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Lavid2002 01-19-2012 08:36 PM

Buying a duplex, renovating, and renting. I want your 2 cents!
 
Hi everyone!

I am looking to buy my first home. I have tossed the idea around for a while, and have asked many friends from property investors, real estate agents, owners, to builders. The answer I get from everyone is to buy a duplex, rent out one half, and live in the other. I would be doing it as a project, an investment, and obviously home. Down the road I could purchase another property and rent out both sides of the duplex.

I am green to carpentry, construction, and building, and have no experience in investing, property buying, etc...

I am working with a couple (A friend of the families) who builds homes. They purchase properties and renovate them, they are contractors, and they built their house. I spend as much time as I can with them when I am not in school or working. I work for free for them, and soak up as much about carpentry and construction as I can. I read as many books as I can when I can't work with them. I can't get enough!

I would really like to be a landlord / owner of a duplex in the near future. I joined this website to learn some more but all of these threads seem to be very specific. Does anyone have any advice for me given my scenario?

Thanks guys and gals

-Dave

joecaption 01-19-2012 08:42 PM

As far as what? You have not even really asked a question, hard to have an ansewer.
If you have already bought it what can anyone say?
Start to work on it, come up with an issue and come back with a question on how to fix it anyone here would be glad to help.

Wildie 01-19-2012 08:48 PM

Quote:

Originally Posted by Lavid2002 (Post 828371)
Hi everyone!

I am looking to buy my first home. I have tossed the idea around for a while, and have asked many friends from property investors, real estate agents, owners, to builders. The answer I get from everyone is to buy a duplex, rent out one half, and live in the other. I would be doing it as a project, an investment, and obviously home. Down the road I could purchase another property and rent out both sides of the duplex.

I am green to carpentry, construction, and building, and have no experience in investing, property buying, etc...

I am working with a couple (A friend of the families) who builds homes. They purchase properties and renovate them, they are contractors, and they built their house. I spend as much time as I can with them when I am not in school or working. I work for free for them, and soak up as much about carpentry and construction as I can. I read as many books as I can when I can't work with them. I can't get enough!

I would really like to be a landlord / owner of a duplex in the near future. I joined this website to learn some more but all of these threads seem to be very specific. Does anyone have any advice for me given my scenario?

Thanks guys and gals

-Dave

if you live in Ontario, Canada don't do it! Provincial rent controls will kill you!

1910NE 01-19-2012 09:21 PM

Don't buy a place that has centralized heating/ cooling...

cleveman 01-19-2012 09:58 PM

Just like Sammy Sosa said, only insert "rental properties".

I don't own anything where there are any rental inspections. In Iowa, you have to have a rental inspection program if your muni has 15,000 people. I'm not saying that is a bad deal, just added cost.

In my area, I have bought 5 repo properties, 3 in the last 18 mos. I used to say that I could probably not buy anything again because it wouldn't have a return like I could make on something I built. That became untrue as prices fell with the repo's.

I also tell people that rentals are good if you or your spouse has some other income, because you can get rid of your income tax liability.

The simple way to look at is if you are competent in the construction area, property maintenance, management, etc., then you can be successful. You have to also have a head for business, which goes without saying. If you want to be successful in the restaurant business, you had better know something about restaurants, and the same holds true for this business.

Lavid2002 01-20-2012 10:43 AM

Quote:

Originally Posted by joecaption (Post 828378)
As far as what? You have not even really asked a question, hard to have an ansewer.
If you have already bought it what can anyone say?
Start to work on it, come up with an issue and come back with a question on how to fix it anyone here would be glad to help.

I would like to get a good idea of what I am getting myself into before I purchase a property. Any and all advice is welcomed. From carpentry to selecting tenants. If you have had rental properties before how did you make out? Was it a profitable venture that you continue to do. Do you own several properties? Is one rental property a handful? Have you ever lived in a duplex with other tenants?

Quote:

Don't buy a unit with centralized heating and air conditioning
As opposed to what? Separate HVAC systems for each section of the duplex? So it's not a tug of war on the thermostat, or to avoid high maintenance costs on a rental?

