Renovated Duplex, First Investment

[Davin Kieff]

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $268,000
Cash invested: $16,800

This was my first investment. I was very nervous about jumping into a first deal due to stretching the amount of cash I had on hand, but I could not have asked for a better investment. Everything turned out great for me and was my door out of the renting hamster wheel.

What made you interested in investing in this type of deal?

I wanted to get out of paying rent, but I did not want to fall into the cash flow trap that is brought by buying a new single family home. I wanted my first home to be a house-hacking duplex, and that is exactly what my girlfriend and I settled on.

How did you find this deal and how did you negotiate it?

I found this deal through a local realtor. We were really early on bidding the property (made offer first day on market). Traditional negotiations took place.

How did you finance this deal?

I financed this deal by taking a loan from my 401k and using an FHA loan.

How did you add value to the deal?

I was the primary investor and analyst for the investment.

What was the outcome?

Great positive cash-flowing investment!

Lessons learned? Challenges?

The inspectors do not catch everything. I now know more of what to look for when assessing a property. House Flippers typically skip many corners to save money on homes.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I worked with a local realtor and lender.

[Davin Kieff]

@Dmitriy Fomichenko, thank you sir!

@Andrew Freed, as you know the market has been in an upswing for the past couple of years, with that, I'll give you the numbers that I am currently renting at (tenant has been under lease for 1.5 years) and what estimated market value is at this time.

Current analysis:

Rental Income

Unit 1 Income $1,353.00 (I charge myself this rental rate, for numbers sake)
Unit 2 Income $1,128.00
Total $2,481.00

Monthly Rental Expenses
Vacancy Rate $198.48
Repairs $124.05
Property Taxes $150.00 (property taxes are high in NOLA)
Principal & Interest $1,006.82
PMI $167.94
Home Insurance $346.61 (Insurance is also high in NOLA)
Sewerage and Water  $160.00 (city, I pay both sides on shared line)
Total $2,153.90
Monthly Profit from Real Estate $327.10
Annual Cash Flow $3,925.20

Cash on Cash return 23.50%
Net Operating Income $18,022.32 (assuming paying myself)
Cap Rate 6.70%

Expected Market Rate at this Time (based on surrounding rentals and upgrades):

Unit 1 Income $1,624.00 
Unit 2 Income $1,353.00

I am still a novice, but I will try for these rental prices and if it doesn't rent I will drop a bit.

Regards,

Davin