Today we’re going on a tour of the first duplex I ever purchased, 7 years ago. We’ll walk through all the numbers: what they were then, what they are now. We’ll also go over some struggles I’ve had with this duplex along the way.
It’s been an incredible experience since I purchased this first duplex. I own over 180 units of real estate, two storage unit complexes and a couple other commercial buildings. Today will be a blast from the past on my first ever multi-family property. We’re going to talk about the things I did right, the things I did wrong, how much money I’ve made on this property, and how the property is functioning now.
I’ll be walking through the whole property inside and out, checking in on my management company. I will put together a to-do list of anything that needs attention. We will check in on the numbers and the overall state of the property.
This is one of the few properties I own where the tenant takes care of all the lawncare and exterior maintenance. This property is unique with the flower beds, trampoline, and ropes in the trees. My other properties where we manage the exterior, we keep them very clean and managed so that it’s nice for multiple tenants on the property. This is one of the few properties where we allow them to have their own stuff in the yard. Overall they do a fantastic job at maintaining the property.
When you don’t have tenants moving in and out, as a landlord you can get a little more lazy about keeping up some of the general maintenance. One example is with the exterior paint on this property. We probably should have redone it already, but when you have a long term tenant that doesn’t have an issue with it, that type of maintenance can get overlooked. So the first thing on my to-do list is to get the paint redone on this property. This is not so much for the tenant, but for me to keep the property maintained for the long term.
One of the first things we did with this property is sand and refinish the hardwood floors. They’re still in great shape, but there’s also now seven years worth of wear and tear on these refinished floors. The floors will need to be refinished sooner rather than later.
The kitchen looks about how it was when I bought it. The tenants have kept it in fantastic shape.
One of the things that was intimidating as a new investor walking into this property was the upstairs. There were flies everywhere. I wasn’t sure if there was something in the floorboards or attic or what, but it was overwhelming wondering how big of a problem it would be. When you’re first starting, everything seems bigger than it is. It was a quick fix to get rid of the flies and a few other small things. But when you’re looking at putting a large down payment on a property, seeing everything that needs to be fixed can seem like a huge problem.
Seven years hasn’t been a lot of wear and tear other than the floors just getting walked on. The tenant said the duct was looking dirtier than they wanted, so we’re going to check the filter. This is a check on how the maintenance company has been handling things. The filter looks clean and is in the right place. I don’t know why they’d be seeing dust coming out of the ducts so I’m going to call the management company and have them check that out.
Overall the property is in good shape all things considered. Other than getting the outside painted, the property has been maintained really well. We didn’t get to see the unit downstairs. It’s a simple space, just tile floors with one bathroom, and a small kitchen. I didn’t know what I was doing at first, and I selected a really bad tenant for that downstairs unit. I was still trying to figure out if I should use a management company or not. The tenant paid the first month’s rent and then never paid again. Right when we started the eviction process, they just disappeared. I learned very quickly how important it is to find good tenants!
It’s a good idea to walk through your properties every so often. It’s very easy to just have a number on paper. Going through every property this year is going to be a good way to meet all the tenants, stay on top of what’s going on, and get a beat on how the management company is doing with maintenance. Luckily this tenant is awesome and it’s been cool to see her and the unit again.
Let’s look at the current numbers on this property. Right now it’s bringing $1,400 a month. I’m setting aside 24% for my expenses. That includes my management fee of 6%, maintenance, capital expenditures, 6% for vacancy even though we’ve had very little of any of these expenses other than management. Obviously we’ve had fixes on the building here and there in general maintenance, but it’s not been anywhere near to those expenses. I plan for the worst, and usually it’s a lot better than that. We still set it aside for that rainy day fund for when the issues do come.
If you have $1,400 in rents that are coming in, then multiply it by .76, that takes the 24% for expenses out. That leaves with you $1,064. Next we take out the mortgage of $560, which includes taxes, insurance, principal pay down, and interest on the mortgage. That leaves us with $504. Multiply that by 12 to get your cash flow. We are cash flowing $6,048 per year on this property. That doesn’t include principal pay down, tax benefits, or appreciation on the property. This property has gone up in value well over $100,000. I could probably sell it for $220,000 - $250,000 or more.
If you take the $6,048 and divide it by the $24,000 down payment, that means you are getting 25% in cash flow alone on this property every year even though we’ve left rents way lower than we should have. It’s just an awesome return. This property has been great. We’ve got great tenants that are happy, and a great investment. We’re able to win, they’ve got housing. It’s just a win all the way around.
If you’re looking for deals like this and want to get into your first duplex or fourplex purchase, you can get my real estate investing course. The course shows you how I do my due diligence, how I find a property, lock down a deal, how I maintain it through the years and get returns like this.