Living for free and it is great

[Larry Lenz]

Hello, I wanted to share a purchase of a duplex I made in September.

I started looking for a place to rent in April. I started searching and found a couple of places that I may have liked. While looking, the notion of me buying a multi-unit property so that I could live rent free came around. Being in early May, I had not yet starting reading BP nor thinking I wanted to become a "real" real estate investor.

There were two properties I found on the MLS that seemed like a good deal and that I was very interested in. Being that I was going to live there, the emotional part of wanting to live in a specific area and quirks, etc did play a part in my final decision. So the property I ended up going for was in a neighborhood I was more familiar with and the size of the duplex a bit smaller than the other. I also wanted to move fairly quick on the closing and the owner of other property was going through a bankruptcy so I thought the one I was buying would not take as long.... well 105 days to close was a lot longer than the 45-60 days my agent thought it would take...

The offer and counter - The house was originally listed on the MLS for 84,900. A few days before my offer the price was reduced 79,900. It was on the market for a few months by this time too. With the help of my agent, the first offer we made was 72,000. They countered and I do not recall the exact amounts but my final counter of $76,100 was accepted.

The numbers:

Bank financing was 2.90% for 20 yrs with 15% down - payment $358/mo

Taxes are $100/mo for the first year then half that for being OO the following year

Insurance is $43/mo

Total expenses = $501/mo

Rental income = $650/mo

$650-$501 = $149/mo extra, which covers my utilities! The renters pay all of their utilities. Plus $50 more after my taxes go down in 2015.

A great part was that after my closing costs, I did not have any more expenses to find and get tenants moved in... who moved in only a week after I did! If I have expenses they will come out of pocket for now but when I move I should get enough rent from my side to cover all of that and a little extra.

While waiting and waiting for the closing is when I started reading BP. So looking at it from an investor's hat, I was fortunate that the numbers worked out pretty well. A couple of things in hindsight that I might have done differently are; a longer loan term so my payment could have been lower and try to haggle the price down a little bit more than I did. But based on outcome, I think I did pretty good and already have some lessons learned from the process!

Thanks for reading.

[Nicole A.]

I agree with J Martin. They may actually be good, nice people...call us jaded, but overall, I have found that when my tenants "do favors" for me, they throw that in my face when something comes up, such as late rent. I say, keep it friendly, but professional. Don't let yourself get into any sort of imaginary debt with your tenants, especially in the beginning when you don't know them. There are exceptions, of course, but overall at least to start...keep a professional arm's length distance.