Ariana and I moved into a 2 bedroom apartment after graduating college. We actually got denied for our first several apartments because Ariana was working a minimum wage job and I was painting houses (under the table) as I could not find a professional job yet. So without being able to show much income, most apartment complex/landlords did not want to rent to us. After finally finding an apartment in Rochester, we focused on putting our expensive degrees to work with jobs in our field. A few month out of college I was able to find a software development job at a local company (my degree is in computer science). Ariana (who’s degree was in zoology) was volunteering at a local zoo and working with outdoor animal at a local humane society. She resisted the urge to bring home too many animals, but we did end up with 2 cats.
Looking For a House
The building we rented an apartment in had 8 total apartments and very little yard (it was close to downtown Rochester). Given that we both grew up in small towns, we were anxious to move somewhere with a yard and some additional space. We set our goal to buy a house before our 1 year lease was up on our apartment. We began saving all our extra money to put towards a down payment. We also started making a list of everything that we wanted in our house. I wanted a fenced in yard (so we could get a dog) and a finished basement. She wanted 3 bedrooms and hardwood floors. We found a Realtor and she started sending us listings of houses that met our criteria.
A Duplex Makes Excellent Financial Sense
Around the same time I came to the conclusion that I was not smart enough to invest in stocks. I had opened an account with TradeKing, read 30+ stock and mutual funds books and spent my nights after work reading about financial analysis and stock trends. Even with all this, each day something different would happen in the market that I did not expect or understand. I determined that I had to find some other way to invest and make money outside of my day job. Oh, and I had set a goal of being able to retire from my day job within 15 years of graduating college, so I had to find some sort of side venture that help me achieve this goal.
This was late 2006, and the housing market was on fire. There were multiple “Flip This, Flip That House” shows on TV and Ariana and I would watch them while eating dinner. I had read The Automatic Millionaire in college and recently picked up The Automatic Millionaire Homeowner. The mixture of the TV shows and the books made me start to think that real estate might be the path to my 15 year retirement. All the shows on TV made it look so easy, the books explained the numerous benefits of real estate and my father owned a few rental properties. After doing some research online, I came across the strategy of purchasing a duplex, living in 1/2 and renting out the other half. By doing so, you could essentially live rent/mortgage free as your tenant’s rent would cover the mortgage. To add to this, I recently had read Rich Dad, Poor Dad, which changed the way I looked at assets/liabilities. That book described an asset as something that put money in your pocket and a liability as something that costs you money each month. So even though a banker considers a house an asset, according to Robert Kiyosaki, it is a liability unless it is bringing in income. I realized that I could turn our soon to be purchased house an asset if we purchased the duplex.
Happy Wife, Happy Life
At this point, I was gung-ho about the duplex. I knew that it was an easy way to try out real estate investing with little risk. It would also allow us to sock away a bunch of money each month and move into a single family home within a few years, at which time we would have a duplex with 2 rents coming in each month. I contacted our Realtor and let her know that we wanted duplexes to be included in our search.
As I always did (and still continue to do), I do a bunch of research and determine what makes the most financial sense without really discussing the plan with Ariana before diving in head first. As we continued to look at houses, I was looking excited about looking at duplexes and was looking for ways to split any single family house that we came across into a duplex. Ariana, on the other hand, was not very excited about getting a duplex. From her perspective we did not know what we were doing. We didn’t know how to fix toilets and we didn’t have time to deal with tenants. Oh, and I had just proposed to her, so we had a wedding to plan on top of moving. The last thing that she wanted to deal with was managing tenants that lived in the same house as us.
On one of our trips out with our Realtor, we found our current house. It was a basic ranch, 1180 sqft, 3 bedroom and 1 1/2 baths. It had a fenced in yard and an unfinished basement that could be finished (my criteria). It had 3 bedrooms and hardwood floors (her criteria). She was ready to buy the house, but I was resistant because I wanted a duplex. I felt like if we didn’t start with a duplex, I would not be able to get into real estate investing because all of our money would be spent to buy this house and each month on the mortgage. After some discussions I realized that she was very concerned about buying a duplex. As much as I wanted to get into real estate investing, I realized that I needed to take a step back and make sure she was comfortable as we would both have to deal with such a monumental decision. As a result, she convinced me to buy this single family house.