My First Deuplex, Rock Island, IL

[Ryan Klemetson]

My wife and I have wanted to invest for a long time, and we fell in love with a duplex in Rock Island, Illinois. It was built in 1909, and still has a lot of original woodwork. Great tenant on one side, retired military in the best kind of way, and the owner had lived on the other side the previous 13 years. It is in a sub B neighborhood, a few blocks away from a C class neighborhood.

We bought the duplex for under $90K and each side rents out for $750. Thus far we have spent most of the cash flow on repairs. (New electrical panels, treating for termites, plumbing, and bringing the side the owner lived in up to code).

I would love to hear from some other members their opinion on the danger of falling in love with a property, and the common repairs they have run into owning/working on older homes.

Lessons learned thus far:

1. Don't rent to friends or family. My wife got so excited about us becoming land lords she offered one side to a lady we knew from church who was unhappy with her current apartment. She told us she could move in March, which became May, which became June, which became not June 1st but June 30th. Plus she wanted us to make a lot of changes to the current arrangement of the home. We cut bait and helped her find another apartment while we started marketing the property. We ended finding a great couple, but we lost $3K in vacancy waiting for our friend. Lesson, there is nothing worse than when two people think they are doing each other a favor.

2. Leverage is great, but not if it affects your sleep. We put 20% on our first home with some saved money, but also a loan against my 401k (interest is paid back into the account; the only fee is $20 a year). We then bought this first rental property with a home equity line of credit. We have enough saved up in stock index funds to pay off our floating debt in case of a personal crisis. However, having the debt makes us a little uneasy, so we are going to pay off the equity line before acquiring new properties.

3. Contractors are expensive. Thus far I have been blessed with reliable contractors, but I am in a constant state of feeling ripped off. I have found that they will always take a little off their bill with the slightest push back ($50 to $100), but I feel I need to make several more 5am trips to Lowes before I can find some people that I trust.