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Category Archives: rental properties

Deciding If an Opportunity Is Right for You

Not all decisions are binary.

Although the decision to invest or not is binary, the question really boils down to, “Is this the right investment for me right now?”

Your reason for investing should drive the type(s) of investment(s) you invest in. To oversimplify a bit, there are two investment strategies: building wealth and creating income. In the real world, these two strategies are not mutually exclusive. Where you are in life will influence your strategic choice.

Let’s look at an example rental house that requires no initial out of pocket investment. We’ll assume the debt on this property covers the initial renovation and all the costs of acquisition. We’ll even assume the house provides positive cash flow from the time it’s rentable—$50 each month after allowances for debt service, taxes, insurance, vacancy, maintenance, and capital replacement (big ticket items like HVAC units that can’t be expensed off in one year).

Multiple Perspectives

Here are a few ways to look at this opportunity: Continue reading →

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To Rent Your House, or Not? Part 1

It’s no fun to discover you inherited a house that’s upside-down (on the mortgage).

I read this really interesting article a few days ago that can be found here. We didn’t write it, but we have heard it before: the housing market crash in and around 2009 left many people with very few options.

The truth is that we never really know how the housing and job markets are going to go. With that knowledge we should all have a backup plan that is attainable before we sign that dotted line!

So many things can happen that make a mortgage unmanageable. This leaves homeowners with very few options, one being to rent their house out and find another dwelling that more meets their needs. Putting the house on the market to try and get out from under the mortgage is, I think, the first choice when you realize you just can’t do it anymore. Sometimes that is not a viable option depending on how much you owe, repairs needed, and the time it will take to sell it.

Considerations

There are some things to consider before you, too, become a landlord by accident.

Look at what your mortgage payment is, and figure out if you can charge any dollars over that for rent? You will need those extra dollars for repairs, taxes, and insurance. Anything that you charge over your mortgage payment cannot really be considered profit either. You will have additional expenses. Because of this, renting your house out will not immediately earn a very good living for you 99% of the time.

A Scenario

Let’s look at some fictitious numbers (because I can’t remember the real ones honestly, but I will get close) to help explain why renting may seem like a great idea, but may not be worth it in the end.

I’m going to use a scenario where someone was left a house that had a mortgage on it. Before they got the best advice, they went ahead and signed to assume the mortgage and take on the additional house payment. They had the credit to do it, and the mortgage company was happy to oblige rather than foreclose and put it on the market themselves. This is a typical situation that can make someone an unintentional landlord.

Continue reading →

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Workin’ on a Presence and New Project

It’s a logo.

You’re Too Kind!

Thanks to all you zillions of people who celebrated along with us as we officially acquired the Hermit Haus property. Since then, I’ve been starting on a website, which is nowhere near finished, but you can look at it, if you want to. And we have a temporary logo, featuring the friendly Hermann. We at least now have a presence!

We’ll let you know when there’s a Facebook page and all that, but until then, we will put updates on the Hermits’ Rest Enterprises page.

And More Remodeling

The new project we’re working on now is sprucing up our old office, which you may recall is a really lovely 1930s house in Cameron, the former Trubee place. It has four bedrooms and two baths, though one bedroom is really better suited to being a sunroom, office, or den. It has a huge living area and a gorgeous dining room. Continue reading →

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A Contractor for that Mattress House?

“I’m very good with digging through rubble. You guys should have hired ME,” says Vlassic.

The good news is that the Mattress 8 project in Temple no longer has any mattresses in it.

The bad news is that it doesn’t have a contractor working away in it, either.

It’s not for lack of trying! Lee and Mandi have been contacting potential contractors, scheduling meetings, finding the potential contractors are flaky, and starting the process again. Lots of times. I know that all our mentors say Craigslist is a great place to find contractors who will work for reasonable rates, but we are not lucking out in the Temple market at all.

But maybe the tide has turned! Lee met with another potential contractor, who even has a team and is interested in investing. His initial estimate is in line with what we think the project will cost to get it up to rental quality. We’re just waiting for the bid now.

Cross your fingers, or whatever you do to support your real estate redevelopment friends, and hope this one works and we can MOVE on this project!

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Do You Have Anything for Rent?

diagram of houe

We buy houses. We renovate houses. We sell houses or rent them out. But whatever we do has to make sense. Right now, it’s getting harder to buy rental houses in many Texas markets. That means it’s getting harder for tenants to find houses they can both afford and want to rent.

One thing Austin and Cameron have in common is a shortage of housing most people can afford. I’m avoiding the term “affordable housing,” because of the connotation of it being subsidized.

  • In Cameron, many teachers and other professionals commute in to their jobs because as even the school superintendent noted, “I could rent houses in the $900-$1000 range in no time.” There just aren’t many houses in that price range, and those that exist stay rented. We were able to relet one of ours before the previous tenants moved out.
  • In Austin, our available rentals seldom stay on the market for more than a few days.
  • Tenants are staying in place more than they used to. A few have even been asking for two-year leases or longer.
  • Nationally, many older folks (and young singles) are having to take on roommates to afford their rent, ala Golden Girls.

Why Are Rentals Scarce?

Continue reading →

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