Quest for early retirement

Quest for early retirement

Seabrook/Galveston · Member since 2018 · 274 posts · 178 votes

Well, after seeing all of Sammy B’s post, i thought I’d start my own to keep track of how I’m doing. My goal is to retire by 50. I’ll be turning 36 soon. If I can average at least $300 a month per door, then I figure I need 3 doors a year. I’m assuming I can figure out how to pay for health insurance on that, but that’s another topic.

My first house was a duplex in Galveston. Currently renting to tenants that came with it at 2173 total per month, about 1700 a month in expenses. Somehow, the bottom tenants are using $600 a month in electricity cooling an 880 sqft home (bottom floor). I detailed some of it in another post. Fortunately, I have a happy update on that property - Galveston housing Authority agreed to have utilities switched to tenants AND they suggested increasing rent to 1400 for the downstairs. So I’ll be getting g 2250 total and dropping a 700 a month th expense (water too).

I’ve been looking for the next property, and probably made about 7-10 offers. I even went and bid at the Harris county tax auction. Well, this past weekend my realtor called and said someone be knows at a bank is going to list a bank owned 996 sqft 1/1 in Galveston and we can have first look at it, and they’d probably accept 85-90k. It also had 4800 taxes we’d have to pay.

We went to look at it Tuesday night, and at that price, I was expecting some serious work needed. Turns out it was an Airbnb rental that was already staged for the next guest and in very good shape. It even recently had central ac installed! Power still on.

It was 2-1 long ago, and were going to add a wall with a door to put that room back. We're using Jet Lending for 3 months, and we expect the ARV to be 140k after about 9k worth of work - paint the porch, pressure wash siding, new laminate in bathroom in addition to wall.

Under contract as of today, hoping to close Friday, that will probably slip to the following Tuesday or Wednesday realistically though. They accepted our first offer of 85, and that makes me wish we’d started at 79, oh well.

Should rent 1200-1350, however, being that it is already furnished except for the extra bedroom we’re adding, we’re going to give short term rental a try. Airbnb estimates we should earn 2250 a month with a 50% occupancy rate. We’ll try it through the peak summer time, and if that doesn’t work, we’ll rent it long term (or sell it). I like this one because it seems to have a low margin for catastrophic screw ups

Anyway, sorry for the long car, and thanks for reading

Edit: none of the formatting in the app took. 

Home 2, door 3 of 45, i clearly need to hire a professional for pictures when i list it

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Nathan GesnerBusiness Member
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
7y

Looks like a nice unit. When considering vacation rentals, don't forget to add in all the additional expenses. Let's assume you are correct and can make $2,250 a month.

I think Galveston charges 9% tax and AirBnB will charge 4% so that's $292.50 in fees.

You have utilities, TV, and internet. I expect those will average $300 or more. You'll have to maintain the lawn which can cost another $200 a month but let's assume there's only six months of lawn care so you can average that out to $100 a month.

Just those charges alone ate up $700 a month so your income just dropped to $1,500. That's $150 - $300 more than you would get with a long-term rental but...you haven't counted the cost of your time. You have to answer inquiries, process reservations, get guests checked in/out, handle maintenance calls, inspect and clean after every stay, replace consumables, etc.

Again, I don't know the actual numbers but it doesn't take much to bring that income down to the same level you would get with a long-term rental and the long-term rental requires a lot less work on your part. Something to think about.

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    7y

    Looks like a nice unit. When considering vacation rentals, don't forget to add in all the additional expenses. Let's assume you are correct and can make $2,250 a month.

    I think Galveston charges 9% tax and AirBnB will charge 4% so that's $292.50 in fees.

    You have utilities, TV, and internet. I expect those will average $300 or more. You'll have to maintain the lawn which can cost another $200 a month but let's assume there's only six months of lawn care so you can average that out to $100 a month.

