How I got a free duplex as a junior in college

Question

In 2010 as a junior in college I ran into an old friend who inspired me to buy a multifamily property. He had recently done a deal for a duplex with his parents and was living in one side for a couple hundred bucks a month while managing the other side. I thought this was a pretty smart idea on his part and after some contemplation came-up with the grand idea of buying my own duplex but with the other side paying ALL of my expenses and hopefully more.

There was a few problems with this though:

1. I knew little about real estate outside of the 3-4 books I'd read

2. I knew nobody that had any knowledge of rentals

3. I had no money, not even a job (college rocked)

Oh well, I pressed forward. My plan was to buy a REO for cash, remodel the property and use the gained equity as my down payment so I didn't have to come-up with 20%. I convinced some family members to loan me $100k to buy and remodel a property. I purchased a duplex for $70k cash and spent $35k on the rehab for a total investment of $105k. The property appraised for $142k, so I then refinanced the property and repaid my family members in full.

In the end nobody spent any money out of pocket and I created about $37,000 in free equity, $2K in cash reserves because we didn't refinance for about 4-months, and a free place to live for myself. Though I'll always be proud of this deal because it's what got me started the property will never be a cash cow. I am currently renting one side for $675 and will rent my side (yep, still live here) for around $900-$1000 per month when I move-out later this year. It should cash flow around $300/month when I rent both sides which I am satisfied with since I knew little about valuing a rental property and estimating cash flows at the time.

My takeaways?

- I bought during a huge down cycle which had a lot to do in me buying a cash flowing property, more and better due diligence is necessary

- Accepting a full-time summer internship and taking 6hrs of summer classes will undergoing a major remodel on a 2700 sq./ft property is absolutely brutal, don't ever do this.

-Never buy a house made of block and/or with a concrete pad

-This works and it's going to change my life

Thoughts?

Christopher B. · Answer

Account Closed Thanks. Rinse and repeat is exactly what I am looking to do moving forward. I am working in a flip now and have a new investor so I hope to do another deal like that later this year, will posted rails here. $30k/month in passive in one would be fantastic, my right now is to get to $6k and will reevaluate then.

@Brennan Burke  first off welcome to BP, there is an ocean of information at your fingertips. I found my foreclosure through the MLS, I used an agent but she wasn't worth much., so I ended up doing all the research myself. I found a few properties I liked, ran the #'s and decided what I'd be willing to pay for them and then kept an eye on them.

Sam J. I only have the one duplex still. I only had access to the money for that one deal and then got out of real estate for 2yrs while I finish graduating, etc. I am currently finishing-up a flip house and will share the details once I close on the sale, it should turn-out pretty well.

@Bill S.  thanks, it was and still is a great learning experience, from rehab to management. The original intent was to have my parents co-sign but we ran into some issues there. I worked seasonally in my brothers business while in college My parents had to get the loan in their name, I refinanced it under mine in 2012. I was pretty upset about this at the time but it was a lesson learned because I just made assumptions that things would work a certain way and charged into it. Fortunately it did but looking back the risk was even greater than what I thought it was at the time.

Account Closed · Answer

So you ask for my thoughts.

1) Congrats

2) Can you rinse and repeat?

3) If the answer is yes, you have just generated $3k/month positive cashflow if you can repeat this 9 more times. If you can do it 99 more times, you're looking at $30k/month of positive cashflow. Then you can really follow your passion. Whatever that is. :)

Matt Devincenzo · Answer

I think the 24 how many more he needs to acquire to reach his goal of 26 total.

Brennan Burke · Answer

@Raymond B. I was steady trying to figure out why the names weren't highlighted, thanks for the tip.

Raymond B. · Answer

@Brennan Burke,

To make the @ work, do the following:

Hold down the shift key and type @?

Look below this Window, and you will see a list of names of people that have posted in this thread.

Click on the name of the person that you want notified via an email, that you responded to them.

If you are a Colleague with anyone that has NOT posted in the thread, and you want them to see your post, hold down the shift key, type the @ and the first 4 letters of their First or Last Name.

Then look below this Window and click on that person's name.

Raymond

Christopher B. · Answer

@Brennan Burke No problem, glad I could help.

Brennan Burke · Answer

@christopher bush Thanks for the welcome and that info is more helpful than you can imagine!

Sam B. · Answer

@Christopher Bush Thanks for the info, looking forward to hearing more on your flip!

Bill S. · Answer

First of all congrats. Just starting early is great if nothing else even though you obviously have a lot more.

@Christopher Bush  so how did you qualify for the refi loan (being in college and without a job or so you said)?

Sam B. · Answer

@Matt Devincenzo Good call Matt - @Christopher Bush if you'd share the second deal, what you did different, etc., I'd love to hear it.