How We Bought A $50K Duplex – Part 1

Who, What, Where, When, and How?

2009 Recap

Seriously – Wasn’t Kitten PoP freakin’ adorable?

2009 was a big year for the PoPs. We got a kitten, got married, and bought a foreclosed house that we fixed up as we lived in it. We learned a lot about what we could do in terms of “home repair”, and found that the list of “repairs we were willing to tackle” was a lot longer than the list of “repairs we’d have to pay someone else to do”.

Early 2010

We watched home prices in a few rental-heavy neighborhoods not too far from our home continue to drop.  And by drop I mean that prices were reaching low levels that had not been seen in these neighborhoods in about 15 years.  It was not uncommon for a property to be listed at $60K, and when you looked at the sales history on the county property appraisers website, you could see that it sold in 2005 or 2006 for $250K.  We were watching the real estate bubble burst in epic fashion not too far from our home. But how could we capitalize on this?

Even though prices were dropping we still couldn’t jump right in.  The thing is, the US government locked us out of a lot of these deals because they were trying to get HomePath buyers to buy many of them.  And the remaining sales in this price range were happening as all cash deals.  Without a financing contingency, banks could get the homes off the books faster, which is precisely what they wanted.  But… we didn’t have all the cash. What to do?


Mr. PoP began preliminary talks with his parents about the possibility of borrowing money from them, and after a few months of talking about it pretty casually, we drew up some real figures – a $50K loan with 5% interest only payments for 5 years, with payment due in full at the end of 5 years.  (As part of our debt prioritization, we’re looking to pay this off in 4 years.)  This was July 2010.

With our non-traditional financing set, we could now compete with cash buyers, who were dominating the foreclosure/rehab home marketplace in 2010. We were scouring for deals, hoping for a duplex, but open to single family homes in the right rental price range.

And before long we found ourselves singing along with Kenny Rogers:  “You got to know when to hold ’em, know when to fold ’em. Know when to walk away, know when to run…”


Know What You Are Aiming For

Cracks like these on the inside and outside of the house indicate that the foundation is probably settling. It could cause significant problems down the road.

Our criteria was pretty straightforward.  We wanted:

  • a property that was relatively close to where we lived since we’d be acting as property managers
  • a neighborhood with solid rental history and easily determined rental rates
  • a dirty, ugly interior/exterior bad enough to scare off most
We also knew what we didn’t want:
  • structural problems (like termites, settling foundations, etc)
  • squatters or existing tenants – from what we understand they are incredibly difficult to evict
  • too many unknowns


It Became Our Routine

One of the more ridiculous things we saw – a pop-corn ceiling rotting inside of a shower from water damage. Why am I not surprised that a pop-corn ceiling inside a shower might not dry properly?

Since we knew what we wanted, we felt like we were pretty easy clients for a realtor to have.  We did most of the research looking for the houses ourselves – scouring the latest listings on realtor and a variety of other local email listing services in our area to find the most recent listings.  All we needed from the realtor was the codes to get in and to draw up offer contracts when we found one worthwhile.

For months and months, date night (and many other evenings) consisted of driving around neighborhoods looking for crappy houses that looked abandoned.  We would then look them up in the county Property Appraiser’s website to see if they were REO (real estate owned – aka a foreclosure) yet.  We got very good at identifying houses that were near foreclosure.

We would usually stop and scout out a couple of houses a night, parking and walking around the houses, and if we had the entry codes, going through the inside looking for damage.  There was pretty much always something wrong – it was just a matter of how bad it was.

Ironically, the worse the house was, the less likely we are now to have pictures of it, but here are a couple of choice ones that we managed to snag before running back to the car and speeding away.


This is a knife that was stabbed into a house’s wooden siding and left there at eye level.  Really makes you want to get to know the previous occupants, huh?

Imagine turning the corner and almost hitting yourself in the face with this knife sticking out of the wall!


An aspiring painter must have lived in this house as they painted words on the interior and exterior walls that rhymed with “witch” and “runt”!  Rumor has it there was a particularly nasty divorce precipitating the foreclosure.

Don’t know if you can make out the fun word spray-painted on the back of this house.


But if the inside and outside of the place looked like they had possibilities, we would go for a walk around the neighborhood, stopping to talk to anyone who was out and about.  If they were friendly and walking their dogs, eager for a nice young couple to move in and fix up the neighborhood, this was a good sign.  If they were on their phone screaming, “Where’s my money!?!  He stole my f*-in’ money!”, we took this as a bad sign and headed for the car right away.