    Just those charges alone ate up $700 a month so your income just dropped to $1,500. That's $150 - $300 more than you would get with a long-term rental but...you haven't counted the cost of your time. You have to answer inquiries, process reservations, get guests checked in/out, handle maintenance calls, inspect and clean after every stay, replace consumables, etc.

    Again, I don't know the actual numbers but it doesn't take much to bring that income down to the same level you would get with a long-term rental and the long-term rental requires a lot less work on your part. Something to think about.

    The DIY Landlord Book4.7248 Reviews
  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    Glad to see you post up @Bruce C. and looking forward to following along.

  • Seabrook/Galveston · Member since 2018 · 274 posts · 178 votes
    7y
    @Nathan G. I have taken those costs in to consideration, and yes, you’re right that $1500 wouldn’t be much more for all the time it will take. I am, however willing to take that or even less in the short term to see if I can achieve an occupancy rate at 70% or better. When we started out, vacation rentals is where we thought we’d start and we looked in to it for Galveston. There are quite a few that even manage to average 90%. And yes, that is a lot of work too, but I’d consider it worth it. And if we don’t make it work on this one, we take our lumps, learn our lessons, rent it out long term at a price we are happy with, and apply what we learned to the next one.
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    7y

    I think it's a great idea as long as you go in with eyes wide open. Vacation rentals have the potential to be very lucrative.

    The DIY Landlord Book4.7248 Reviews
  • Seabrook/Galveston · Member since 2018 · 274 posts · 178 votes
    7y
    Finally closed today. It appears it is going to be normal for it to be difficult to get the lender, seller (in this case a bank), and title company hearded efficiently in the right direction. My agent did get the bank to pay the 4800 in taxes owed, so we’re ahead of where we wanted to be already! We’ll hopefIlly be levelImg thIs Monday Update on property 1 - duplex long term rental also in Galveston : we had our repairman there to do some work on the main support of the house. We expected to have to do this eventually, but we were hoping to get to wait, oh well. $4k hit there. But the real update are the tenants...the upstairs tenants were given 2 notices of violations by the animal control department! We knew they were kind of messy when we inspected the house after they had been in it just one month when we purchased thenproperty, and we suspected we would end up evicting them, but didn’t expect it to get to this level. It is an 880 sqft unit - animal department sited them for too many animals because they have 4 dogs, cats (how many?), rabbits, snakes, some other large lizard, and a sugar glider! They also have 2 kids. The AD also sited them for it not being healthy / general living conditions. Glad our repairman was there when that happened. Our PM is going to start the eviction process.
  • Real Estate Agent · Galveston, TX · Member since 2015 · 255 posts · 219 votes
    7y

    Congrats on the new place!! I personally have a handful of AirBnBs here in Galveston and can tell you if they are run right they are really worth it. There are a handful of tools you can put into place to help take the majority of the workload off of you with minimal costs. Also just small tricks like using firesticks instead of cable since everyone uses netflix anyways!! Let me know the next time you're on the island and I'll buy you a coffee. The more I talk real estate with other people the less my wife has to hear about it!

    Sorry to hear about the bad tenant! I just had to get rid of one in my downtown property. Two hoarders in a 1000 sq ft studio, smoked when no one was there to catch them and had 3 large dogs none of which I had ever seen taken out of the apt! Yay for inherited tenants! Even with all their stuff out I still have a major job to get that smell out. 

    Best of luck on your future properties! 

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    Congrats on the closing @Bruce C. 

    Post more pictures when you can.

  • Georgetown, TX · Member since 2018 · 29 posts · 25 votes
    7y

    Loving this thread! I'm also working a plan to retire, though since I am 57 already, I have a five-year plan! Timothy Church was our agent on a Crystal Beach property on Bolivar Peninsula in June; and we are running that as STR. We feel the income will absolutely pay for the PITI + expenses; but so far we don't have enough information to know what we'll pocket (for the next property) after a full year rental.

