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in Real Estate Investing · March 7, 2021

Why we sold our Duplexes and how it turned out.

It’s been a while since I last wrote a blog post so there is much to catch up. I figured I’d start with the sale of our duplexes.

At the beginning of 2020, we had no intend to sale the duplexes. The goal was to refinance from our high interest private loan into a conventional loan and hold them for a while.

After the renovations, the duplexes appraised at $245,000 each. We bought them for $175,000 each. That is an increase in value of $70,000 and we only spent $15,000 in renovations. We had a net increase in equity of $55,000 within a year. We were thrilled and continued on with the refinance.

As with any mortgage, there are loan costs associated with the refinance of a mortgage loan. Points, note taxes, appraisals, administrative fees, underwriting, etc. In our case amounted close to $10,000. In addition to a prepayment penalty.

In a buy and hold strategy, these costs make sense in the long term. Given that we were thinking of holding these investment for at least another 5 years, we went through with the loan and got cash from the refinance in the amount of $28,000 from each duplexes for a total of $56,000.

This cash allowed us to buy our first Georgia investment property, Big Horn which has been so far been our most profitable investment.

Overall, we were happy with how the refinance turned out and selling was not on the table at all.

Then Corona virus came along and other events occurred that led us to begin considering the sale of these duplexes. Let me go over these events to shed some light on how volatile real estate investments can be.

COVID 19 crisis

It is no surprise that Corona virus has affected landlords throughout the country and we were no exception. I wrote a blog on how Rona affected us (read more), but in summary, we had tenant’s behind in rent payments and early lease terminations that were not anticipated. With eviction moratorium our hands were tied and self-managing from long distance posed a greater challenge. While I had my dad helping with the maintenance, the responsibility to collect rent, lease units and handle tenant issues was still mine.

Increase Criminal Activity

One of the most pressing concerns were new criminal activity in the neighborhood that disrupted the peace of our residents. The corner house right across the duplexes was sold to a new investor and the new owner rented to a drug dealer which then brought a lot of conflict to the neighborhood. There was a street shooting involved in which our tenants were affected. Apparently, two drug rivals began shooting out in the open at 3AM and a woman driving by was caught in the middle of it. In order to protect herself, she had to duck which then caused her to crash against our property hitting tenants cars and our property fence. To make matters worst, the window of a car of a guest was shuttered with a shot gun bullet.

My dad lived in a duplex next door so he was able to help mitigate, but of course this was a concern to our tenants and the tenant whose guest car was shot stopped paying rent and moved out. Another tenant followed along leaving us with two vacancies.

Towards the end, the tenant in the corner house was evicted and the new owner sold the place. That is a clear example of how a real estate deal can quickly turn ugly.

Property Taxes Skyrocketed

Property values in Fort Lauderdale have been rapidly appreciating in the last few years, and with all the improvements in the area, someone has to help fund these and who better suited to pay than real estate investors ripping the benefits of increased property values. Our property bill came in October and I almost cried. The property tax billed doubled from $2500 to $5,000. It was quite a disappointment because we had not anticipated such a big jump and of course it affected our numbers. I should have known that the $70,000 value increase came at a cost. However, the properties supported an increase in rent and that was the plan to counter this added expense.

This is something to keep in mind when buying investment properties that appreciate. Property taxes are based on the appraised value given by the county property appraiser and this value is due to increase with property improvements or higher sale price.

The Florida Insurance Issue

It is no secret to anyone from Florida that property insurance in South Florida can be ridiculous and 2020 came in with quite hefty increases. This was not such a surprise to us and thankfully I was able to find a solution and secured reasonably priced insurance. However, after the purchase of the Big Horn in Georgia and only paying $600 for insurance, it began to feel a bit ridiculous to pay the highly inflated Florida insurance cost.

Finally, The real estate craze arrives to Florida.

Despite the previously noted events, we were still on board to keep these investments long term. We knew the opportunity for appreciation was huge and while the properties weren’t providing the most amazing returns, we were still making some money. In the long run, it was going to be worth holding.

