All Forum Posts by: Zach Davis

Hey Guys, I have a duplex in my area that was built in the 1920s. It has been fairly well maintained but not really updated at all. Its still the original plumbing and electrical, plaster walls, no insulation, all that fun stuff. I was hoping to hear some opinions or experiences with older buildings that I would need to think about before making an offer. Thanks!

Hey, thanks for the reply Matt. The rents are currently at $700 per unit and that is what I'm figuring the income at. At the most they could be increased to $725 at the lease renewal. Update: The property has been pulled from the market, which is why the link now goes nowhere. I do still have access to the owners realtor and he will accept offers but the reason he pulled it was because he got upset at a lowball offer, what that offer was I don’t know. If I do end up making an offer on this place it will probably be closer to $150k but I figured the mortgage in the previous post at $160k just because that’s really my max and I like to figure expenses a little high. In a related note, the approximate replacement cost of the building is 155k; similar sized lots in this area are approximately 40k so it is somewhat undervalued. I’ve also attached a Google Street View shot of the property now that the link doesn’t work. Any other thoughts on this property or my approach?

Hey Steve, thanks for taking the time to look at my post. Here are the monthly costs I have; property taxes will run around $210, rental dwelling insurance is $25, water/sewer should run around $50, and garbage will be $45. Other than that I haven’t gotten too in depth with the property’s historical costs. I’m mostly just trying to do a preliminary review of it to see if it’s worth my time to dig deeper. Also, I just heard back from my mortgage broker and I’m looking at between 4.875% - 5.0% for an investment property loan with 20% down. If I figure 160k offer and 32k down, the interest rate at 5% makes my principle and interest payment just under $700. Hope that gives you enough to render an opinion. Thanks!

Hey guys, I was hoping to get some feedback on this duplex.

http://rmls.com/report/13396573

The property’s been on the market for around a year and has had only one real offer that fell through. They’re currently asking $170k which is down from $180k 6 months or so ago, the current owners bought it in 2001 for $145k. Both units are two bedroom one bath and would rent for between $725 and $750 per month per unit, they are currently both rented month to month for $700 each. It’s in a cluster of small, mostly well maintained multi-family properties surrounded by single family homes but this one is somewhat of a trouble building in the neighborhood. Initial assessment on that: it doesn’t seem to be the current tenants but the overgrown landscaping and poor lighting that welcomes the trouble element. The idea would be conventional investment property financing with 20% down and probably offering somewhere in the neighborhood of $150k-$160k. I haven’t been able to get ahold of a broker as of yet to determine the exact rate I’d be looking at but my initial knee-jerk figures say I’d be barely cash flowing based on the 50% rule and would probably cash flow $80-$100 per unit in 1-2 years. Certainly not a money maker but my idea is that getting my foot in the door and gaining the experience might be the more important consideration for the time being. Maybe I’m wrong on that? Hoping for feedback on that as well.

I have run this by my father in-law, who is a successful multifamily investor. His input was that on your first small rental property anything that doesn’t lose you money every month is a good deal just for the tax shelter… Thoughts on that? Thanks in advance for your input.

Hi Hunter, I'm an aspiring investor as well so there may be others who have better/different ideas than myself but here goes... The model that I have seen consistent success with in the residential rental world is as follows: get into a small multi-family property, something between 2 and 4 units that you can live in and get a conventional owner occupied mortgage on. The rates are better and they require a smaller down payment. Also, at least in my area, if you find the right 4-plex you can live in one unit and still cash flow the property with the income from other 3, which frees up your income to snowball your holdings. Live in it for 12 months to satisfy the owner occupied part of the loan and then buy another one using the same method. You could potentially have a good income from 16 units by the time you have to start getting creative with your financing. Good luck, I hope to see you at the top some day!

