Bought my first rental unit

24 Replies

So I purchased a rented duplex out of state. Found it on Zillow of all places. Paid $16,000 cash for the duplex with tenants paying $550 and $600.

My question is the Zillow listing said that tenants pay all utilities. Come to find out they only pay electricity. I reached out to real estate agent to find more info like if they just added it to the rents?

What would be your suggestion if I don’t hear back from the agent since deal is done

@Tim Herman no I didn't. I asked about the deposit and got it credited at closing. I didn't think to ask about utilities since it said those were paid for by tenants On Zillow. (One of many mistakes in sure) It was posted for less than an hour and Zillow showed 12 saves and 100 views so I said I'd buy it contingent on inspection. One of the things the old man was gonna clean out the garage which is full of crap and I told him leave it and I'll do it. He accepted my offer and I sent my $1000 to escrow. The inspection report came back great. So I wired the $15,000 to escrow.

Got the keys and got a dumpster and a few guys to clean the garage for $450

@Jason P. , did you close at a title company? Did you hire an attorney? Do due diligence? Something sounds completely off. I live in Bolingbrook and I invest heavily in Bolingbrook, both flips and buy-and-hold to rent. Ifyou purchase a duplex for 16k and it's free and clear of any underlying lien's then it is a remarkable deal to say the least. I just find it difficult to believe. That said, I hope that my gut feeling is wrong.

Unfortunately, you are stuck. This should have been covered during due diligence. Did you hire an inspector? Did he/she note it? I would potentially reach out to him if it was a failure on his/her part?

You can also review the contract to see if the seller made any representations just in case!

However, it seems like you got a great deal. So now you can determine whether separating out the utilities are worth it or not. Will likely cost you something between $4k and $8k. If each tenant racks up a $40 to $80 electric bill per month, that is a return of 12% to 48% depending on where things shake out - so I would certainly consider it. It may also increase your valuation come refi. 

@Marco Anemone Nice. My FIL is in Bolingbrook so I was looking around there and as far as joliet.

Yes I used a reputable title company. No lawyers. I did my due diligence after I got it under contract and gave myself some outs. I wanted to lock it up and figured I could take a chance on $1000.

I thought it was too good to be true. The old guy had it listed at a high price for several months and he slashed it. I was the first to go look at it. Guy was in his 80’s and didn’t want the hassle. I think he didn’t like his real estate agent and wanted to screw them on commission. He thought they were trying to rip him off.

I was at the right place at the right time. Only thing I didn’t realize was I had to pay water, I didn’t think to ask since it said tenants pay all utilities.

@Jason P.   I hope this doesn't come up the wrong way. You can get creative with utilities whether or not tenant pays  . Honestly, you are better off just saving up your energy towards finding the next best deal.

No, I am not trying to undermine your situation in anyway. worst case scenario (minus $250 for utilities) cash flow for the duration of the tenant's lease? You are sitting on a pile of gold if this indeed the case for you. One clue, if current lease does not include utilities, next tenant may have their utilities covered . Unless I may have misunderstood you completely, I think you are in a better position.

@Jason P. 16k I assume its is in a war zone, and needs repairs ,  do you have  any experience in that area ?  Also why are you buying props out of state without a team, HUGE HUGE mistake. The realtor is NOT your " team " . Do not buy it without having people you trust look at it . 

Good Luck 

Usually, on the listings, it is stated how many meters are per unit so then you get an idea if the tenants are responsible for their own or landlord should pay for it. As for your agent, they live for referrals, you can leave a review of your experience on the net. if he's paying attention he will reach out. Good luck!

@Diana Costta thanks. On the listing I didn’t see anything about the metered. Just said tenants paid all utilities. But I got a great deal I’m just gonna drop it. I already bought the property so I doubt there is anything they can really do.

But thanks for everyone’s help.

@Bob Stevens if I loose a tenant the linoleum floors need to be replaced. But that was the only other “big” thing that needed to be done. I told the tenants if they want that done they could do it and I’d pay for materials.