If you're as addicted to HGTV as I am (admit it, you are), you've probably considered all of the following:
1. Flipping a house.
2. Secretly buying the Property Brothers clothing in one size larger.
3. Shiplapping the shit out of your living room.
4. Buying an investment property and watching the big bucks roll in.
I'm going to focus on that last one it's the only one I've actually done.
(though #2 would be really satisfying).
Buying a duplex seemed smart. It feels like cozy apartment living, but you get to make all the decisions (can I paint? Hmm... why don't I ask myself!). You get to make it nice if you want! You can get a dog! And you get your tenants to pay for a big chunk of your mortgage. Heck, some people get tenants to pay alllll their mortgage.
What's not to like?
Once my then-boyfriend, now-husband and I started talking about moving in together, we thought, Why not make things extra complicated and buy an investment property together? Much like my Property Brothers makeover, that process deserves an entire post to itself.
Anyhow, Josh and I bought our duplex about 3.5 years ago after a massively long search. We probably looked at 50-60 properties before stumbling upon a sunny, up-down duplex in Minneapolis's Lowry Hill East (or the Wedge) neighborhood.
This house was everything we were looking for.
We loved the neighborhood. Walkable, lots of cool stuff to do, and plenty of street parking. The home itself is about 120 years old and was built as a duplex, not a single-family home that was later turned into a duplex-- so the layout is awesome. Better yet, over the last century (!), no one had severely messed with the place. Still lots of original charm, woodwork, stained glass windows... it's great.
Ultimately, we beat out two other offers and now live upstairs, with tenants living below. Here's what we did to make our offer the most appealing, why we love living in a duplex, plus the downside of being a landlord.
3 Things That Helped Us Get This House
1. We knew what we were looking for.
As I mentioned earlier, we'd toured at a lot of houses, over months. When I first checked out this place, it honestly felt too good to be true.
Once I got over my initial shock, I moved quickly. I called Josh (who was out of the country at the time) to see what he thought. Without even seeing a picture, he told me to go for it. I had a family friend do a walk through, making sure there were no red flags-- like signs of flooding or major structural damage. When I got the a-okay, we submitted an offer immediately.
This place was only on the market two days before we gobbled it up-- which was easy to do since we'd looked as so much junk and knew exactly what we wanted and had a few key experts on-hand to boost our confidence.
2. We were strategic about price.
When we submitted out offer, we knew were were going up against two others. Because of that, we decided to offer above the asking price. Everyone on our team's gut said this place was slightly under priced, so we offered $10,000 over asking, which was still within our budget.
3. We appealed to the seller's emotions.
I think this tactic sealed the deal.
At our realtor's suggestion, we wrote a letter explaining that we were a recently engaged couple that wanted to own in the neighborhood we'd been living in for the previous eight years. We told them a little about ourselves and why we loved the house.
It's easy to forget that at the other end of the deal, there are human beings, just like you and me. You have no idea why the someone might be moving, and if they're all about the money OR might prefer to see the place go to people they like.
As it turns out, the previous owners were selling because of an out-of-state job. They told us the if we increased our offer by $2,000, they'd forget about the other offers, who were both from investors. We did, and boom. House was ours!
The good news about owning an investment property:
Our tenants pay a large percentage of our mortgage.
It's not like our entire mortgage, but it's a hefty percentage, which in theory cuts down on monthly expenses.
We get to live in an awesome neighborhood.
Could we afford a single family home in our same neighborhood? Maybe, but it sure wouldn't be as nice of a place (and would probably need a lot of work). Buying a duplex allowed us to spend a little more money on a nicer house, knowing we'd have help paying the mortgage.
I've loved the tenants we've had living downstairs.
File this under duh, but great renters makes a huge difference-- especially if you live in the same house! It's also a perk to have other people around for times when you're home alone or out of town.
I might eventually devote an entire post to this, but a key element in having great renters is treating them with respect. Fix things quickly, don't cheap out on everything you put into your rental unit, give them a bottle of wine or six-pack at the holidays. A little goes a long way.
It's a great long-term investment.
When we eventually move out, we're probably not going to sell. It's worth way more than what it was when we bought a few years ago. Hopefully that trend continues.
The bad news about owning an investment property:
We've sunk quite a bit of cash into this place.
Already fantasizing about that monthly "help" with the mortgage? Take a chill pill, Scrooge McDuck.
Let's talk money. First, there was the down payment. There is a big difference between paying rent every month and throwing down nearly three years of "rent" in one lump sum.
As landlords, our property is subject to inspection by the city, who required us to make all sorts of crazy updates... including repainting the exterior (which we wanted to do anyhow), but ended up costing about $15,000. Lovely.
We've also sprung for new storm windows, bought new garage doors, regraded the backyard, redid our kitchen, replaced the dryer and so much more. While we do get to write-off most home improvement expenses, it all adds up.
It can be inconvenient.
The first weekend we owned the place, our new tenants lost power. Josh was out of the country, and I was in the middle of dinner at a wedding. Instead of guzzling pinot grigio in my fancy dress, I spent 40 minutes on the phone problem solving.
We've had leaks, faulty light switches, mice (eww), broken dishwashers, and non-functional heat. Things never seem to go wrong at 9am on a Tuesday. It's always Saturday night on a holiday weekend. And it's you that gets to figure it all out.
It can be expensive.
We always joke that it's impossible to have anything fixed for less than $1,000. Electricians, contractors, handymen, plumbers (especially plumbers!) can cost a small fortune. If you're handy, you can cut down on expenses by tackling things yourself OR at least having a clue as to what things truly need to be done (and what's just an unnecessary up-sell). But if you're not, have more in your reserves than you think you need.
You share a house with other people.
Cooking smells, loud parties, and renters that might not be as clean/tidy as you like... it's all the same shit you've probably dealt with as a renter, except this time, it's in your home and it's your problem.
You also have to occasionally have awkward and very direct conversations with people (once, we had give a packet of information on how to effectively clean your house so mice wouldn't make nests in it. True story, and an issue that's been fully resolved!).
So...Would I do this all over again?
Overall, I love our living situation. We get to live in a sunny, 2-bedroom, 1-bath unit that works perfectly for our small family. The upkeep is manageable, largely due to the fact that my husband is very handy. I tackle the more daily upkeep stuff, so as a team, our arrangement works really well.
Yes, for sure we'd do this all over again. However...
Not to sell myself short, but if I'd done this as a single gal, I probably would've crumbled under the stress. It can be difficult to manage a property solo, and having the added pressure to get things fixed for a tenant ASAP can be annoying. I know some people who own rental properties all on their own and are killing it, and I am in total awe.
Also, all homes are not created equal. My husband owns another duplex a few blocks away, and it hasn't been as great of an investment (lots more upkeep, the place isn't quite as nice as ours but cost more moolah, etc.).
If you're looking for an easy rich quick scheme, a multi-family home isn't necessarily a great idea. But it's been a fun adventure.
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