New member saying "hello" ...and seeking wisdom

[Jared Olson]

Hey BP crew!

First I wanted to briefly introduce myself, and bore you with some noobie questions :)

My name is Jared, I graduated college last year, and have been working a professional job as a VOIP technician/Systems Admin. My fascination for investing started around age 12 when my dad made me read "The Automatic Millionaire" in order to "earn time" to play video games. For every hour I read, I could play 1 hour of Halo. Haha, it was painful but, looking back now, I thank him.

Fast forward to a few months ago when I read "Rich Dad, Poor Dad" and realized that I was caught in the ratrace and don't want to stay there. Since then, I've been consuming investing material and listened to almost every single podcast on BP and am reading "Investing in Real Estate" by Gary Eldred.

*end of story, and on to real estate question*

I've been trolling realtor.com and zillow searching for my first home/investment property. I want to purchase a multi-family home, preferably with an FHA loan, live in one half and rent the other half. I enjoy fixing things, and am not afraid hard work. So here's the deal, last week a local Realtor showed me duplex that needed some work, but seems like a profitable deal.

Brief stats: cost of home: 75,000. Lower unit rents for $425. Upper half is vacant but was renting for $625. Taxes are $500/year and mortgage insurance about $500/year. On paper, this matches the 1 percent rule and the 50 percent rule. Also, rents in my area for this type of house range from $400-600, based on my craigslist and local paper research.

My thoughts: The bottom unit doesn't appear to need interior work. The upper unit needs TLC. The bathroom utilities are 70s color yellow(made with this color), the kitchen appliances are very outdated, it has the faint odor of cat urine, and most of the carpet looks like it was stolen from the Scoobydoo Mystery Machine. Upon purchasing the home, I would remove all carpet and give it a much needed deep-cleaning and paint all the interior walls.

Concerns: The utility bills seem very high, the lower unit ranges from $100-200/month and the upper unit is at least double. This doesn't surprise me too much considering the house was built in 1920 (pretty standard for houses in my area). My Realtor told me the seller could not provide the current tenant's lease without an accepted offer, but said it's a month-to-month basis now (sounds shady to me?). Also, the seller has never lived in the house and basically knows nothing about it.

So I guess my main questions would be, where do I go from here? I don't know the first thing to look for when it comes to roofs, or siding, or foundation or the "big things" to watch out for. Can someone help point me in the right direction?

Thanks a ton!

Jared

P.S. If you want to see the house: http://www.zillow.com/homedetails/925-W-Woolman-St-Butte-MT-59701/78194848_zpid/

[Brandon Turner]

Hey @Jared Olson Welcome! You've definitely come to the right place to learn more about investing. If you haven't yet, be sure to check out the The Ultimate Beginner's Guide to Real Estate Investing and The BiggerPockets Podcast. They are both great at learning the fundamentals.

Oh - and don't forget to set up your Keyword Alerts!

See you around the site!

[Erin L.]

Welcome! I had to laugh because I do the exact same thing for my 2 boys. My 11 year old is reading "Investing for Teens" right now so he can earn Halo and Minecraft time, ha! As for the rest, I can tell you that living in one side of a duplex is a fantastic way to get in the game and learn a whole lot. We have been doing that and DIY'ing most of the reno and brought rents up from 425 per side to now 1200 10 years after we purchased. You are a great age to do something like this since once kids come along duplexes get to be tight quarters… ask me how I know LOL. As for the other, I don't know your area but maybe get an inspector or mentor involved to help with your investigations and search… you will learn the major things to look for as you get experience but until then get a pro to help and prevent some of the mistakes that many of us wish we had prevented :) Good luck to you!

[Dmitriy Fomichenko]

Welcome to BP community @Jared Olson It is a great place to meet new friends and learn about various aspects of real estate and more.

Wishing you the best!

[Cody Brinkman]

Hey Jared. I'm also new to Bigger pockets. I recently purchased my first duplex and I'm by no means a seasoned investor but I may be able to point you in the right direction. You're right about the numbers looking good on paper, those utilities are pretty steep though and I imagine the winters are pretty brutal there. In regards to you tenant situation should you choose to buy the property the fact that their on a month to month agreement isn't such a bad thing. My property came with tenants on one side and they are terrible. You would have an opportunity to qualify your own tenants. If you should go that route I'd also move into the currently occupied unit and rent out the larger unit. That should completely cover your mortgage and give you a little extra to start doing those repairs you spoke of. As for your structural concerns Erin is right. Definitely get a pro's opinion before you put a penny down.

Hope this helps point you in the right direction

[Dave Visaya]

Hey @Jared Olson welcome to BP and thanks for introducing yourself! I look forward to hearing from you in the forums and being active there. Don't forget to share your success stories soon!