All Forum Posts by: Jeff Mauerman

I am recently divorced and paying both spousal and child support, so my income has been cut roughly in half. I am looking for ways to generate revenue so that I can start to rebuild my retirement.

I own a home on six acres in rural West Michigan in an area that is popular for hunting, fishing, hiking, snowmobiling, cross country skiing , and water sports. It is less than an hour from four metropolitan areas, and about an hour from Lake Michigan. It is a three-story house, and the lower level (walkout basement) is laid out very much like an apartment. It has a large bedroom, a family room, dining area, full kitchen, and a three-quarter bath. The space is fairly well lit with good windows, and also has ample artificial lighting. It has a somewhat rustic feel, including a woodstove with a large field stone surround. There is the main kitchen upstairs, so the lower level kitchen could be exclusively for the renter.

There is no way to completely separate it from the main part of the house, as it also has the laundry machines, furnace, electric panel, and storage areas I need to access. It is also tied to the central HVAC so no separate controls.

I am considering making it into a short term rental, or possibly renting it as a “room“ in my home I to a full-time renter. Either way, the space will need some refreshing, specifically new flooring and some minor bathroom renovations. It is roughly 700 ft.².

Given this information, where would you recommend I begin? And specifically, am I better off getting a full-time renter, or doing a short term rental (which I think I would prefer so I can have privacy when I wanted)? thanks in advance for any ideas you have.

@Shakura Muhammad, My answer would depend on what kind of flooring you were talking about. Depending on the market your flip is in, you may want to go with a high-end finish like solid hardwood or tile, which require specialty tools and tend to be more difficult. If it is in a lower and market, something like click lock laminate or luxury vinyl plank might be sufficient, and are fairly easy to install even for a novice.

There is a product that splits the difference, which is an engineered hardwood floor – looks like the real thing but installs like laminate. Tends to be pricier, but you could save a ton on installation.

Another consideration would be your holding costs (Mortgage, taxes, insurance). How long will it take you to complete flooring job versus hiring it done? If you pencil out the numbers, (time held cost) + (your materials) + (estimated lost rent during renovations) and see if it meets or exceeds the cost of a contractor.

When calculating materials, you will want to allow between 10 and 20% extra material for waste and mistakes. Contractors cost for materials might be lower because they can often buy in bulk and since they are experienced generate less waste.

Good luck, hope this helps!

@Nicholas Blaylock,

When you say “get back,” does that mean you are completing your service with the army and will not be deployed again?

If that is the case, I would encourage you to read up on everything in the forums about house hacking. With $7000, you could probably get into a livable small multi family property using a 3 1/2% down owner occupied loan. By living in one of the units and renting out the other(s) you can pay for most or all your living expenses and bank what you would normally be paying in rent. Save this money and figure out your strategy to invest in future properties. This can be a great jumping off point.

If you are still active with the military and are likely to be deployed again, I would recommend continuing to save cash. Most non-owner occupied loans start at 15% down, although I have heard of banks that will do 10% down, but they are rare. Assuming a 15% down payment, you’ll be looking at a house that costs about $45,000. That does not take into account any purchasing costs such as loan fees or potential renovations. Depending on your market, this may or may not be a price range that works for viability and cash flow.

There is also a lot in the forums and the podcast about wholesaling, which requires much less of your own money and more of your time and energy.

My final thought is listen to all the bigger pockets podcasts you can squeeze into your day. They are a wealth of information and various strategies, many of which are geared toward people starting out.

Good luck!

@Alex Varner,

In my opinion, it comes down to reputation and references. 50% does seem high, but if it is a small job it may be their way of doing business. I would recommend asking for referrals, and don’t just call on the phone - drive by the sites, talk to the property owners, and examine the work that was done.

I would also encourage you to ask him if this is his standard way of doing business, or is his upfront money request based on the relatively small cost of the job. It never hurts to ask the hard questions up front, rather than later in the game when expectations may have already been established.

Good luck!

There are a number of homes in my area which are owned by a county land bank authority. They are all distressed properties, ranging from roof leaks and crumbling plaster to empty shell (meth house that has been stripped of ALL systems). Prices range from $5000-$30,000 per property, ARV in these areas would not likely exceed $70,000. Prices asked seem to have little to do with the condition of the house, they are all over the map.

Does anyone have experience working with or negotiating with a county authority like this? Each home has a set of must do’s that come as a stipulation of the sale. Some of the demands are frankly absurd, as are some of the prices being asked. Since these people have no skin in the game, what might be a good strategy for approaching them to see if they can relax some of the restrictions/prices so I can rehab these properties and get them back on the tax roll? Many of these have been sitting on the market for 300 days or more.

One upside is that all back taxes will have been settled or satisfied, so that will not be a concern with any of these potential properties.

@Mindy Jensen,

I also have trouble with the iPhone app, big spaces between paragraphs when posting, and often the post feed will go into a loop, where when scrolling down I see the same posts over and over again. Thanks for looking into this, much appreciated!

@Kwadwo Boafo,

There is a neat little iPhone app called DealCheck. The free version is limited, but it may give you the information you need to get started just by playing around with the numbers.

From everything I have seen, the BiggerPockets calculators are among the best out there. BP works hard to equip their community.

Good luck!

A few thoughts on the subject of looking for a different location to invest in.

I would say there should be nothing random about how you choose an investment area. There are many great viable markets, particularly in the Midwest and the south. One place I have found a good starting information is city-data.com, Which shows housing units, job growth, population growth (or shrinkage) etc. I consider myself lucky to be in Michigan, where there is almost every kind of real estate market you could wish for.

If you listen to the bigger pockets podcast with market seeking in mind, there are investors from almost every part of the country. All of them have enjoyed a high degree of success in their chosen market. If there truly is nothing within a 2 Hour Drive of where you live, you could explore one of the markets where people are already enjoying success.

The coastal markets tend to be better for appreciation, the Central markets better for cash flow. That said, a lot depends on your area of investment and how long you plan to hold a given property, and what your investment goals are.

Hope that helps, and good luck on your journey.

Something you may want to consider is the materials that were used in these older homes. On one hand, they used old growth timber and other very high quality materials which will survive almost anything and outlive you or me. On the other hand, it is not uncommon to see asbestos wrapped pipes, asbestos siding, lead paint, asbestos floor tile, asbestos textured ceilings etc. If any abatement is required, that can get pricey. A good friend of mine lives in a very nice antique home in a premium area, and when one of his two water heaters blew out, the estimate to deal with the asbestos and non-conforming ducting was upwards of $40,000.

Also, some municipalities have a “distressed and abandoned” code or similar. In some locations, if a home has been vacant for more than say, two years, the local government may require you to bring it entirely up to code before they are put up for rental or sale. Don’t know what your locality has in that respect but it certainly worth investigating, could bite you hard.

I would suggest that you find a great home inspector so you know exactly what you’re getting into. In some cases, all of the difficult work has already been done years ago, you just need to know. Although homes built after 1950 are easier, there are certainly deals to be found in the older stock.

@Ari Newman, Of the scenarios are you outlined, the only one that puts your family member ahead is the short-term rental option. All of the others, which involve borrowing against the equity in the property, would cover the bills for a time but in the long term would put her further behind financially, barring potential appreciation of the property. My concern would be getting stuck in a perpetual cycle of borrowing against equity with no additional revenue.

I am no expert on short-term rental options, but I know there are certain protections in place for property owners when using the services - I know there are others in the forums who could chime in with better information.

I don’t know her whole scenario but some other thoughts - Would it make sense for her to reside in this property for more than six months of the year making it her primary residence? Would the taxes and fees on her main residence be less than this property if she were to switch?