    We also have two LTRs in Austin area that stay rented. Since both are free of a mortgage, we are planning on leveraging that income for new properties; but we will run into debt to loan ratio issues, so we will be getting educated on what our plan would look like use good real estate practices to leverage what we have to get what we want.

    Following your story and admiring the things you've accomplished already. I am curious to see how you do with the STR, as I am constantly rethinking STR in favor of LTR, especially if we could get a multi-family.

    Inspired by you!

    Andrea Cole

  • Lender · San Antonio, TX · Member since 2018 · 109 posts · 108 votes
    7y

    Great report @Bruce C.! And way to go getting those utilities switched over to the tenants - that sounds like a cash flow nightmare!

    Looking forward to seeing more updates. I'm interested in doing AirBnB's in New Braunfels, but a lot of these smaller municipalities are making it near impossible. Thankfully the Texas Legislature has sided with property owners - hoping to see that trickle down to the local governments soon.

  • Seabrook/Galveston · Member since 2018 · 274 posts · 178 votes
    7y

    Galveston being essentially a vacation tourist city is happy to have the AirBnB it seems, as long as your paying them of course.

    At the vacation rental house today cleaning while rolling contractors through for bids on the leveling work in the back. Looking like $2k, which is only $500 more than we expected. I’ll take pictures when the lighting is better (of course the only rain for the week is on Halloween!), but just washing the front with a hose, Dawn, and scrub broom had made it look a lot better.  Was gong to paint the porch today, but the rate I’m moving and the rain will probably push that back. 

  • Member since 2016 · 13k+ posts · 12k+ votes
    7y

    I would suggest that if you want to reach your goals you should not be investing in SFHs. Concentrate om multi units to maximise your income. Preferable 4+ doors to reduce expenses. SFHs are far too costly to maintaine.

  • Seabrook/Galveston · Member since 2018 · 274 posts · 178 votes
    7y

    It had been a busy end of the year at home and at work and I haven’t had a chance to come update much

    Home 1, duplex - good news is it has been nice not paying downstairs $350-500 a month in electricity, and the bump in rent from the city of Galveston has been nice. We also finally got the upstairs tenants evicted and out with the help of the sheriff last week. Bad news is I’ve never seen a place that disgusting. You can smell it walking up to it. Were about $800 in just getting stuff hauled away and wiped down. We have at least 6 windows to replace or repair, several doors, and all of the laminate flooring. I have a tile cleaning company coming to see if they can save the tile. I’ve nuked the place this morning. Thousands of roaches is not an exaggeration. We also found some of the animals dumped in the yard the next morning. It’s Galveston, so it’s not snowing, but pets shouldn’t be left outside in the low 40s. We’ve got 1 quote for $3300 for labor for repairs. Waiting on a couple more. Well at least go ahead and add third bedroom to increase rent.

    House 2, AirBnB - taking longer to do the repairs than I’d like. Was hoping to be done at the beginning of January, now we’re trying squeeze in the refi before end of month. Sadly, our repairman’s grandfather passed away and he had to leave last week. Thursday is appraisal. We do already have someone booked for end of February and a couple of inquiries for March. Looking forward to see how this goes.

    Looking around for third property, but we’ve got to get settled on the first 2 a little more. Did go look at a triplex with a bullet hole. That was interesting. Would be a good property, but somehow the guy managed to purchase the place for 106k 8 years ago at foreclosure and not manage to get in equity built up. The bank is willing to let the mortgage be assumed, but buyer had to pay about $20k to get it current. If it was ready to rent that’d be one thing, but it needs a lot of work. 60-80k.

    Looks like this on every wall and floor

  • Seabrook/Galveston · Member since 2018 · 274 posts · 178 votes
    7y

    Been so long i didn’t realize I didn’t mention why the AirBnB repairs have dragged out. When we started pulling off the back wall in the bathroom to repair the leak, we found that the current floor is built up essentially 6” above the old (original?) floor. Pulled up floor and found linoleum staring at us. Well, when the window started leaking around the edges it ran down to the wall and to old floor and got trapped in between the 2 floors. We had to replace quite a bit of subfloor in the bathroom. 

