Posted by Sandy (NY) on January 10, 2003 at 05:21:06:
you can just tell the tenants you are the manager and a good friend of the owner. It is the truth and they will be less likely to try and take liberties with you because they aren’t seeing the “owner.”
Sandy
DUPLEX living in one half renting the other. - Posted by Ricky
Posted by Ricky on January 09, 2003 at 10:46:08:
I am 22 years old, college graduate that has been working for a year and half. I am looking to buy a house and have wanted to buy investment property. I have found a house that cost $79,900. It is a duplex with a 2 bedroom on one side and a 3 bedroom on the other. The house has a new washer, stove, carpet, and vinyl. The home has central gas heat and air. I am not opposed to a small negative cash flow, because I would be living in one half. The other half I have been told will rent for $500-$600 (I have asked to see lease contracts). Is $80K too much?
Second the house was built in 1910. What extra questions should I ask and should I be worried about the age if up keep has been good?
Re: DUPLEX living in one half renting the other. - Posted by Jay
Posted by Jay on January 10, 2003 at 01:01:56:
Ricky, I am also 22, and I am currently in college. In May, I purchased a 4plex, and have had no problems yet. The tenants were very accepting that the owner now lived next door. It’s actually very convenient- on the 1st, I have knocks at the door and rent money being handed to me. 80,000 for the place doesn’t sound unreasonable at all. I live in a part of my state where things are selling at pretty steep prices. A SFH is between $100,000 and 150,000 for 2 bedrooms. Where my brother lives on the other hand, you can pick up houses for $40,000 no problem. It really depends on the market you are a part of. I’d check that out, and as long as it’s in the ball park, I’d go for it. Good luck, it can be hard at our age just to get into investments, but in the end it will pay off.
Re: DUPLEX living in one half renting the other. - Posted by GL(ON)
Posted by GL(ON) on January 09, 2003 at 16:19:15:
The price sounds in the ballpark. You will have to check your local market to be sure if it is a good deal or not, compared to what other properties have sold for.
In my area there are lots of houses and apartments 100 years old and older. They are nothing to be scared of if they are in good shape especially if they are brick. Get a home inspection done. If it turns up anything wrong,that isn’t too major, ask for a rebate to cover the cost of repairs. This will lower your down payment.
Tell your tenant the house belongs to your mom.You are renting from her and looking after it for her. No one will believe you own it anyway, you are too young.
Be businesslike from the start and allow NO slack. You know how if you don’t pay your store credit card, visa etc, on time they let you know that it is not acceptable? That’s the way you have to be.
If they whine and go give me a break, say “The rent is due on the first. There are no exceptions. This is my Mom’s retirement. Her life savings are tied up in this place. Whose side do you think I am on, you or my mom?.”
Re: DUPLEX living in one half renting the other. - Posted by Joe(VT)
Posted by Joe(VT) on January 09, 2003 at 14:14:43:
Rick
I just did the same thing. I graduated 2 years ago and just bought my second duplex 8 months ago. It is a very smart move. I am not sure how handy you are but as long as you are willing to learn, don’t worry about it. Line yourself up with some good resources. Ask around for reputable plumbers/electricians and so on. They can be a great help in a pinch.
As far as the numbers go, they look good. A roomate splitting your costs in half could also really help out. Just make you if you go through with the purchase to save some money asap. It is so important to have an emergency reserve or a credit card with at least a 2000 limit. A furnace dieing in the middle of winter can be a nightmare if you are not prepared.
Good Luck
Re: DUPLEX living in one half renting the other. - Posted by Cathlin
Posted by Cathlin on January 09, 2003 at 13:29:59:
Ricky,
My husband and I bought a duplex as our first home, lived there for 3 years, and still own it 9 years later. The tenant’s rent covered all but $5 of our mortgage payment, and that was with 100% financing -zero down. What a deal! But it gets better… we’ll probably be selling sometime this year and putting $75k in our pockets mostly from appreciation, plus a positive cash flow over the years totalling over $25k. That duplex has been wonderful for us, and a good introduction to landlording. Our tenants knew we were the owners and lived next door. They were fine with it, and they didn’t trouble us with problems any more than any other tenants we’ve ever had. We felt that if the tenant was willing to live that close to the landlord, they were probably pretty good people with not much to hide, and they were.
