Duplex Case Study

I recently purchased a duplex to live in half and rent out the other half. I am also managing it myself for now. Below is a breakdown of the numbers for the property. You will see that the cash flow for the property is negative and might ask ‘why would you buy it if it had negative cash flow?’ Well… It is a nice property in a good neighborhood, the type of tenants I hope to attract are long term headache free tenants. Also I needed a nice place for my family to live and the total price I am paying after receiving rent is significantly less than what it would have cost to get a place just as nice and the same size so it met my current needs. In addition to this I still have a job so the tax deductions are important to help reduce my taxable income. 

Purchase price: $166,500

Down payment: $8325

Interest Rate: 4.125%

Closing costs: About $1700

Current rent: $750/side $1500/total

Market rent: $850/side $1700/total

Taxes: $4507

Vacancy: $1700

Maintenance/Repairs: $1700

CapEx: $1700

Property management: $1700

Monthly Costs: $1825 including mortgage

Monthly Income: $1700

Monthly Net: -$125
Additional considerations: Mortgage interest deduction and Depreciation
Books that helped me: Who Moved my Cheese, 4 Hour Work Week and one of Robert Kyosaki’s books.
Podcasts I listened to that helped get me started: BiggerPockets, InvestFourMore, CashflowGuys, WheelbarrowProfits and Rental Rookie.
Let me know what you think of my purchase and my analysis of the property.


The Best Sunglasses I Ever Owned Were FREE!

​Ok, so the best pair of sunglasses I ever owned were free to me because I found them abandoned in the grass, but they did last me 8 years of everyday wear and tear. These glasses were a pair of Oakley’s that I found one Saturday in high school when I was getting done with baseball practice. I wore these sunglasses everyday, baseball practice, the beach (I also accidently left them at the beach in Hawaii the day I moved back to the states) school, work, everywhere. If you have every held a little kid you know that they like to grab everything that they can, well my sunglasses were no exception to this rule. My sunglasses would get taken off my head and thrown on the ground. Sometimes these kids would take one of the arms of off the sunglasses and their parents would think that their kid had broken them but I could just put them back together and everything was fine. Eventually one of the pieces holding the arms on started to weaken and then broke but the arm would still stay on. I had to replace them because I had used them so much that the lenses were so scratched that it was obstructing my vision more than assisting it. So when I went to replace my sunglasses how much researched did I do to find the perfect pair? NONE. I found an Oakley store and found a pair of sunglasses that looked as similar to my other pair as possible and purchased them.
But why would you want to buy a $150 pair of sunglasses when you could just go to any store and buy a $10 pair of sunglasses? How long does that $10 pair of sunglasses last? Is the $10 pair of sunglasses comfortable? Does the $10 pair of sunglasses look good?
I know people that buy multiple pairs of sunglasses every year because the cheap ones they buy are always breaking. The initial investment for my sunglasses may be higher but over the life of them they have been much cheaper to own (that is as long as the Oakley’s do last that long and the cheap ones are always breaking and being replaced). I have also found that most $10 sunglasses are uncomfortable. I have a big head and all those cheap sunglasses seem to be trying to crush my head and after about 30 minutes I usually want to take them off. Some cheap sunglasses may look good and other may look cheap or ugly so that one is more of a preference of opinion.


How I Won a Cookie Eating Contest (With no Training)

When I was 15 I went to go watch Hoodwinked in an outdoor downtown setting. Before the movie started they announced that there would he a cookie eating contest that we could complete in. I was in the 15-18 year old age group. I was the youngest in the age group and one of the smallest in the age group I was competing in. I had not prepared and had never competed in a cookie eating contest.

The rules were that you had to eat all the cookies in the bag and all you could have was a cup of water. When I started I decided to dunk each cookie into the cup of water before I ate it. This softened the cookie and made it very easy to just swallow the cookie without having to chew. I finished so much faster than everyone else that they made me drink my cup of water to make sure I got all the crumbs from the bottom of the cup.

The key to winning is you want to make sure the extra crunchy cookies get soaked for longer and the softer ones just need to be dipped and then eaten. You also want to make sure that while you are eating one you are dipping the next cookie in the water. The water is just there to help the cookies go down easier not to make you less thirsty.

If you have to eat Nilla Wafers you want to make sure that you soak them extra long because they will tear up the roof of your mouth if they are still too hard.


Opportunity Cost

Most of us have great ideas businesses we would like to start. But why do we all delay starting these new ventures?
We worry about what other people will think or that we will fail and lose lots of money. Do we ever think about how much we are losing in opportunity chance? If we hold onto our money too tightly and don’t try to create opportunities for ourselves we are delaying our own success and happiness.
The compound effect is more noticeable the sooner we start trying to achieve our goals. Also if we start early we can learn faster and progress faster.


Minimum Wage Increase

One of the pros of increased minimum wage is increased pay for low wage workers. Obviously. Another pro of increased minimum wage is that it decreases the effects debt. If you have debt and your pay doubles and your expenses (besides debt) double you will have twice as much money left to pay off your debt.

So if you were using all your money that is left to pay off your debt and you had say $50,000 you would be able to pay off the debt twice as fast as shown in the table above. This is why I have changed my mindset from no debt to leveraging debt to your advantage.