  • Seabrook/Galveston · Member since 2018 · 274 posts · 178 votes
    7y

    House 1, duplex - repairs are underway and should be complete end of next week. Still fighting the infestation. Repairs plus materials will come in around $4500. We expected some large repairs but hoped to not need to do them until next year. If we can get it rented quickly we can still break even or at least get very close for the first 12 months.

    House 2, STR - I'll have some pictures after we spend this weekend getting things set up. Needed at $130k appraisal, hoped for $140k, and it came back at $170k!!! Homerun on this one! We are trying to get a friend rent it to give us a trial run, but we've already got the last weekend of February booked along with 2 more bookings on March.

    Numbers for house 2:

    Purchase $85k ($90k with closing costs and appraisal and all)

    Repairs $12.7k - some extra elec and foundation

    Holding costs - 4K

    Extra furniture for str - 2.5k. Unbudgeted costs as we started off LTR, but fortunately it was mostly furnished from foreclosure.

    Total all in at ~109k

    Appraisal at 170k

    PITI - ~950 / month

    STR projection - 1700 after utils / month avg

    LTR - fall back plan is $1300 / month

    Probably biggest take away so far has been how long repairs really take and budgeting for how that impacts your holding costs. Paying $1200 a month interest only to a hard money lender for an extra 4-6 weeks sucks. Also, I’ll probably double my contingency budget the next time the total repairs are this low.

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    @Bruce C.  Now that's what I'm talking about with Property #2, nice one on the appraisal!  

    You made $61k in equity AND have a cashflowing asset.  Great job.

    Good luck on Property #1 - what's the target to get that one squared away and finished?

  • Seabrook/Galveston · Member since 2018 · 274 posts · 178 votes
    7y

    @Sam B.

    Yeah, I still haven’t come down from the adrenaline/happiness/high what ever it is I’m feeling.

    There are a couple things causing a bit of uncertainty in the duplex: the bugs and the smell. The bugs have gotten better with treatment, but they are still an issue. All goes well, some more spraying and baiting takes care of the problem. All goes terrible, and we spend $3k tenting plus the money to house the lower tenants a few days.

    The smell was terrible, but has gotten better with cleaning and paint, and the laminate floors in the bedrooms that they family let the dogs use the bathroom in are out today. Hopefully some air and vinegar will fix that. The tile floor also took a hit though. Again, maybe just more vinegar fixes it, I have a quote for 1.25 per foot deep cleaning, and of course worst case we replace it all.

    Between those, I could be 0-7k extra at the end of it, on top of the $4500 plus 800 for cleaning I’ve already spent. After repairs, top should rent at least $1200, but I’m hoping 1400 just like the same size unit below it.

    Purchase price was 133k

    Total maintenance so far $15k

    Utils 3.1 (and no longer paying)

    Was appraised at 140k before we fixed a few windows and doors, maybe 150k now.

    PITI + mgmt is 1200 / month

    Total rent $2600-2800 / month

  • Seabrook/Galveston · Member since 2018 · 274 posts · 178 votes
    7y

    @Sam B.

    Oh and in the numbers for the duplex above, I should add we’ve collected $12k in rents so far. Not collecting rent for 3-4 months while evicting has been a gut punch.

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    @Bruce C.  Sounds good, still really good numbers even through all the headache.

    I'm flying into IAH tonight, will be in Beaumont all weekend, if you happen to be in the area.  Or if I end up back in Houston, I'll shoot you a PM and we'll have to get together for some lunch.

    Keep the photos coming and congrats again on the appraisal.  

  • Georgetown, TX · Member since 2018 · 29 posts · 25 votes
    7y

    Fantastic job, Bruce! So great to hear how it is all coming along! 

