December 10, 2004 12:18 PM
21st-Century Landlords
Excerpt: Your objectives are to learn how much you can afford to pay for the property and to become confident that you'll collect enough rent to clear at least a couple of hundred dollars a month.
Fresh out of grad school in 1998, Keith Colacioppo moved back home with his parents in the Bronx to save money. He lived frugally and opened a 401(k) retirement account at work. But Colacioppo wanted to do more to cut his taxes and kick his savings into high gear. "My accountant kept telling me it was time to buy real estate -- buy, buy, buy," says Colacioppo. So he did.
His motives, and success, explain the surging interest in buying rental real estate. For several years, Colacioppo scoured the Bronx for just the right property -- not to live in, but as an investment that would produce more in rental income than it would cost in expenses, and that he could hold for long-term appreciation. But it turned out to be easier to find a job than to find a suitable property in good condition. Colacioppo looked at more than a hundred houses, and "most of what I saw was overpriced garbage," he says.
Finally, in 2001, a neighbor gave him a tip that the owner of a 50-year-old, two-family house wanted to sell and move back to Italy. Keith made a private offer of $315,000, agreed to wait for the owner to leave, and closed in June 2002. The duplex has a 600-square-foot, one-bedroom apartment on the ground floor, plus a 1,000-square-foot, two-bedroom unit upstairs. His instincts paid off. Both apartments were clean and livable and have been occupied almost continuously. His mortgage, insurance and taxes total $1,700 a month, and his apartments rent for $900 and $1,300, plus $175 for both parking spaces.
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