Although there was an obvious lack of maintenance in many of these places (with roofs in need of repair being one of the easiest deferred maintenance tasks to spot), it was just as common to see poorly executed and un-permitted construction…

So,  anybody else have any great stories about picking up investment properties?

Continue reading the rest of the story (links will be updated as the parts are published).


23 comments to How We Bought A $50K Duplex – Part 1

  • Haha I can’t wait to see Part 2. The title’s cracking me up already.

  • I love house hunting! The crazier the better. When we were house hunting a few years back, we looked at this house that was seriously like stepping back into the 70s complete with wall to wall shag carpets (including the bathroom!). It’s hilarious what you can find. Can’t wait to read Part 2.

    P.S. That picture of your kitten is adorable!!

    • Aww, Kitty PoP thanks you! He eventually grew into his ears, but he was so cute when they were huge by comparison!

      A 70’s house – that’s awesome. Reminds me of my friend’s old attic bedroom in her parents house. It still has LONG red shag carpeting!

  • Wow, those are some crazy price drops.
    Looking forward to the rest!

    • Yeah – we live in one of the areas of the country that was hit most drastically by the real estate boom/bust of late. All neighborhoods weren’t hit quite that hard – but it was insane to watch at the time.

  • hahahaha. The knife in the wall is very frightening, yet hilarious. Good for you two for getting such a great deal on an income property.

  • So glad I found this series. we are going throught the same thing with our first rental property (a single family home). We were intent on location and no major structural problems but after that the uglier the better. Our house is totally filthy, but it’s getting better by the week. We looked at a house by that same artist in our town, with the painted words and all. He must really get around! We also could have gotten an ancient Surburban left in the garage of one foreclosure. Our house didn’t come with any vehicles or words, just lots of grease and nicotine stains. Can’t wait to see what happens next.

    • Haha – so glad to see our artist is really building his career!

      We didn’t spot any free suburbans, but we did see a couple free boats, and one free RV. It looked like something a rapist would drive in a lifetime movie of the week.

      Ahh these trips down memory lane. =).

      So glad you guys found a place – hope you’re taking before and after pics. In hindsight I wish we had taken even more before pics!

  • Oh my gosh. The knife and the cuss words gave me a good laugh. Wow! I can’t wait to read more about this adventure. I am so excited for you!

  • Wow interesting, I never thought of driving around looking for foreclosures, might be tougher out here in socal but that’s awesome you guys found one. I’ll be renting out my condo in a year or so, so I need to gather all the info I can on becoming a landlord :)

    • Good luck with renting out your condo – will you be buying another place or just moving elsewhere?

      • Depending on where my gf gets into med school, I’ll either be staying in town and looking to buy another place or moving to who knows where :)

        • Good luck with your girlfriend’s applications! Med school can throw a kink in things because I’ve heard it can be so hard to get into that most people have to go where they got in and don’t have much of a choice in being picky about location.

  • Jim

    Great find! Congrats! I was able to get a 14 acre farm in Tennessee, it has a single family home, which I have been able to rent out, a barn which I am in the process of renting out half of, and a pond, which I am going to be fishing!!! Got the total note paid for! Keep up the good work, like your site!

    • The farm in TN sounds beautiful. Our primary residence is on a little pond, and one of the neighbors regularly fishes from the banks. It’s relaxing just to watch him =)

      Thanks for the compliments on the site!

  • As they say, its best to buy when the prices are low. Your property is fabulous! Reading about your pool next!
    Marissa recently posted..The highs and lows of working for yourself.My Profile

    • Thanks, Marissa! Mr. PoP and I have often wondered whether more fortunes are made in booms or in busts. For us, I think buying low in the bust is going to be a big part of our wealth accumulation story.

  • Just wanted to let you know that I linked to this post on my site here because I thought this was a great series!
    Ney @ recently posted..5-5-13 Shopaholic Savers Weekend Update- Our New Look!My Profile

  • eureka

    So, the earth shattering inside secret tip is – have parents that can loan you 50k.
    Gee willikers

    • I would say the earth shattering, inside, secret tip is there are no secrets, just hard work and luck. If the deal you find is good enough, you will almost always be able to find financing. In this case our parents were the easiest source, but we could have also gone for hard money lenders, or a HELOC on our house. In fact, the HELOC was how we bought our lot a couple of years later.
      Mr PoP recently posted..Financial Literacy And Asking The Wrong QuestionsMy Profile

  • […] hits, stay put. Better yet, take advantage of some of the deals out there and put cash to work. The PoP’s duplex purchase in 2009 is a stellar example of this […]