  • Rental Property Investor · Houston, TX · Member since 2018 · 13 posts · 8 votes
    7y

    Love that you're tracking your progress. Keep it coming, and thanks for sharing!

  • Seabrook/Galveston · Member since 2018 · 274 posts · 178 votes
    7y

    @Sam B.

    You looking at another property down that way? Not headed that way myself this weekend. May not be headed anywhere, actually. 4 and 6 year old came down with the flu last night. If you do swing back through Houston let me know.

    Thanks @Andrea Cole and @John Finch

    Still looking for that third property. Went and looked an 8-Plex in Dickinson. 6k sqft, 3 buildings, looked like all 2/1, although one set may have been two 3/1s. Separate utilities. It had been flooded in Harvey, and it was going to need 200-240k. It was supposed to go to auction on xome, but apparently someone offered the bank ~$35k and they pulled the auction. I was sad to hear that. I think even with just 2/1s it still would have been conservatively $5000 a month in tents, optimistically $7000. Also could have rehabbed a building at a time to spread out the expenses and get income starting in on one building before moving to the next.

    Lesson learned I think - don’t screw around with middle men on foreclosures. Just go straight to the bank. Worst that can happen is they’ll say wait for the auction.

  • Seabrook/Galveston · Member since 2018 · 274 posts · 178 votes
    7y

    @Sam B.

    Well it has been an interesting few weeks.

    Duplex - started repairs with the bid for $3300. He was doing good work, was going to be done last Friday, but the I stopped hearing from him on Monday. Finally heard from his wife on Tuesday. Apparently he had been sober for a wile, but he went out one night and something happened. He’s been in a coma for a week and there is a cop posted to arrest him. I hired his helper to finish for the balance I owed him. They are very green, but there isn’t any complicated work left. We’ll see how this goes.

    AirBnB - one thing after another. Store delivered the wrong laundry center. Was supposed to be electric dryer, they sent gas, and we didn’t go to install until Monday. Tried to get a plumber to hook it to nat gas, but they were going to have to pull a permit, and this a very old house, and they don’t think city inspector wouldn’t make us change a lot of things. So we exchanged the dryer. I’ll be hooking dishwasher up myself at a later date as we have the same inspector problem on that end.

    First booking is Saturday night. Hope we get a good review as there is a bit “chicken or egg” problem with needing reviews to get more bookings, but needing bookings to have reviewers. That said, March is booked for 13 days so far.

    We’ve had nothing but cloudy rainy weather, so I don’t have the most recent pictures of the finished product

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    @Bruce C.  Sorry to hear about the contractor woes but it looks like you're getting through it.  

    Keep us posted, goodluck with the first Airbnb rental.

  • Seabrook/Galveston · Member since 2018 · 274 posts · 178 votes
    7y

    @Sam B.

    Installed the dishwasher last night after work. Didn’t leave the island to drive home until 230 this morning...

    Cleaning crew coming by this afternoon. Everything’s ready to go for our first guest!

    We're booked for 16 nights in March so far, with a payout of 1025 (I've already subtracted our cleaning). That breaks even for PITI. One more small short booking pays for lawn/utils. I'm pretty happy at the thought of breaking even our first month. I was anticipating having to wait to build up reviews and clients and potentially not get many bookings for the first year.

    What I’m interested to track to help with pricing is when people book. Based on the way things are going, I wouldn’t expect the last week of March to fill until end of next week or early the week after that. I need to see if I can leave prices high until the last week, or if I need to drop sooner.

    So far all my bookings are AirBnB. None through vrbo or TripAdvisor. I did get 2 inquiries from Craigslist, but one was for a night already booked, and the other was yesterday morning wanting to rent last night and tonight. A shame my contract wasn’t finished earlier.

  • Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    7y

    @Bruce C.  Good work getting it finished up as well as the first month being a solid breakeven month.  Looking forward to hearing how this progresses.

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