New to investing

[Pete Amador]

Hello everyone my name is Pete Amador. I currently reside in Austin, Texas. I am a Peace Officer and a military veteran. I recently paid off my new home first finance for 30 years, then 15 and finally paid in 12 1/2 years. I've been anxious for years to delve into the real estate business. Now with my house paid off I feel I'm able to. This is my current situation any wisdom and experience will be greatly appreciated. I have been per-approved through Supreme Lending. I'm interested in buying a duplex and living in one unit while renting the other. I am going VA although feel like I'm getting cold feet. The unit is appraised at $108,490 through the appraisal district, but the asking price is $117,500. It's been on the market for 293 days and appears to have potential. What would be the next step. What should I look for and not miss or forget to do?

[Jon Holdman]

Welcome to BiggerPockets, Pete Amador.

First, realize that county assessments (they're not appraisals) are for tax purposes. They may or may not have any relation to actual values. If its been on the market for 293 days, though, its overpriced. Don't be the sucker that finally buys it. Find a buyer's agent to help you. It won't cost you anything, and they will have access to the MLS to help you determine the true value.

Second, do some reading in the Landlording and Rental Property forum about the realities of being a landlord. New investors often fall into the "cash flow = rent - PITI" myth and are then in trouble when that irregular but inevitable major expense crops up. Don't be that investor.

Third, congratulations on paying off your house. Many people will tell you to refi and extract that "trapped equity". But IMHO, a house you live in is nothing buy an expensive doo-dad, like a boat or car. Now, do consider if that property makes a good rental. If you can sell it and take the cash, what could you buy? What sort of return on the equity are you getting by converting that to a rental. Also keep in mind that if you have gains on the house you can sell now or in the next three years and avoid capital gains tax.