside for vacancy, cap ex, etc. However, my wife and I believe we can increase rents significantly by making improvements to the property such as double pane windows, security doors, better insulation, etc. (things that faculty or doctoral students at the university would appreciate more so than the current undergraduates renting it).

The way we are looking at our deal is in contrast to what the majority of people our age are doing. Most "dumb-20-somethings" are buying SFHs they can't afford and putting all their own income towards the mortgage- we've at least got some income from the property.

It made sense for us too because we didn't believe we had too many options off the MLS for an FHA-style loan which was the best option we had for leveraging. We made a full-price offer which I would have balked at if this property wasn't significantly cheaper than the comps near it. Average price per square foot near UNR on the market was $200- and there were some REAL dogs on the market too. This was listed for $140 per square foot and in good shape. We submitted the offer on the property on Sunday, and it had only been on the market since Thursday (we hadn't even seen the inside yet). Obviously other folks thought it was a good deal too. There were three full-price offers (I believe) that came in within a day after ours.

Reno is REALLY hot right now. We're glad we got in when we did because we believe there will be appreciation and rent increases near UNR. They have a supply issue with student housing and our location is a very comfortable walk to the university.

Overall, we're excited.

@Wesley Pittman , congratulations on the purchase. 

While you are thinking outside the box, why stop at just one tiny house? I know a guy locally who has a place to park his, but says that many people can't find a place to park their tiny houses. Could you fence-in part of the property that is currently unused, and create parking for more than one tiny house? Maybe a small tiny-house mobile-home park? A tiny-park?

Definitely look into zoning for that, don't get in trouble! Providing sewer hookups and electric connections could be a small investment that yields huge rewards. 

@Mindy Jensen

You and I think on similar wave lengths :)

I have already given that some thought but have not further investigated it yet. I am friends with folks in the planning department of City of Reno and have spoken with them. It's definitely a grey area, however, I am planning on further investigating it. Our property has already capped out its density (maximum 14 du/ac, and our property is capable of fitting 2.7 dwelling units per the density standards), and a tiny house on wheels is considered an RV technically, and city code doesn't permit people to live in RVs.

Even if tiny houses turn out to be a no-go for this piece of land, I'm sure we'll find an economically productive use for it.

@Mindy Jensen ,

Do you have any idea what the price range is that people would pay for tiny house parking?  We have purchased one tiny house, but we are preparing 3 spots with electric, water, & septic.  We live in an unincorporated area of our county, so no deed restrictions (yay!).  My concern is that tiny house people are looking to live economically, and economically for them might not equal profitable for us.

@Leigh Ann Smith , I don't know what the going rate is, but I am going to the North CO meetup tonight, which is where I first met the guy with the tiny house and the tiny house park idea was formed. I'll ask him if he knows.

@Mindy Jensen

@Leigh Ann Smith

Is there a BP group or discussion board for all things tiny houses? I love the idea for myself personally and have to believe there is some way to make them into productive investments also. I'd like to find a place to talk with other like minded people and share knowledge and experience.

@Wesley Pittman @Mindy Jensen

The tiny house idea is one I have looked into a lot in the San Diego area. From what I've found you need to actually put the houses in with a foundation. I am exploring the idea of doing a multi-family development using them but they will be installed with City permits and foundations. This is the model I'm thinking about using. 

http://kithaus.com/?modules=k6

I've also had the idea of a tiny house trailer park, but within City limits in SoCal that going to be tough. 

@Lee Ripma I think my favorite part of that link you shared was the "optional indoor bathroom and kitchen." I love being environmentally sound, but I draw the line at an outside bathroom.

@Wesley Pittman , I think it fits in pretty well with vacation rentals.  That's not the same strategy that @Lee Ripma is looking at, and we may end up doing a hybrid of vacation rental and renting out spots, but this is as good a forum as any.  I set up a keyword alert for "tiny", but I may need to change it to "tiny house", because I keep getting alerts when people post that a house has a "tiny bathroom" or something like that!

@Mindy Jensen  I draw the line there as well! I am looking at the 400 sf model that includes both a kitchen and a bathroom inside the unit! The weather in San Diego does allow the type of configuration below. 

http://www.revampthecamp.com/wordpress/wp-content/uploads/2014/04/AIRBNB_Venice-LA_02.jpg

@Leigh Ann Smith I think a tiny house trailer park would be fantastic and get a lot of publicity. It seems like tiny house refers to a structure built on a trailer while modular or prefab refers to something that is also small but comes pre-assembled and is designed to be up to code. There so many cool modern prefabs, both large and small! 

http://curbed.com/archives/2015/05/29/prefab-housing-homes-design-buy.php

Tiny houses are such a great concept, and the market is demanding them and ready, however, our zoning codes and building regulations are not ready for them. Most folks doing tiny houses are skating around the rules within a kind of murky grey area. In the rurals this may work, but in the city you would likely draw the ire and resentment of your neighbors- and more importantly code enforcement to your property.

The reason so many tiny houses are on wheels is to avoid two main limiting factors. Dwelling unit density restrictions from the underlying zoning and standard building code. I haven't checked with Reno specifically but many communities have a "minimum size" a dwelling unit has to be which is often over 600 square feet. This is a somewhat vestigial clause that originated during the early 20th century tenement housing crisis facing American cities.

In terms of the density restrictions, tiny houses are ways to effectively increase the density of your property without building above the dwelling unit cap. The problem is in most communities, you can't live in the city on a single family or multi family lot (other than a mobile home park) in an RV or trailer. Tiny houses on wheels would technically be considered RVs.

In Reno the city is doing a brand new 30-year comprehensive plan for the city, and the plan is what ends up informing the actual ordinance regulating development. I'm optimistic in light of the demand by many millennials and down-sizing boomers that more flexible development standards will become the norm- standards that are more encouraging of creative spaces rather than prescribing sterile ones.

If you couldn't tell, I have a degree in urban planning. Lol.

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