However, it came to our attention that there was a ridiculous increase in real estate prices in our area. Below average properties in the same neighborhood were being sold for above market prices and we began to question whether that was cue to make a glorious exit and bring our money to Georgia where the returns seemed more promising and also easier to manage.

And that is what we did.

The Turnout

Our realtor who recommended we start out at listing price of $270,000 each. Honestly, I didn’t really think it would be possible to sell at that price considering the appraisal in June came back at $245,000.

Personally, as an investor looking to buy, I would not have bought the properties at that price, but our strategy is different.

We sold duplex one in December 2020 and the second one in February 2021 at asking price of $270,000 and the crazy thing is that they appraised at that value. We are talking of a $25,000 increase in 6 months. Crazy, huh?!

My dad also sold his duplex at the same time and has also moved his money to Georgia.

In the 18 months that we owned the duplexes, we net out a gain of about $35,000 each. While the after tax profit is only $30,000, it was considerably good for our first investment. This put us in a great financial position increasing our personal net worth and availability of cash to buy investments here in Georgia.

Overall, our first deal was a total success in our books.

I can’t take all the credit for the victory since I feel that a lot of this was luck. If you read my post, How I Jumped Into Real Estate with No Money Down… and Barely Made it… you will realize that we took a huge risk buying these duplexes and some may say it was a bit reckless too.

It is important to note that a lot of the profits were eaten by the high interest loans that we used to acquire these. Then there were the refinance loan costs and prepayment penalties which we could have avoided had we know we were going to sell.

We would have never been able to buy these duplexes without taking out loans, so we do not regret paying any of the high interest loan because we made a decent profit without much of our own money.

While we are not really thrilled about having paid the refinance loan costs, the cash out refinance opened an opportunity for us to buy our first investment in Georgia which led to us questioning our Florida investments. We probably would not have considered selling without getting a feel for the real estate market here, so the refinance was not all bad. These costs were about $10,000-15,000 so it does burn a bit 😣

I do admit that I was a bit hesitant to let go of the duplexes and the selling process alone was a pain in the ass. We had several failed offers and it was just really stressful.

Perhaps in a few years, these duplexes will be worth a lot more and I will miss out on that, but I am quite happy with our decision.

These properties were not a walk in the park, but we did it and gained tremendous education in the process.

Was it easy? No.

Was it worth it? Definitely.

Could it have been a complete nightmare? Yes.

Could we have done it better? Yes.

Do we regret any of it? Absolutely not.

Once I am done with the accounting and final analysis, I would like to share a full disclosure of the numbers of this deal for those of your that like to break down the numbers like we do.

Finally, please leave a ❤️ if you liked my post. It means a lot to me knowing that someone out there is reading.

Until next time!

This post may contain affiliate links. I may get commissions for purchases made through links in this blog.

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New Blog Post 🚨 In this week’s blog post I am New Blog Post 🚨 In this week’s blog post I am going over why we bought a short-term rental, our experience so far. Plus what we did prior, during and after purchasing our first short-term rental in March 2022, a Cabin in Blue Ridge, GA.

Check it out at www.beyondjustnumbers.com or link in bio @beyondjustnumbers
I can’t stress this enough. Some investors are l I can’t stress this enough. Some investors are looking to make money from day one, but that’s not always the case. It wasn’t for us and I’ve talked to a lot of rookie investors who have told me “Thank God I have my personal finance situation together.” 

This is just my opinion. Do you agree? Let me know in the comments!

Want to join a free community of like-minded individuals? Join our REI Coffee Chat Community where we talk real estate investing, personal finance and financial freedom, and much more! Link in bio @beyondjustnumbers

Want to learn more about investing in real estate? Read my blog www.beyondjustnumbers.com

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I used to think that investing in real estate was I used to think that investing in real estate was for the rich. I became in love with real estate while working for a real estate investment company that owned hundreds of units. This was back in 2011 and I was 20 years old at the time. I had less than 5 years permanently living the US, so I had no idea about anything. I grew up in Colombia and the only talk of money we ever had was the lack of it. 

