How I got a free duplex as a junior in college

[Christopher B.]

In 2010 as a junior in college I ran into an old friend who inspired me to buy a multifamily property. He had recently done a deal for a duplex with his parents and was living in one side for a couple hundred bucks a month while managing the other side. I thought this was a pretty smart idea on his part and after some contemplation came-up with the grand idea of buying my own duplex but with the other side paying ALL of my expenses and hopefully more.

There was a few problems with this though:

1. I knew little about real estate outside of the 3-4 books I'd read

2. I knew nobody that had any knowledge of rentals

3. I had no money, not even a job (college rocked)

Oh well, I pressed forward. My plan was to buy a REO for cash, remodel the property and use the gained equity as my down payment so I didn't have to come-up with 20%. I convinced some family members to loan me $100k to buy and remodel a property. I purchased a duplex for $70k cash and spent $35k on the rehab for a total investment of $105k. The property appraised for $142k, so I then refinanced the property and repaid my family members in full.

In the end nobody spent any money out of pocket and I created about $37,000 in free equity, $2K in cash reserves because we didn't refinance for about 4-months, and a free place to live for myself. Though I'll always be proud of this deal because it's what got me started the property will never be a cash cow. I am currently renting one side for $675 and will rent my side (yep, still live here) for around $900-$1000 per month when I move-out later this year. It should cash flow around $300/month when I rent both sides which I am satisfied with since I knew little about valuing a rental property and estimating cash flows at the time.

My takeaways?

- I bought during a huge down cycle which had a lot to do in me buying a cash flowing property, more and better due diligence is necessary

- Accepting a full-time summer internship and taking 6hrs of summer classes will undergoing a major remodel on a 2700 sq./ft property is absolutely brutal, don't ever do this.

-Never buy a house made of block and/or with a concrete pad

-This works and it's going to change my life

Thoughts?