First Purchase!

[Wesley Pittman]

My wife and I made our first real estate move and purchased our first property ever!

I've been reading and getting my book smarts, but we both agreed that at some point we were just going to have to go for it and started learning via the school of experience. Thus, we decided to purchase a duplex near the University of Nevada, Reno. My wife works at the university so it's a great location for her and not a bad commute (by bike) for me to work. We plan to live in one unit and rent out a bedroom in that unit, and then rent out the entire other unit. The property is two 3-bed, 1-bath units. We've got an FHA loan, and took advantage of a Nevada Rural (??? Reno is definitely not rural but it qualifies...) Grant program that allows you to take a large "gift" towards closing costs and purchase price for a quarter point of interest over the life of the loan.

The property was in pretty good condition, and the land underneath it is really valuable. We bought it on MLS so we paid market value, but were okay with that going into the deal since we both wanted a place we would be okay living with for the next few years while getting some actual experience property managing and being land lords.

One prospect I'm REALLY excited about is the property is on a corner lot with a very large unused areas. Because of code in the City of Reno, I highly doubt there is any "developable" land left due to density restrictions and set-back requirements, however... I don't see any reason an attractive tiny house on wheels couldn't effectively make this property a triplex. I'll need to investigate that more, but it's an exciting thought.

We're already learning so much by actually owning the property, and my wife turns out to be a badass property manager (which is awesome, and I had no idea would be the case). I'm getting a lot more familiar with the financial side and comparing my pro forma to reality so I can get better at analyzing deals. When it comes time to start picking up purely investment properties, I think this duplex will have given us a little more knowledge and a little more experience that will be super beneficial.

It's been a lot of work no doubt to learn- spent 12 hours at the computer on one of the days this weekend to properly get all of our accounts set up and start tracking everything in our personal finance software- but it's well worth the effort. I see it as cost of admission to get in the game!

Rock on!

[Wesley Pittman]

@Hersh M.

Sure. I don't mind sharing numbers at all.

Purchase price: $275,000

Amount financed: $270,000 @ 4.5% with FHA assumable loan

Estimated repairs: $10,000

Current total rents: $2,050

As I stated before, the deal is barely acceptable- certainly not an investor's dream. Current rents leave barely anything to set aside for vacancy, cap ex, etc. However, my wife and I believe we can increase rents significantly by making improvements to the property such as double pane windows, security doors, better insulation, etc. (things that faculty or doctoral students at the university would appreciate more so than the current undergraduates renting it).

The way we are looking at our deal is in contrast to what the majority of people our age are doing. Most "dumb-20-somethings" are buying SFHs they can't afford and putting all their own income towards the mortgage- we've at least got some income from the property.

It made sense for us too because we didn't believe we had too many options off the MLS for an FHA-style loan which was the best option we had for leveraging. We made a full-price offer which I would have balked at if this property wasn't significantly cheaper than the comps near it. Average price per square foot near UNR on the market was $200- and there were some REAL dogs on the market too. This was listed for $140 per square foot and in good shape. We submitted the offer on the property on Sunday, and it had only been on the market since Thursday (we hadn't even seen the inside yet). Obviously other folks thought it was a good deal too. There were three full-price offers (I believe) that came in within a day after ours.

Reno is REALLY hot right now. We're glad we got in when we did because we believe there will be appreciation and rent increases near UNR. They have a supply issue with student housing and our location is a very comfortable walk to the university.

Overall, we're excited.