I purchased a duplex in 1988 as a freshman in college. The owner held a mortgage for $31,000 and I borrowed $3,000 from my grandmother for a down payment. Three months later the owner died and left his wife managing the mortgage and another duplex. I bought my second building from her in 1990. She gave me a 5-year lease with option to buy for $31,000 and $1,000 down.
I would love to tell you I built on that start, now have hundreds of properties, and spend weekends in Paris. I don't. The dreams I created, built on Robert Allen's Nothing Down philosophy, failed to include the basic upkeep investment properties require. In 1993, the 2nd apartment building caught fire. No one was hurt and insurance rebuilt part of the building. In 2000, I was forced to replace a sagging retaining wall for $10,700. For 17 years I invested little or no money in the properties, only making minor repairs as necessary. Finally, in 2005 I got a renewed interest in Real Estate. I knew I could not sell the properties for a profit and they were in desperate need of updating and maintenance. I did not have cash to repair them, so I had to borrow on the equity. It was then I learned, in Real Estate, time heals all wounds.
After seventeen years, the property I purchased for $34,000, and did little to maintain, was worth $48,750 to the bank. They were willing to loan me 80% of the value and I only owed $27,619. The difference was more then enough to do what I needed. The property I purchased for $32,000 in 1990 and owed only $28,576 to payoff, was worth $65,750 to the bank. I borrowed 90% of the value and made repairs to it as well. I have learned that properties require two levels of maintenance; long term structure and ongoing upkeep.
The structure really only requires a good a good foundation, roof, windows, and exterior. I paid for a new roof on one of the buildings, replaced all of the windows, and contracted to have the entire property wrapped in vinyl siding. Inside you need to focus on the bathroom and kitchen. I replaced the commode and updated the plumbing in the sink. The ongoing maintenance requires yearly checks of the furnace, gutter cleaning, termite inspections, and yard maintenance. I am creating contracts with services for each. My focus is on durable construction and annual checks. I have found tenants are happier when they are left alone, but they will also not help you maintain the property.
I have financed $30,500 in repairs for both properties in the past two years and still have a positive cash flow. I am probably the worst person to be investing in real estate. My job requires that I travel every week. I have two children less than 5 years old, and I do not do any of the work on the properties myself. But I am a believer, and the one thing I do have is time.