Note that I’m 24 and unmarried, which makes it a little easier to have a roommate haha. I also rent out my spare bedroom on my side. The duplex is in a better area and tenants are easier to work with.Ī few months ago I purchased a duplex here in Austin as my first home – with one side rented out while I live in the other. The 4 plex was become too much of a headache and we decided to invest in a duplex closer to home instead. We sold the 4 plex for a small profit in 2014. Two more years sounds like the right time frame. The rents are going up and the repair bills should taper off at some point. I’m pretty sure we’ll do better in 2013, but we’ll have to wait and see. I think I need to give the property a little more time to turn around. That’s probably why they had to short sell and didn’t repair anything. The previous owner was paying even more mortgage than we had and received less rent. *Notice the last sale price of $380,000 in 2005. We purchased this property for $300,000 so we would come out all right if we decide to get out of it.
Zillow isn’t always reliable, but my real estate agent has also been sending me her PIP (property investment profile.) A similar property down the street is pending sale at $359,000 so I don’t think Zillow is far off in this case. I checked and the zestimate is up quite a bit. I’m saving the best news for last because there is a silver lining. You are familiar with the property and the mortgage had some time to season. I think renting out your previous home is the way to go. We lived there for 7 years and it is still in good shape. Our rental home on the other hand is doing much better. If I had to do it over, I’m not sure if I would have been so enthusiastic about this 4-plex. The bill seems to always be more than what I think, though. The thorough property inspection gave us some warning so we knew we had some big repairs pending. There is always one thing or another going wrong. LessonsĪn older property can be a PITA to own and operate. I’m pretty sure we will make under $100,000 this year and should be able to use a lot of the offset next April when we file our taxes. We’ll carry forward the rental loss to 2013. Unfortunately, we made too much money in 2012 and are unable to use the rest to offset our active income. For 2012, we were able to use a part of this to offset the income from our rental home. Tax purposeįor tax purposes, we also had a mortgage interest deduction of $10,838 and depreciation of $6,595. It’s still disappointing because my goal was to have positive cash flow in 2012. I would call it even money for 2012 although we had negative cash flow. This is actually not too bad in the grand scheme of things because that’s about how much went into the principle. In short, we had a negative cash flow of $3,614 in 2012. They nickle and dime quite a few things and it adds up. I also underestimated the property management cost. At some point, I would like to start updating the interior and increase the rent. After this, I don’t think there are a lot of big ticket items left, but you never know. This year, we made additional drainage repairs and I just found out that the fireplaces need serious repairs, too. The big repair cost in 2012 was the exterior paint ($5,500) and drainage repair ($2,000). Actually, I did increased the repair estimate, but just not enough. I should have taken this into account and increased the repair estimate accordingly. I think the previous owner was losing quite a bit of money every month so they didn’t want to do any repairs. The big difference here is the cost of all the repairs. I looked at the statements from the previous 2 years and I came up with $11,354. It’s not a huge difference from the projection. The insurance came in a bit higher than quoted and I also purchased umbrella insurance for additional protection. We also raised the rent so 2013 should be a bit better here. I assumed 5% vacancy rate and it’s pretty close to what we had. We actually collected more rent that I projected. I’ll put it next to my original projection so you can see how wrong I was. I finally finished our 2012 tax return and I can share the details from the 4-plex now. We purchased a 4-plex through a short sale process in October 2011 and my rental income projection was quite wrong. Owning a rental property is one of the most popular ways to generate passive income, but it’s not always easy.
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