1st Investment Duplex

[Enrique Hernandez]

Investment Info:

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

Purchase price: $130,000
Cash invested: $9,000
Sale price: $185,000

I did not have the knowledge then to keep the property and pull money out to complete renovations to another property we purchased a year after this one that required a complete overhaul. Used the proceeds to complete the work on a fixer upper I negotiated for $45k. Got a $30k downpayment and a $15k 0% owner financing for 24 months.

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

After reading Rich dad poor dad when I was 16 and began reading more of his books it was clear that a duplex was the way to jump start my career as an investor and more superior than a single family when it came to cashflow.

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

I was an avid redfin viewer from the beginning. Method of choice was looking for potential properties online using redfin then when I had run simple numbers I would drive by each property and its neighborhood and if it was worth pursuing, I would schedule to see the property through the selling agent. When I had located this particular duplex I contacted a local agent to represent me on the acquisition.

How did you finance this deal?

Used an FHA loan as owner occupying with a 3.5% downpayment. My understanding at the time was that I may not qualify any other way. With this said, all went through fine I was contacted by the FHA representative about three months of owning the deal and I had to write a letter explaining why I had not occupied the premises. In reality I had just gotten into an accident and was not able too even if I wanted so everything lucked out.

How did you add value to the deal?

Raised the rents from $550 to $650 for the 1 bed 1 bath unit and from $625 to $750 for the 2bed 1 bath

What was the outcome?

the property tenants paid for my wife's new car that we needed.

Lessons learned? Challenges?

I learned it was possible to buy investment properties and manage myself from a distance. Always super helpful to have another handyman in the city you invest for the minor repairs. My biggest challenge was dealing with tenants. It was our first investment so it was new to us. The challenge was separating business from personal relationship. Best not to step beyond owner tenant relationships. Becoming "friends" is not recommended.

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

Not for this one.