Hey Brandon, you and Josh talk regularly on the podcast about the dangers of getting emotionally attached when buying properties. Finding a good tenant is just like finding a good deal on property. You make a list of your requirements and stick to the list. If you start making emotional decisions and deviate from that list based on your feelings you are likely to get burned. If this guy wouldn't normally make it through your screening process then turn him down politely and save yourself the trouble. Just my $.02.

Hi Michael, thanks for the welcome. I’m not completely holding until next year, I am actively looking for deals or partners but haven’t had much success on that front as of yet. I do have a few contacts in the real estate investment world from my property manager days and I have had a few properties in the last year brought to my attention. I end up pursuing three of them and one other that I found myself. These properties were all potential owner finance deals that for one reason or another, didn’t work out. I lost two because a buyer came along with a better offer that I could not match. Another decided he didn’t want to do seller financing after talking to his attorney and the seller of the latest one ended up in tax trouble and decided to unload it for cheap through a realtor to get the funds to fix the issue. It’s not so much that I’m not going to take action till the end of next year. I think the situation I’m in would be better described as; unless I can find a well-funded partner or a creative finance deal in the next year I won’t be able to move, if I can’t I’ll be qualified for conventional financing around that time. Hope that clears it up some. Did I miss anything? I’m sure there’s something out there that I haven’t thought of yet and I’d love to hear some other ideas.

Hi Jerry, thanks for the welcome and thanks for the suggestion about the learn section. I have started to delve into it, I've actually been listening to the podcast for a few months which is how I found this site and I've read the beginners guide. I wish I had known about this place before I made the decision to buy my house back in 2008. Which brings me to why I'm currently stuck in a holding pattern... Housing has dropped pretty severely in my area with the market only beginning to rebound in the last year or so. Since I bought my house in 2008 I lost a ton of equity and ended up with a $235,000 house that's now, after the rebound, only worth $180,000. That's better that the $155,000 it was worth at the bottom but still not good. To make matters worse I bought with an FHA loan which had an additional mortgage insurance premium that made my total payment around $350 a month higher than what I could rent it for which is what kept me in it for so long. Its just been in the last month that I've gotten my house to a point where I could barely cashflow it as a rental. The problem being, since I had to refinance in order to get it to that point, I now have to live in it for at least a year to fulfill the owner occupation clause in the mortgage. And, since a 4-plex around here averages around $300k-$350k and I don't have $90k to put down in order to get investment property financing, I'm kind of stuck until this year is up and I can rent my house and get an owner occupied loan on a plex with a more modest down payment.

Hey everyone, I'm a new member from Sandy, Oregon. Sandy's a town of 10,000 that's located in Clackamas County and just east of Gresham and Portland, Oregon. I have experience in construction and remodeling as well as property management but I'm currently working on building the capital needed to get into my own duplex or 4-plex from my personal home. I hope to make the leap towards the end of next year that will start me on the way to a portfolio of multi-family rental properties and maybe the occasional flip. Just wanted to say hi and see if I could find anyone in my area (or even outside of my area) to network with and learn from. Thanks for taking the time to read my introduction.

What year was the duplex built? Things like insulation practices and paint types have changed quite a bit over the years. For instance, you are typically warned that houses built before 1978 have lead paint, however approximately 1/4 built after the late 60s don't contain any at all. A cheap hardware store lead test will tell you right off just how expensive replacing that siding might be and that might answer your question for you. Also, depending on the year, your plex may or may not be insulated. If it is old enough to not be insulated, installing new high efficiency windows without insulating will just allow your tenants to feel the drafts coming from the bottom plate of the wall and around the outlets and lighting. The furnaces I would run until they either break down in a big way or get too expensive to maintain. I agree that the roof is the number one priority, and if it really is on its last legs then you’re much better off replacing it before you end up with mold abatement or sheetrock repair expenses. I would suggest having a reputable roof maintenance company take a look at it. If their inspection finds the roof in acceptable shape they may be able to service it and prolong its life for another few years at a fraction of the cost.