Rural Investing: A Duplex Purchase

While I was finalizing the purchase of my first duplex I identified another one in a small town near my hometown. It was a town so small it actually is part of the Waterloo Utilities and school district. Although it is small town living and small town taxes. I reached out to the owners by finding them on Facebook and was surprised they responded and said they would be selling it soon. I said I would love to come check it out before they listed it. 

I met them at the duplex. It was a 2 bedroom 1 bath side by side duplex with central air and furnaces. There had been a good amount of work done to them including new windows, vinyl siding, new floors and one had a brand new bathroom. The town is known for having some water issues but the basement was a crawl space so I figured I would not have much issues with it. 

The area had good schools, low taxes, and big yards so I thought it would be a great duplex to own. They wanted 120,000 for it and I offered 110,000. We finally agreed on 112,000 although after inspection I was able to get 2,000 at closing for repairs. 

The minute I got it I went over and started with the punch list of items I needed to do including paint, new countertops, reinforce all the decks and haul a bunch of trash in the yard away, landscape and mow. All 3 of the neighbors came by to tell me the horrors of the place including doors being broken down and never put back on. Trash and cars everywhere, cops, and domestic issues often. Electric being run from extension cords because the utilities were shut off and trash bags piling up in the yard. This was enough to scare any new landlord but I was determined to not let this happen by giving a great product, marketing the property well and selecting great tenants. 

I finished up all my repairs and maintenance in about 2 weeks and had it for rent October 1st. Not an ideal time in Iowa to try to rent it. I shot a little high on rent, 775 but I thought it had some nice benefits to it. I was able to fill one unit quickly but the other one took about 1 and a half months. I was able to get some great tenants and I am now making some great cash flow.

Here are my numbers:

Purchase Price: 112,000

Concession of Repairs: 2,000

25% down payment

30 year fixed loan at 3.0% interest

I pay 30 a month for trash and water (I don't want the trash issues ever to come up again!)

Rent: $1550 a month

Taxes/Insurance: $283

Vacancy: 8%

Maintenance: 10%

Capex: 5%

Self-manage

Cash flow after all real expenses: $552

These are the reasons I love rural Iowa! I hope to have a few blog posts in the future talking more about the benefits and drawbacks! Especially towns within 10-15 miles can provide some great communities with great cash flow!

Learning: USDA, Developing, Rural Iowa

Wanting: BRR Deal, to help others invest in Iowa (let me know if you love Rural areas too!)