First property: Owner occupied duplex, LOTS OF ???

Question

Hey everyone,

My name is Justin, 26, and I just bought my first investment property in S. Florida. Obviously I'm a newbie to owning real estate as well as to BP so really just trying to set up a process that will ease the way in the future as I am planning on multifamily investing long term... I have some good people around me but there are a few questions that keep arising so please see below and any insight you could give would help a ton. Thanks in advance!!!

1. To simplify the puzzle at tax time, is it a typical practice to designate a new bank acct. to be used only for property-related transactions such as collected rent, security deposits, purchases for rehab and maintenance, etc.?

2. As my fiancé and I are moving into one side of the duplex right now, and the tenant of the previous owner has signed a new 12 month lease with us, from everyone's prior experience, is there anything I should consider or look out for as we will be accessible to the tenant pretty much anytime...?

3. We are taking a month to do some renovations to the side we are moving into and will do the same when the ^above tenant decides to move out in the future. I love the opportunity of "forced appreciation". We are planning to lay down new tile throughout, paint everything, stain kitchen cabinets, and just some small improvements that are needed. Is there anything that you always try to do whenever you purchase a new property that adds value (or will catch the eye of a future tenant at least)?

Sorry for the book! Thank you so much for your help guys!!!

Brie Schmidt · Answer

@Justin Couchman Welcome to BP and congratulations!

1. Keep 1 account for security deposits and then you can have another for the property.  Make sure you keep an itemized list of what you bought.  Also make sure you designate if it was a tenant specific purchase (paint for just their unit) or a building expense (paint for the entry and hallways) because they are deducted differently when you live in part of the building.

2. I  lived with out tenants for the first 2 years.  We did have a separate email address set up but otherwise they were very respectful and we had no issues with them knowing we were the owners.

3. This is not really my area of expertise - but also know what is considered maintenance and can be deducted this year and what is an improvement and can be depreciated over time.  You can ask specific questions here or there is a landlord Tax book on Amazon that I found very helpful

Aaron Montague · Answer

@Justin Couchman

Hi Justin.  Welcome to BP.  Check out the beginners guides as a 2nd step :)

Congrats on the purchase.  I hope your monthly expenses have been driven close to zero.

Directly:

1. Get two, maybe 3, accounts.  Personally I use 1 for security deposits, 1 for money that is not yet mine (last month's rent) and 1 as an actual checking account for the business side of the property.  It will make your life MUCH easier at tax time.  I'd also recommend getting a good tax accountant.  Your taxes shouldn't be more than $400 or $500 with one duplex.

2. At least get a separate email address for the business.  Getting a different phone number is up to you.  There are endless debates here on BP on whether you should tell the tenants that you are the landlord, I've never had any issues.

3. Fresh paint makes everything look better.  Go gently into renovations.  At 20k renovation will take forever to recoup in an investment.  Bear that in mind.

Great first step.

Justin C. · Answer

Thank you guys for your help! I'm going to be posting random questions all over this site probably so hopefully one day I can pay it forward to others on BP!

Eddie T. · Answer

1. Keep the security deposit in a separate non interest bearing escrow account. This will save you so much headaches down the road because if you have it in an interest bearing account you have to show the tenant paperwork of how much interest they earned while you were holding the money etc etc. Remember this money is not yours your just holding it.

2. I use google voice for my rentals But because I have more then 1 property this may not be necessary for you.

3. Kitchens & Bath is what sells homes! And some nice curb appeal and new paint.

Scott Demots · Answer

Hi @Justin Couchman welcome to BP! Congratulations on your first deal. You've definitely come to the right place to learn more about investing.

The community here can definitely help you navigate the REI waters. I can't add anything to what has already been shared.

See you around the site!

Justin C. · Answer

Hey Aaron,

I appreciate the quick response! Everything is valuable insight. I've set a budget for $4K per side max in reno, so not too bad on that front. I see you're a multifamily investor so you might be able to answer my next question. I used an FHA loan to finance this one, and will likely in the next year or so have the means to do it again. This being my first property, how long do you think I'll have to "prove myself" to the bank before I'll be able to finance #2? Thanks again for your help!!!

First property: Owner occupied duplex, LOTS OF ???

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