New to REI and BP - Zero to Duplex in 4 weeks

[Kyle Nagle]

So this is a hybrid new member introduction, since things are moving much faster than I anticipated.

Hello BP!  My name is Kyle Nagle, currently living in Sioux Falls, SD.  Some quick straight forward background information about me.  I'm 31, single, no kids.  I grew up in the south eastern part of Pennsylvania (about 1.5 hours from Philadelphia).  After graduating high school I moved to western PA and studied music education at University for about two years.  I then moved back east and jumped into flight training to pursue a career as a professional pilot.  After slowlyknocking out most of my pilot certifications and working in sales for at&t I decided the life of a pilot wasn't what I wanted.  I made a slight detour and transferred my at&t job to the Pittsburgh area where I studied Air Traffic Control at a community college.  I did well there, graduated, and was actually hired to work for the school as an adjunct professor teaching for them.  Luckily I was then able to be offered a position in the FAA working as an Air Traffic Controller.  

I moved to Sioux Falls to work for the FAA in August 2015.  I moved out here with very minimal belongings into a furnished studio apartment.  The job is great and the money/benefits are fantastic. But in the end I'm still working for someone else and I feel like I'm not in control of my own destiny as much as I could be.  I started to try and educate myself about what to do with all this earned income.  Read various books and articles on investing, mainly stock market related.  In the end, putting the effort into learning about the stock market, researching various mutual funds, and/or paying some broker a bunch of fees to manage my money (while they're most likely no better off than me) didn't make sense. 

Enter Google and the Bigger Pockets website.  

One morning, while still searching for ways to invest my money, Bigger Pockets came up in my search results.  I perused the site and quickly realized it was all about investing in real estate.  I saw there as was a podcast and started watching some of the clips on Youtube.  One of the guests on the show mentioned Rich Dad Poor Dad.  Which was I book I remembered hearing about, and even thought about reading but never did.  

I read the book!  The concepts and ideas presented in the book were so compelling.  A lot of them were things that various people I looked up to in my life would mention to me growing up.

Examples:

"The poor and the middle class work for money... the rich have money work for them"

-The cash flow chart.  Converting high taxed earned income into passive income through buying assets.

-Tax strategies, such as a 1031 Exchange (which totally blew me away when I read it)

-If I stopped working tomorrow, how long could I survive? 

I just kept reading the book while also going through past BP podcasts.  One morning I came across Podcast 64 50 Units in 5 Years while Working a Full Time Job with Josh Sterling.  It seems in life, every now and then things come across your plate when you need them the most.  Mentors appear when you're ready for them, opportunities start to show up when you're looking for them, and everything just starts to make sense.  This podcast was watershed moment for me if you will.  Here was a guy with a similar background to me.  Went through flight training (racked up lots of debt), went on to fly for the airlines (I never flew for the airlines however), then decided that wasn't for him and became and Air Traffic Controller in the FAA.  As the title tells, he was able to get 50 units in 5 years.  If he can do it why can't I?  Even if I could get 25 in 5 years.  So it begins.

I wrote down a goal of buying a SFH as a rental (while still living in my studio apartment because it's cheap) sometime this August/September. I thought this was a lofty goal, being that I still have to travel for about a month for work, finish up the training process for work, and save up for a down payment. So that was the plan and I just kept learning, reading, researching. Then, I found this awesome concept of house hacking. I could find a duplex, live in one side and rent out the other! Change of plans now, buy a duplex in August/September. Still researching I come across various financing options. I learn that in fact I COULD use an FHA loan with as little as 3.5% down. Now I only have to save for 3.5%. Going even further I discovered the state I now live in (SD) offers a 3% gift towards a down payment if you get an FHA through their program (SDHDA).  So all I would need is .5% down and if I could get the seller to pay all closing costs even better.  The SDHDA program however does have income limits.  I would be over those limits if I waited until my target date of Aug/Sep.  I also have a lease to worry about with my studio apartment.  SO, I contact my landlord (who is a RE Agent and has a few rental properties) and we work out a deal.  I'll use her as my agent and she'll let me out of my lease early.

After looking at a handful of properties (not much selection currently) I was able to strike a deal on one at $5k less than asking price, plus seller pays all closing costs, and the unit that I will be moving into must be vacant by the closing date (seller will have to legally find/buy the tenant out).  It has the features I was looking for in terms of condition, size, location, etc.  As of 2003 new roof, siding, windows, furnaces, radon barrier, carpet, cabinets, etc.  It has good rental history, both units are very clean and well kept, decent neighborhood, and literally 5 minute walk to work for me.  Closing date is set for 4/1 contingent upon inspection (which is in 2 hours from now as I write this) and other things.

All in all for about $400 in home inspection costs, .5% down payment, and a few other misc things I'm buying a 2,400 sq ft home. Where after all income/expenses it will only cost me about $200 a month to live in. A few years down the road if I move out with both units rented it cash flows (also using 5% vacancy, 5% repairs, 5% CAPEX) at least $200 per month. That's also not considering me refinancing into something with lower PITI payments with no mortgage insurance.

So that was my lengthy hybrid newbie introduction and almost success story.  Thanks to Josh and Brandon from BP, all the contributors, and community for all your help so far.  

Oh by the way, that goal I had on my whiteboard to buy a SFH in August/September is still there. It just means it will be my second purchase ;)

-KN