I haven't bought a property yet. I am looking around southern NJ. I am hoping to get some good leading advice from this thread. Maybe some good book references or something of the like. I have found a couple resources for help but I need to know what else to inform myself about before I purchase a property and start to seek out tenants after fixing it up.

Also, I keep mentioning "fixing it up" because my ideal duplex would be one that requires work (That I am capable of, and enjoy doing), in exchange for a lower initial property price.

jomama45 01-20-2012 11:00 AM

This is only my own opinion, but I'd never buy a rental property that was built as a single family and converted to a duplex. Too much unknown & constant attention IMO.

I'd also warn that owning a duplex & living in one half can be tough. Depending on the tenants, you may NEVER be off from work. We own a 6 family unit, and I try to be secretive when I even go on site. What I think will only be a 2 minute stop can easily turn into a 2 hour repair. Seems the phone or e-mail just isn't an option for many renters.......

Lastly, what you're doing now & looking into getting into is certainly going to be worth it longterm. I don't know if there's ever been a better time to invest in real-estate. Prop. values low & interest rates even lower. As for the financial end, you'll certainly need to be able to make this place cash-flow before the bank will borrow you the money. I wouldn't expect to make money from this, but it can certainly offset your own housing costs greatly, while paying off a long-term investment.

Lavid2002 01-20-2012 11:06 AM

Quote:

Originally Posted by jomama45 (Post 828864)
This is only my own opinion, but I'd never buy a rental property that was built as a single family and converted to a duplex. Too much unknown & constant attention IMO.

I'd also warn that owning a duplex & living in one half can be tough. Depending on the tenants, you may NEVER be off from work.

That's a good point, the guy who warned against central HVAC was probably pointing towards that.

I could write something up in the rental agreement about emailing me problems, and using the phone or knocking on the door only for emergencies. Additionally, I like to do things right. I don't think I would rent a property if it wasn't in tip top working order.

From someone who was no experience with tenants, I'd like to ask what kind of problems you have with your tenants? What do they come to you for?

jomama45 01-20-2012 11:21 AM

Quote:

Originally Posted by Lavid2002 (Post 828871)
That's a good point, the guy who warned against central HVAC was probably pointing towards that.

I could write something up in the rental agreement about emailing me problems, and using the phone or knocking on the door only for emergencies. Additionally, I like to do things right. I don't think I would rent a property if it wasn't in tip top working order.

From someone who was no experience with tenants, I'd like to ask what kind of problems you have with your tenants? What do they come to you for?

To be honest, I've faced far less problems than I had anticipated, it just seems that the timing is typically bad for things to require repair. Regardless of maintenance, there are certain things you have no control over. If roots deiced to grow into the sewer main and back-up the sewer, you can't really forsee that. If they dump grease down the sink and it backs up, you can only fix it.

As for problems, just recently I had the sewer back-up in the basement due to the grease issue. Friday night at 6pm on my way home from a long day at work, and I have a fairly weak stomach for that stuff. Had to call the plumber to snake it out after hours.

I've had some leaking toilet wax rings, one that let it go for months, and the subfloor needed replacement.

Clogged drains. Insects. Bad thermostats. Dogs in a building with no pets. People parking in each other's garage stall. Young punk parting at night with friends. Loud music. Slamming doors. Failing appliances (big one). Failing water heaters (another expensive one). Lack of heat or AC.

I could go on, but that's only from the last few years.

I don't want to scare you out of doing this, as it can pay HUGE long-term dividends, but don't think it's going to be just like living in a single family remote home because you have a wall between the units.

Lavid2002 01-20-2012 11:27 AM

This is exactly what I am looking for! Thanks so much for the advice! Anyone else have something to share?

I have lived in a duplex before, but as a tenant. Not as a landlord. Im sure they are totally different worlds.

