First Duplex Real Estate Investment Learns and Numbers

• Purchase Price: $226,000 (After repair value $371,000)
• Downpayment: $56,500 (25%)
• Closing Costs: $7,560
• Renovations: $6,500
• Monthly Rent: $2,450
• Monthly Expense : $1,470
• Yield: 16.7% (Yearly Cashflow / Total Cash Invested)

I acquired my first duplex investment rental property in early 2021. I’ve learned that duplexes are hard to come by as competition includes investors and as well as many first time home buyers (possibly using the house hacking strategy). I made offers on five other duplexes before landing this deal. A duplex offers not one, but two rental units that provide a reliable stream of passive income. This type of real estate is a way to "diversify" from my other single family properties. I'm confident that this investment will bring long-term financial benefits and stability to my portfolio. 

Renovation for this property was minimal since one side of the duplex already had a renter in place. The empty unit didn’t need much work either. Just cosmetic fixes that would help it stand out when listing it, and small changes to make it safer and feel like home to potential renters. Like with most acquisitions, there were a lot of lessons learned. These are my top three for this deal: 

1. Increasing earnest payment gave me a better chance in negotiations. Earnest payment is the deposit given when making an offer. This amount is subtracted from the downpayment so I figured, "Why not just make this as high as possible to show the seller I am serious?" Doing this helped me beat out other buyers.
2. Don’t be afraid to walk away. If the seller won’t negotiate, walk away and find the next property. The goal for every acquisition is to get a great deal (Yield that beats the “average” in the area). Cashflow on day one. As I mentioned, this was the sixth duplex I made an offer on. I walked away from the previous offers because the sellers were not willing to negotiate.
3. Don’t skimp out on Property Insurance. This may sound like a no brainer but one of the previous duplex I made an offer on caught on fire. Luckily, the offer was still in escrow and has not closed yet. I remember receiving the news from my agent and how shocking it was. My agent also shared that the seller did not have insurance on the property as they owned the property outright (did not have a mortgage on it), and just decided not to carry insurance. This was eye opening experience as a new investor. This incident could have happened to anyone. Luckily, no one was hurt in the fire, however, the seller lost a lot of money from not having insurance.

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