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.

Author: Luis Fernandez

Luis Fernandez is a businessperson in the hotel and software industry. When not glued to a screen, he listens attentively to his 4 years old's imagination.

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