First Rental Property Purchase

9 Replies

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $490,000
Cash invested: $110,000

Duplex inside of City of Decatur, great schools nearby in a high cost of living area which makes it hard to fill the unit outside of the summer (a lesson we learned when the house sat empty until a HUGE surge of people wanted to move in during the summer). Both units were filled quickly once summer hit, I've put in about 15k worth of repairs/improvements so hopefully nothing ever breaks again for at least 5-10 years.

What made you interested in investing in this type of deal?

Wanted passive income, learned quickly that things aren't so passive to start.

How did you find this deal and how did you negotiate it?

We let our real estate agent know we were looking for a duplex or triplex for an investment property

How did you finance this deal?

Bank loan

How did you add value to the deal?

Our unit had a massive backyard that was not enclosed. We had a fence built, which attracts renters with pets which allows us to charge a minor pet rent fee plus I've read that pet renters typically take good care of units and are more likely to stay in a rental property instead of bouncing between apartments.

What was the outcome?

I've got two great tenants and our rent covers mortgage, insurance, property tax plus a small amount on top. That being said, having the property be empty for 4 months was a stressful emotionally and we constantly questioned whether we made a good decision purchasing.  I still have no idea what the right strategy is with this unit and how to handle our taxes.  I know the repairs and improvements are tax deductible, but no idea on if its a good idea to pay of the mortgage quickly or if that hurts my ability to claim tax deductions.

Lessons learned? Challenges?

Buying a home in a high cost of living area with great schools is great because people want to live cheaply in expensive places if the schools are good, but not until summer time.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

We used Jason Cook at Ansley Atlanta whom we have used for our primary as well. Our lender was Liz Costley from Bank of America that is also fantastic and was working with us at every step of the way to get us the best deal.

@Quang Nguyen, congratulations! I live in Decatur and have been trying to do exactly that, but when I analyze deals at that price they do not cash flow, once I account for taxes, capex, mortgage payments, and typical maintenance costs. Does the property cash flow? Do you mind me asking how much you charge in rent? Congrats again, it sounds like you and your dad put a lot of work into it. 

@Nelson De la Torre Yeah, we are cash flow positive by about 500 bucks. Mortgage + insurance + property taxes are about 2700 a month and we are charging a little over 1600 per unit.  I haven't done the math on how much money we "lost" with 2 empty units for 4 months, but I am pretty sure I'd rather not know.

@Rick Baggenstoss we did year long leases for our units so June and July respectively, although its probably a good idea to just force it to be end of May and we'll consider that for our next tenants, although I'm hopeful these are semi long term renters and won't be moving any time soon.

Congrats Quang! I'm looking at Decatur as a possible area for investment as well. $1600 a month per unit is more than I would have expected for a multifamily in that area! Well done!
If you don't mind me asking, how distressed was the property when you bought it?

@Ryan Ford   one unit was fairly well updated with new floors etc, another unit was pretty beat up, we needed to repaint, re-carpet, and additional work. Externally, it looked kind of ugly, but mostly just aged and dated, so we painted the outside to make it look nicer.  We honestly were questioning our sanity for a very long time, since we couldn't find anybody to rent it for the first few months of ownership, but when summer time came, we had a flood of potential renters.

Originally posted by @Quang Nguyen :

@Ryan Ford  one unit was fairly well updated with new floors etc, another unit was pretty beat up, we needed to repaint, re-carpet, and additional work. Externally, it looked kind of ugly, but mostly just aged and dated, so we painted the outside to make it look nicer.  We honestly were questioning our sanity for a very long time, since we couldn't find anybody to rent it for the first few months of ownership, but when summer time came, we had a flood of potential renters.

I appreciate you taking the time to answer Quang! Congrats again on a successful investment!

 

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you