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Updated over 11 years ago, 05/05/2013
New to investing
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?
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.
Welcome to BiggerPockets, Pete. Do you know how much the duplex rents for, or will rent for? That can tell you if it's worth pursuing further.
Thanks Jon H. for your input. My question is where do find a buyers agent? The agent who showed us the duplex is an agent, although he seems to be the sellers agent.
Jon K the rent for each is $625,, $1250 total.
Thanks Bryan, looking forward to learning as much as possible from those with knowledge and experience.
Thanks again, all.
Welcome to BPPete Amador.With 1250 rent per month,the proper price for the duplex should be 75,000 considering 10% cap rate.
According 50% rule,NOI would be 625 if u rent out the duplex.Annual noi is 625*12=7500.with a 10% cap rate,the price should be 7,5000
Hope that would be help.
Thanks Hua! Sure helps. Thanks again
Welcome to BP Pete. I missed this post but thought I would drop a quick line and welcome you to the site...I always try to reach out to active military and veterans (I was an AF maintenance officer until I separated last summer). Thanks for your service and good luck!
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Hey Pete Amador congrats on paying your house off!!! I can't wait till I can say that :)
Be sure to check out our "Start Here" page
and also "The Ultimate Beginner's Guide to Real Estate Investing" to help you get started!
Seeya around the site!
Thanks Brandon. Thanks James. Still a bit unsure. I make an offer, agent writes the contract, I get a termite inspection and most importantly get the property appraised. The appraisal returns $5,000 less than the offer can I walk away and retain the earnest money?
Hi Pete,
I'm in Victoria and I remember you when I worked at VPD. I was Records, Cheryl. Left in 1997. Good to see you on this site. I am new here too. Our first rental was my house before marriage. My husband & I started buying rental property about 6 years ago anticipating retirement. It was scary but God blessed Texas with Eagle-ford Shale. It has been good down here with the oil boom. We are experiencing our first eviction and wouldn't you know the guy appealed it. Best advice I can give you is save, save, save and try to pay cash for rental property. Stuff happens. Always have a safety net so you do not have to borrow for repairs, etc. Don't count on tenants for monthly payments of a house you are buying. Cash talks and buy low. Don't get in a hurry there is always a good deal. Wait for it and jump on it. Good to see you here.