1st Investment Property Acquired. Duplex 1.

[Joe Scaparra]

Investment Info:

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

Purchase price: $146,000
Cash invested: $46,000

Ist Investment Property, 3 bedroom 2 bath duplex each unit. Bought to provide college housing for my son and later my daughter. At the time was not considering it a tool for retirement income. After 2.5 years of positive income even with a college dependent occupying a bedroom, the light bulb came on that yes real estate investing could substantially augment retirement income. Gave me the courage to seek more properties starting 2005.

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

Saving money by not paying dorm fees for housing my two college bound kids.

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

Being a newbie, i used a realtor to show me duplex properties only. I realized early that it was cash flow not appreciation that I was seeking, so investing in a duplex seemed like the most logical type property to focus on. In Bryan/College Station there are plenty of duplexes to consider.

How did you finance this deal?

I was still somewhat nervous purchasing my first investment property even though I perceived it to be little risk since my son has going to be living on one side with a couple of his friends. Therefore I decided to put 46k down so to have plenty of padding in terms of cash flow in the event i made a mistake in judgement. I mortgaged 100k.

How did you add value to the deal?

I updated the flooring over time. The duplex was build in 1999 and I bought it in 2003. It did not need anything. I have since replace the roof due to hail and wind damage. The property is close to Texas A&M main campus and Vet school, so I usually have no problem finding students to rent it out.

What was the outcome?

As in all my properties to date, I still own it. It supports my goal to provide significant cash flow to augment retirement cashflow. After acquiring more properties, I began using all profits to pay down one mortgage note at a time. This property was paid for in 8.5 years. Over the years, Bryan College Station has overbuilt apartment housing which in turn has put pressure on rent increases and slowed down appreciation of real estate in general. I have had slight rent growth over the years.

Lessons learned? Challenges?

In a college environment it is best to pre-lease beginning in Jan-Feb for July occupancy. Also strive to have your leases come due mid-July in order to capture the student's semester cycle in August.

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

I used a realtor for the 1st several properties I bought mainly out of inexperience. I now strive to work with only the listing realtor. My experience is that most realtors know little about multi-family properties and after buying a few, I find it to my advantage to not have a realtor representing me. However, I do welcome to work with real estate professionals who bring deals to my attention.