First Timer Investment and OO Duplex

[Daniel Hofmeister]

Hello everyone!

Long time BP lurker, first time forum poster.  A little about me: I'm a 25 year old engineer from Cincinnati who's become steadily more excited about the housing and entertainment renaissance happening in the greater Cincinnati area.  I'm ready to make the jump into real estate investing! 

I'm in contract for a duplex in the Cincinnati area, that needs some much needed updating and repairs before I move into the top half.  The bottom half is leased until April.  The house specs are as follows:

Duplex:

Upper/lower 1BR/1BA each, ~550sqft per apartment

Contracted price: $65,000

Estimated repairs/renovation (cash): $10,000

Rent: $550/month/apt, I'll pay rent for myself into the duplex bank account

Seems like a pretty solid deal, I'm sure it will cashflow nicely.

So now that I'm going down this path, there's a few things I'm not so sure about. For those who have done BRRRR method, does it pay off to renovate to a higher quality finish? I'm considering going for solid surface or granite instead of laminate, pretty nice bathroom fixtures, etc. Does it pay off? Or do nicer/more durable finishes ultimately make little difference in lowering upkeep costs?

Secondly, I'm setting up a new bank account for duplex use only. I have enough income from my day job to live off of, and won't need the paid rent for anything, so the only thing that the duplex account will be used for is putting back into the duplex for repairs, etc. I'll be talking to a CPA soon but in the meantime, I'd like to know if creating an LLC would be in my best interest to not have to pay a bunch of taxes on money I won't personally be touching anyways.

Thanks for your insight everyone!

[Craig H.]

Daniel,

I've done the BRRRR strategy once and owner occupy an apartment in my 5 unit building on the east side of Cincinnati. In regards to your question about renovations and installing higher end finishes it just depends what neighborhood you're in and what it takes to be competitive there. Research Craigslist and Zillow for rent ads and see what types of finishes they have in their rentals and what they're asking for rent. You get what you pay for in terms of materials. If it is going to be owner occupied, I found in my experience you will receive better financing terms if it is in your personal name, rather than in an LLC. I ultimately decided to put the property in my name rather than LLC for this owner occupied property for those financing reasons. Not sure what neighborhood you are in, but $65,000 for a duplex seems like you got a steal. Feel free to shoot me a message and we can talk more if you'd like.