Duplex Vs. Fourplex

My situation may be a little different than most but many can possibly relate. At the time of buying our rental properties we had a business that depended heavily on our input- this is now bettering since we’ve been working on implementing business systems for the past year. And that business was in another country where we had to live in order to run it. As a result, we had little flexibility logistically. These two factors made it extremely difficult to get our duplex property rehabbed and ready for rent with the budget we had in mind. Also, I realized that I wanted to follow a criteria of what was working and avoid what was not. I realized that even though our fourplex was having a lot of problems receiving rent from the inherited tenants and going through several evictions in the process, the cash flow was still positive. The fourplex proved to be much more resilient through hard times compared to the duplex we had (a separate rental ready duplex). Both properties went through hard times as far as receive rent from tenants, and yet at the end of the day, the fourplex, having only owning it for no more than two years, was more than half paid off while with the duplex, also owning it for nearly 2 years, we were negative $3,000 plus the purchase price. I soon realized that the amount of cost and work to get the a newly bought duplex that needed full rehabbing up to speed was no longer feasible for our criteria in investing. It was time to jettison the unnecessary dead weight unpleasant from our portfolio. And so we sold it.

The duplex sold for $12,016.88. We purchased it for the sale price of $7,600 some time in the middle of 2017. It was one of our first properties and we had big expectations with plans of getting our hands dirty, create some forced appreciation, and then rent the two units out. It all made sense and we were eager to start! Nearly two years later, we realized that we had bitten off more than we can chew. By the end of this sale we had reached an expense amount of $16,561.49 not taking into account flights, hotel, and gas (difficult to determine since we have other properties to apply these expenses). With the final payment amount being $10,061.86 a check we deposited with the BofA mobile app while abroad. We sustained a loss of $6,474.63. This is the cost for the tuition of “University of Hard Knocks” There are so many things we would had done differently knowing what we know now. Had we done things differently, I believe we would had come out ahead financially in this deal. There was a lot to like about this deal, but we took the wrong direction and it got way over our heads .. But finally we were able to sell this diamond in the rough and once and for all stitch up the hole in our pocket.

Buying Your First Rental Property

During the time of purchasing one of my first duplexes, I didn’t know what to really look out for. Things like the water service coming from the street was still lead piping and it was leaking. Any rehabbing that would take place and the city inspector would have requested me to replace it. That job would have cost thousands. I didn’t get the sewer laterals inspected. It wasn’t an issue in this case because I never got to the point of renting the units but it could have been. I didn’t factor it the cost for new furnaces and the duct work which tends to be expensive. All these things and the cost associated with them would had made me think twice. However, even if we had replaced all this we still would be between $30k to $40k for a duplex. That’s not too bad. I think the bigger mistake was starting to gut everything thinking we can rehab a duplex in little time and keep costs as low as possible us doing it. We spent a couple thousand dollars just in the gutting out process. Then we added new 220v boxes and meters, etc.. that cost thousands as well. Instead adding all these overhead costs. I believe we could had not put any money in major upgrades, and instead clean it, paint it, do some cosmetic work, fix some holes in the wall, place some peel it flooring, get a new vanity and mirror in the bathrooms and put it back in the market for sale. I think we would had made at least 20% return at the end of the day.

Right after purchasing one of our first duplexes we got ourselves in somewhat of another mess with a bigger property- 12 units building. Fortunately, investors bought the 12-plex and have a mortgage with us due within a year. If things workout according to plan we’ll be able to lessen the losses and use the remaining funds for other deals. Another blow from the lessons of hard knocks! We also learned a lot going through this deal.

Entrepreneur, What Does It Take to be One?

After nearly 8 years ago, I had a net worth of about $20,000. Not much being in my late 30’s. I was an independent software developer with a small pool of somewhat reliable clients. Most of my time was used writing software and then looking for clients which would some times last a month or two to find. I enjoyed this nomadic do-what-I-want-with-my-day type of lifestyle but it was costing me something I wasn’t really acknowledging: I was aging and my net worth was not going anywhere. Being a freelance contractor was not a scalable career- at least not the way I was running it. So one day an opportunity fell in my lap to buy a hotel in a remote Caribbean beach town in Costa Rica called Puerto Viejo. The down payment was manageable. I’d be nearly broke after the down payment but I was optimistic. So I packed my bag and became a new hotel owner in the Caribbean. I can get into the ins and out of running a hotel in the tropics but what I want to focus here is what it has taken for me to survive and strive in this business which I think applies to all businesses- and that is being an entrepreneur in your business. By definition; an entrepreneur is a person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so. And this is how I needed to operate to maintain a financially functional running business.

Having a business has taught me many things but more than anything its problem solving on all fronts. You’re thrown an array of challenges; some problems arrive all at the same time, some in a serial sequence and some that will take years to resolve. Since the issues can range from anything from financial security to government policy your best tools are reading as many books and take as many courses as you can on any subject that relates to the obstacle(s) that lies ahead; and maintain a strong will in perseverance and resilience. Financially, you’ll most likely be better off than working the good ole 9-to-5. Just a quick review of the tax codes and you’ll see that it is in you favor to own a businesses. That is already a good financial head start. This year I will be focusing heavily on technology, marketing and business systems as they are all at the forefront in relevance to your business. If you can consume information and utilize in an ever so changing and rapid way, and be able to swim against current for long periods of time, then I think such person would most likely succeed in business which usually translates into doing well financially. Hence, the Entrepreneur!