Its interesting looking back at where you were and where you are now. My wife and I started looking into investment properties back in August of 2014. Really quickly let me give you a short history into our background and why we decided to even consider investment properties. Ashley's dad has about 10 units and my parents have about 4 residential units and one large commercial property. I recall my dad taking me with him going over to a tenants house fixing miscellaneous issues - my Dad is a plumber and now owns a good size plumbing company so he's pretty handy and because of that, much of that handy man skill and mindset was passed on to me as I grew up. In short, we knew you could make a living doing this, but we didn't know how it really worked and we didn't really know what a good deal was.
We looked at a lot of single family properties at the start but then quickly drifted into small multi-families after we figured out how to run the numbers, so to speak. We determined that cash flow was king for us so we focused our analysis on cash flowing properties in the beginning. We looked for awhile on our own and then found a Realtor based on a recommendation from a friend who also had some rentals. We kept looking... and looking...and looking... I'm actually surprised our Realtor had the patience she had, as I think we probably walked through 40 properties before we finally found one that just seemed to be the right fit for our first property.
If you can imagine a kid walking around a pool before putting their foot in the water, that was us... we weren't even testing the water yet, but just "looking" at it.
Here's the thing though - looking back at those 40 or so properties, we learned a ton! We found out what the rent roll was for the area, the crime in the area, school districts, what a property looked like that didn't need a lot of work and ones that did, and the cost associated for that work. We eventually started getting smart and decided to only look at properties in which the numbers looked good. Only then would we call our Realtor, get in a car and meet her to check it out.. And frankly soon after that's when we landed the first duplex we bought.
We stumbled upon a vacant duplex that a landlord had left after moving out of state. She had actually lived there in the past and rented out one side. Hardwood floors, semi-split level duplex with a 1 car garage on each side, fenced back yard, 2BR, 1BA. She was renting it out at $650-$700 a month. I did my homework and found out the area actually rented in the $800-$900 range (immediate opportunity to increase cash flow). She had recently put a new HVAC in on both sides, new main sewer line outside to the street and a new roof. However it needed some TLC in the kitchens and bathrooms, lacked a dishwasher and disposal, needed fresh paint, a few windows needed to be replaced, drain system needed replaced throughout, the garage door didn't work on one side, and the electrical panel & service would never pass an inspection or be insured by an insurance company.
We went home and double checked the numbers with my predicted rent roll and it had Cash on Cash of just under 16% with a positive cash flow of $621 after taking into consideration vacancy, maintenance, property mgmt and capex (~26%) and after renovations we estimated the ARV to be at $145-150k. The Seller was asking $135k but we knew it needed at least $15k in repairs with the kitchen, baths and electrical plus any unknowns so we negotiated the price to $122k with seller paying 2% closing costs and covering the electrical repairs. We did a conventional 30 yr fixed mortgage at 4.35% with 25% down and closed 40 days later. Here is the cool part - the actual appraisal came back at $145k before we even touched the duplex! So our ARV was off a bit.
After several long months we now owned a duplex! It still needed about $15k in repairs and updating but the electrical had been fixed. I had my Dad come in town with a few of his guys because we had to redo some rails around the stairs and I wanted to add dishwashers and disposals on each side and add stop valves on each plumbing appliance. We ended up replacing the entire sewer line with new PVC because the cast iron was on its last leg and the last thing we needed was a call about a backed up sewer once we had tenants. Ashley's dad also came up and helped me knock out kitchen counter tops and flooring (thanks again guys ;) ).
When it was all said and done we ended up replacing the kitchen flooring, bathroom flooring, painting all the interior walls, garage doors, replaced the fridge and stove on one-side, additional electrical work, fixed the garage door on one side and painted the cabinets to give them a new look and replaced the counter tops and one of the kitchen sinks. Our total rehab costs was about $9k just under our previous $15k estimate. After long hours and several late nights, we finished one side in 3 wks and had our first tenant in there before our first mortgage payment was due. The second side took another 4 wks to get ready for the 2nd tenant. We could have done the entire rehab faster had we used contractors but we honestly wanted to learn as much as we could on these first few deals so we could leverage that knowledge in the future.
Our duplex is now estimated at $160k and rents for $900 a month on both sides, each with one year leases. We now have $60k in equity and cash flow is great!
So our advice to get started in real estate investing - don't wait too long to get started, take action! What are you waiting for? Go get busy! If you want some help getting started, please reach out to us and we can help! Along with the knowledge we've gained over the last two years and countless deals, Ashley now is a Realtor so we can help from start to finish!