EvilNCarnate 01-20-2012 12:34 PM

An iron clad lease is a must. You have to take into account everything. My first tenant taught me to always require a background check and make them pay for it. The people not interested in a place wont pay 20 bucks for processing their application. I also learned that you need to make sure you have what repairs they are responsible for in the house and how they should maintain it. Are you going to cut the grass or are they. Can they park cars in front of the house, can they throw parties. If the toilet gets clogged do you fix it or do they call a plumber. Get walkthrough inspections with them. Verify lights all work, sinks, tub, toilet all drain, heat and air kick on, clean filter in the unit, disposal works, etc. Overall conditions of the walls, flooring.... Have pictures of before to compare to after. Can they paint the walls, do you have paint codes to repaint or touch up after they leave. My house we picked the colors for each room and I kept the paint mix info to touch it up after the tenants moved out. If they can paint you will want the paint code to touch up after they leave or repaint, and if they can repaint it needs to be in the lease and you have to stipulate if their will be a cost for repainting.

There is a lot to consider. I have had a rental property, it can be hard or easy. All depends on your ability, your tenats, your house, and everything else is left to chance.

Blondesense 01-20-2012 12:49 PM

Many years ago I had a friend (female) who rented a duplex. She found out the landlord was going into her apartment while she was out. TOTALLY illegal.

OTOH, I've heard horror stories such as a house being destroyed by turning it into a pot growing facility.

As a landlord, I would want some legal way to stick my head in the door occasionally just to check the general condition.

Where is the line between their rights as tenants and yours as owner?

I have no idea, but it is something I would check out.

pyper 01-20-2012 01:35 PM

Maintaining a house takes time and effort. The other day I went to take a shower and it wouldn't drain. If you were my landlord, I might have been calling you at 6am to fix the drain.

If you travel for work, then figure things will always go bad when you're out of town.

You need a lot of money down for commercial loans, and the underwriting is more stringent. You might need to take out a high interest construction loan until you have it fixed up. Talk with a bank and see what kind of loan you can get.

Do a 15 year cashflow statement in excel. Figure you can raise the rent 2% a year, and expenses will go up 3% a year. Be sure to include real estate taxes and any city/county fees, and insurance. Put everything into it you can think of, and then add a replacement reserve of $1000 a year for things you didn't think of. Put that $1000 in a money market account and only use it for major systems repair.

Assume you get a new tenant once a year. You'll need to paint, clean the carpet, windows, blinds, etc. Figure $1000 a year for that if you pay someone else, or a lot of your time and some lower figure.

To find out what the rent can start at, shop other rentals in the area. You might be able to get the info from realtor.com. Since you don't have a particular property in mind, just look at something in the same area that looks like the kind of place you would buy, and then find out what rent they're asking. Be aware that if there are a lot of vacant properties, then asking rents might not be reflective of what they'll actually rent for.

Beepster 01-20-2012 02:31 PM

The route I am taking, and I wished I would have started at a much younger age, is fixxing up my own house and selling it. Being a CPA, I know that after living in the house for two years, any gain is tax free. Obviously buy a run down house in a good sellable neighborhood.

I have heard too many horror stories of bad tenants. Obviously there are ten times as many good tenants that you never hear about. I have also seen too many clients take baths in the last few years from bad buys.

I am half way through my second house in the middle of a total basement gut/redo. Its hard enough to get home and get to work, can't imagine what it would be like if I had kids ('that's a crappy mudding job Timmy, no supper for you').

B

Lavid2002 01-20-2012 03:41 PM

Wow! Outstanding responses!

Lets see if I can respond to everyone

Quote:

The people not interested in a place wont pay 20 bucks for processing their application.
I read this in a book a week ago! They said to charge application fees. The list of things I have to check on tenants is
*Credit Score
*Rental history w/ references
*Income / Employment?
*Criminal history?
*Have you ever been evicted?

Though I am unsure of the legalities of checking these things. I know I can't rent to someone based on race obviously. I wonder if it is illegal to not rent to someone on account of their criminal history, as it is a type of profiling.

Quote:

Have pictures of before to compare to after.
I am totally keeping a word document on all of these suggestions for when the time comes.

No time now, more later. Thanks guys!


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