The investors I worked for were a wealthy family, so naturally, I thought… Real Estate requires wealth. I don’t have wealth. Therefore, I cannot invest. 

I figured… well shit, I need become wealthy so I can invest in real estate. Eventually, after educating myself I realized how wrong I had it. You can build wealth BY INVESTING in real estate.

Took me a couple of years to figure it all out. Hence, why I didn’t start investing until 2019. I wish I had figured out earlier, but it is what it is. In just 3 years of investing in real estate, I was able to accumulate more wealth than I ever thought possible. 

Just to give you an idea…Did you know you could invest in real estate with as little at 3.5% of the purchase price? For a $150,000, that’s only $5,750. Buy a duplex that needs a little bit of work, fix it up, rent one side and live in the other. This will reduce your monthly expenses significantly, save the money and do it all over again.*

Of course it’s not that simple, but it’s also not that difficult. There are some particular steps and considerations which is  why I recommend doing further reading on the subject. 

Book Recommendation:
✅“The House Hacking Strategy” by Craig Curelop and ✅“Investing in Real Estate with No (and Low) Money Down” by Brandon Turner. 

#realestate #realestateinvesting
🚨 New Blog Post! Continuing the “Getting Star 🚨 New Blog Post! Continuing the “Getting Started in Real Estate Series” 

You’ve found a property either on your own or through a realtor, you’ve run your numbers, you’ve got a lender and now you are ready to make an offer. What’s next?

In this post I want to discuss a few items:

✅Key components of a real estate contract
✅How do you make a compelling offer to ensure you get the property you want
✅The main contract contingencies and how they work
✅Communicating with your realtor

I also provide real examples of what we have done personally. 

Check it out at www.beyondjustnumbers.com

Let me know what you think!
If I listed all of the hats, I’d never end 😂. If I listed all of the hats, I’d never end 😂. Anyone else? Show me the multiple hats you wear and tag me. Let’s have fun with some reels.

Trying to get good at the real game like @investinginyourwealth. How did I do?
The fact that you are not where you want to be doe The fact that you are not where you want to be doesn’t mean you won’t get there. Greatness takes time. Focus on what you control.

And remember, it’s okay to pivot.

#mindset #realestate #firemovement #realestateinvesting #realestateinvestor #rentalpropertyinvestor #rentalproperty #cashflow #motivation #financialfreedom #financialindependence #financialindependenceretireearly
We see a lot of advice around hiring a real estate We see a lot of advice around hiring a real estate friendly CPA. However, when you look up  CPAs that specialize in real estate, they can be pricey.  However, that doesn’t mean that other CPAs or tax professionals aren’t good. They might not be particularly aware of certain items, but they can research and collaborate with theirs peers. Perhaps it may require you to do a little of work to compensate. Things you can do:
✅ listen to The Real Estate CPA podcast or join the Facebook group
✅follow social media accounts of the pricey Real Estate CPA and take notes of what they are saying
✅attend free educational events 
✅read BiggerPocket book on Real Estate taxes 
✅if you know anyone working with a really good Real Estate CPA firm, ask them what they are doing

Then use that to go your CPA or tax professional and be like “Hey, is this something we can do for me?” They’ll probably say, “Let me look into it”. 

If they are good, they are going to research it and/or ask their CPA peer group. (CPAs and tax preparers also have Facebook groups where they collaborate with each other).

Here is a piece of advice, if they tell you “No, we can’t use this loophole or no, you don’t qualify to use this strategy” —> Ask WHY and “How can I qualify in the future?.” This way you confirm they did their homework and aren’t just being lazy. Don’t just take no for an answer. You can then get a second opinion by asking a question in a forum or to your peers.

So don’t panic if you don’t have a real estate CPA or tax professional. 

Next video I’ll be answering the question… “Can I skip the tax professional altogether and do my own taxes?”

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