Investment Number 2 (2 Duplexes together)

[Joe Scaparra]

Investment Info:

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

Purchase price: $140,000
Cash invested: $35,000

This investment was actually 2 duplexes in one Cul de sac. Each duplex was $140k. One duplex was configured a 2 Bedroom 2 Bath One Car Garage each side. The other was configured 3 Bedroom 2 Bath and 2 Bedroom 1 Bath each with a One Car Garage. Gross rents on one is $2300 and the other is $2275. However at the time of buy (2005) each duplex was just making the 1% rule........$1450 and $1300 in respective rents.

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

After investing in Bryan TX, decided to invest closer to home (Austin). At the time, same duplexes in Round Rock were selling for about 30k cheaper with about same rents. I was strictly interested in cash flow only.

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

I considered myself still inexperienced so I relied on a realtor to show and find me these deals.

How did you finance this deal?

30 Yr mortgage with 20% down to avoid PMI. Paid off investment in 12 years with excess cash flow from these and other real estate investments.

How did you add value to the deal?

Mainly added value by taking out carpet overtime and putting in 16inch tile or later LVY. Also I take hood vents over the stoves out and put in microwaves. Also since I do my own property management, I am very proactive in keeping my properties the best on the block. That makes finding tenants very easy. Now upgrading to granite countertops.

What was the outcome?

Buy and hold BABY! Allows me to achieve FIRE! Cash Flow is King!

Did I say that right! Cash Flow is KING! That is the only thing that matters to me as it supports my WHY and my Goal. Property has more than doubled in value but I have not realized the appreciation (equity) as I still own it free and clear. Only interested in Cash Flow. If I was looking to grow my portfolio I would consider 50% leverage and buy more properties, but I'm good at the moment.

Lessons learned? Challenges?

Great lesson learned year three. Tenant absolutely left in the middle of night, and left a mess. If it would have happened year 1, I would have said hell with this rental business but by then I had realized the potential of my investments and the experience made me stronger not weaker.