It’s a great way to start your investing career. If you do end up purchasing it, be sure you get good tax advice, because it can be a bit tricky to calculate depreciation and expenses when you live in one side, especially when you move to your next house and still retain ownership of the duplex. Make sure you do your tax returns correctly from the beginning and you’ll save some major headaches later on.
If this duplex doesn’t work for you - too much deferred maintenance, iffy location, whatever, find a different one. It’s a great way to start.
Best of luck to you!
Cathlin
Who’s gonna manage it? - Posted by John Merchant
Posted by John Merchant on January 09, 2003 at 12:44:06:
I think you’re doing a very smart thing with the duplex.
One thing you might want to consider is hiring a prop. mgmt. outfit to be the only visible manager for the duplex. That allows you to be Mr. Nice Guy, invisible as the owner/bad guy, and you won’t get the midnight phone calls. You can just enjoy your neighbor and not have to talk property repairs with him.
Re: DUPLEX living in one half renting the other. - Posted by JM-OH
Posted by JM-OH on January 09, 2003 at 12:07:58:
Ricky,
Smart move buying a duplex as your first home, at least in my opinion. I’m no expert, but I thought I would reply to your post, because I wish I would have done this very thing when I was first out of college.
Preferrable financing as an owner/occupant should be at your disposal if you plan on living in one side, which is a big advantage to you right away. Not to mention the additonal cash flow resulting from the above mentioned oo financing later should you decide to trade-up to another property.
As far as 80k being too much, Russ gave you good advice, get some comps and the aide of a RE professional to assess what the properties fair market value is. If you were to proceed with the deal, be sure to get an idea of what the seller’s motivation to sell is. If the current owner wants or needs out, for whatever the reason, and depending on how much cash you have to put into the deal, you could potentially negotiate a steep discount. Every dollar you reduce the selling price by will result in additional cash flow towards your mortgage payment.
In regards to the age of the house, there again, Russ’ advice sounds good to me, pay for a professional inspection and make your offer contigent on a satisfactory result.
I’m sure there other issues that you need to consider, be sure to complete due diligence. Congratulations on your decision, sounds like a smart move, IMHO, if the numbers work.
Best of luck.
Re: DUPLEX living in one half renting the other. - Posted by Russ Sims
Posted by Russ Sims on January 09, 2003 at 11:42:01:
Buying a duplex can be an excellent way to get into a home: Not only is most of your mortgage paid by your tenant in the 2nd unit, but a lender will count most of that tenant’s rental as income to you: this helps you qualify for the financing (assuming you’re using a bank). Make sure that the owner transfers all tenant deposits to you.
Is $80,000 too much? It’s impossible to say without knowing your market. What are other similar duplexes selling for? Enlist the aid of a real estate agent to do some comps for you. A good agent will let you know if the asking price is in line with market value.
A building that old should be inspected by a professional. Obvious things to find out about are elements like the roof, plumbing and electrical. I’d also want to know if there are any pest/rot issues. An inspector will probably costs you between $300 and $450 but it’s certainly worth the peace of mind. Good luck,
Russ
Living next door - Posted by John Merchant
Posted by John Merchant on January 10, 2003 at 10:51:47:
I think you’ve done a very smart thing with your 4-plex and living there, you can sure keep an eye on what’s going on.
A suggestion if you ever get to the point where you don’t want the neighbors knowing you own it…just hire a RE management company and have them notify the tenants that it’s under new ownership/management and they will be collecting the rent from now on.
A lot of folk in your situation prefer that because that way they can play “good guy/bad guy” and blame the “new” owner/manager for rent increases, etc.