There are many cons to increasing minimum wage. One problem with increasing minimum wage is increasing costs for products that are produced by minimum wage workers. Most people would not be happy if McDonalds changed the price for a Big Mac from $4 to $8. With increased cost of products your savings are now worth a lot less. For example, before you could use your $2000 in savings to buy 500 Big Macs at $4 now you only buy 250 Big Macs at $8. This would hurt those that have no debt and have been trying to save money the most because they would have put in all that work to save the money and now it is worth half as much. Another downside to increased minimum wage is lost jobs because with increased wages, for a business to continue to be profitable they must either increase revenue or decrease costs. One easy way to decrease costs is to remove workers, as often wages are one of the highest costs for a business. Another way to decrease costs is to move jobs to a lower wage region. For example, if the state of California increases minimum wage to $15 but Nevada still has a minimum wage of $8 the company may hire employees in Nevada instead of California where possible, this also happens with outsourcing work to lower wage countries as well. Another problem with increasing minimum wage is that workers of higher paying jobs that are now only earning minimum wage will not be happy because they have basically gotten a pay cut unless their wage increases at a similar rate. If the rate of higher paying jobs does not increase there could be an influx of educated workers looking for lower class jobs as the minimum wage jobs may be easier than the jobs they currently have. If the rate of higher paying jobs does increase we would be back to where we started in the first place except that we have devalued the dollar compared to other currency. If we devalue the dollar to other currency than it will be a lot more expensive to import goods that the US is so reliant on.

If you don’t like earning minimum wage you need to find a need job or prove that you are worth more than minimum wage. Most companies are willing to pay their employees what they think the employee is worth. For the most part minimum wage jobs are not meant to be careers that someone supports a family on but instead a starting point for gaining experience and getting started in the job market. As shown above there are a lot more cons to increasing minimum wage than pros to it.

What do you think about increasing minimum wage? Leave a comment below.


How I am Getting my PE License After a Year and a Half Out of School

Take PE Exam in South Carolina, and take state specific tests in Georgia and getting licensed in a state 2500 miles away that I haven’t been to in 9 years, California. Each state has its own rules on when you can take the PE exam and when you can get your PE license.  I knew that I did not want to wait too long to take the PE exam because I did not want to forget all the information that I had learned when I was in school. I also wanted to get licensed as soon as possible so that I could put that I am a licensed Professional Engineer on my resume so I could apply for a new job. The only problem was that I was living in South Carolina and I did not have four years of experience yet. Luckily the South Carolina Board of Registration for Professional Engineers and Surveyors allows you to take the test early and then just submit an application and a check when you get enough. Even with taking the exam early I still did not want to wait for four years of experience so I started looking into other states that I could take the exam and get licensed earlier.

I found out that California requires six years of experience to take the PE exam and get licensed. A bachelor’s degree from an ABET accredited school counts toward four years of experience and a master’s degree from an ABET accredited school counts toward one year of experience. With this I would only need one year of work experience so I decided that I would take the PE exam in California after one year of work. I started looking into the application process and talked to the California board and found out that I could apply for licensure in California and take the PE exam in another state and then just call and change the application type from a new applicant to a comity applicant since I would have already passed the PE exam in another state. I also found out that the CBT (Computer Based Tests) that California required to be passed were administered by a national company and I could take the test at any of their locations. So I opted to take the tests in Augusta, GA which is about 30 minutes away.

This was great news as South Carolina does not charge an application fee for admittance to the PE exam for early examination. I would be able to save the cost of an airplane ticket, a rental car and a hotel (well I may have been able to stay with a friend in California and then I wouldn’t have needed a hotel and possibly not a rental car either).  I also would not need to try and transport all of my study materials to California and I wouldn’t have to take extra time off of work so that I could fly out west and get jet lagged.

It took a little bit of coordination but now I will be able to get licensed as soon as possible and I didn’t have to go to California where I am going to be licensed.


Saving Money is Costing you more Money

Why saving money is costing you more money.

Many of us have grown up being told to save money. Why are we always told to save our money and not spend it? It is a Scarcity Mentality. You are taught that there is only so much money and you need to hoard it all so that you will have some when you need it. I am not saying that you should not be saving money. I actually agree that you need to same money because you need to be ready for hard times that might come, but I also think that just saving all the time is not the best practice.

I think that you should try to save up 6-12 months of expenses so that if you lose a job or some other large event happens you will not be financially stressed. But how will I saving money cost me more money? If you are saving money you are probably putting the money in a checking or savings account. Most checking and savings accounts are not earning a very much interest. Even C.D. accounts aren’t earning very much interest. You could put that money to use somewhere else that would otherwise be saving in something that would give you a higher return on investment.

So what should I do with the money instead of putting it in bank? First of all let’s see how leaving your money in a savings account could be losing you money. For example…if you are earning 1% on the money you have in your savings account and inflation is 2% per year, you will be losing 1% of your savings per year that you leave it in this account. You can see this concept if you think about how this year you might be able to go to a restaurant and buy a hamburger for $5. Next year that same hamburger might cost $5.10 but the $5 that you left in your savings account is only worth $5.05. So should I go and buy a bunch of stuff and hold onto it so that I can sell it later? NO, most of the stuff(junk) that we own goes down in value the longer it is owned because everyone wants to new hot item not the old stuff. So then what should I do with my money?

There are many things you could do with you money. You should try to create multiple streams of income to help reduce financial stress due to worry about losing main stream of income. You could invest the money in the stock market through a company that will invest it for you. You could also invest your money in real estate. I’ve heard it said that 80% or millionaires have some of their investments in real estate. You could also invest in a new business that you would like to create that could help you to find financial freedom.

Whatever you decide to do with your money make sure that you do your research and are confident in what you are investing in. If you just start throwing money at different avenues you will not make an informed decision and you could lose even more money than you would have had you just left the money in a savings account.

Leave a comment below and tell us ‘What do you do with your extra money?’