Home News I Bought a Pre-Built Tiny House and Set It up in My Yard As a Rental

I Bought a Pre-Built Tiny House and Set It up in My Yard As a Rental

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  • Steph Douglass owns 29 rental units and is the co-founder of an Austin real estate brokerage firm.
  • To pay her mortgage, she buys and rents out a small house in her garden.
  • Douglas says you need fewer assets to get started investing in real estate than you think.

This essay is based on a conversation with Steph Douglass, owner of 29 rental units and co-founder of Open House Austin. Edited for length and clarity.

In 2013, I was just 24 years old when I bought my first home in Austin, Texas. I thought I would never buy again, but now I own 29 rental properties.

When I bought my first home, I was teaching 4th grade math, and my income wasn’t great. Starting with $43,000, he finished his seven-year career on about $57,000 a year.

So I decided to rent part of the house to my roommate. Since then, I have been using real estate to generate my own income.

For example, the little house in my yard pays off the mortgage on the house my fiancée and I live in in full.

small house.

Added a large porch to a small house.

Steph Douglas



I started by sacrificing my space

After buying my first house, I rented out part of it to my roommate. And when I moved and bought a second house, I made it a long-term rental. But even in my second house, I rented a room on Airbnb.

In the end, I got really sick of sharing my space. I was tired of having to sacrifice a lot of my privacy.

That’s when I transitioned to a smaller house which was the best way to make money without sacrificing my space.

It’s easy to overlook the garden, where you’ll find valuable rental space.

My first tiny house was a converted detached garage already in my yard. But make sure you live in a zone that allows renting a garden. You can check with “your city.gov” such as Austin.gov.

It took a lot of time and resources to get the garage ready for rent. It turns out that buying a small, finished house is a much better option.

A small house on a truck.

My little house was trucked.

Steph Douglas



My little house was $89,000 and completely finished inside

I purchased a pre-built and fully finished tiny house from a local place called Creative Living Solutions for about $89,000.

It was a very easy process. We were able to walk around a lot and see different layouts of the little houses. These places require a lot of space, so you can find similar stores in rural areas.

I dropped 20%, so about $18,000. Saving $18,000 is no small feat, but I think many people can do it if they save a few years like I did.

After that, I took out the remaining 80% with an RV loan. RV loans are just as difficult to obtain as car loans. You still have to qualify and the interest rate is based on your eligibility. Our interest rate is 7%.

gray kitchen cabinets

This is the kitchen in my little house.

Steph Douglas



We pay property tax on the entire property (it’s behind the property the house was built on, but we pay it anyway). Also, similar to buying a car, at the time of purchase he paid his RV tax of 6.25%. Utilities average about $125 for electricity, water, sewage, and garbage.

The tiny house had almost everything: countertops, refrigerator, microwave. All we had to do was plumbing and electricity. So we added an RV hookup in the back of our lot behind the house and hooked it up to the little house. I decided to add an expansion deck as well. All these extra costs came at an additional cost of about $10,000 taken from savings.

After handover, the Tiny House was ready for rent within 10 days.

I was afraid people wouldn’t be interested in renting it, However, reservations flooded in

We rent for a short period of time and have an 80-99% chance of getting a reservation. About 90% of renters come from his Airbnb, but also use Booking.com and VRBO.

gray sofa in a small house

Always choose neutral furnishings for rental units.

Steph Douglas



Here are my top tips for making money from your tiny home

  • Keep your pricing fair and flexible

Some people don’t want to lose their renters because they don’t want to lower their prices. I came up with the price through trial and error and used an unofficial formula instead.

If you don’t make a reservation at least 5 days in advance, we’ll give you a $10 discount per night. If there are no reservations for the next day, we will reduce the price by another $10.

Every time you change the price, the algorithm boosts your search. So not only will the low price attract more people, but more people will see your listing.

  • Change the title of your online listing frequently

A bedroom in a small house.

I shop at thrift stores to decorate my little house.

Steph Douglas



If you change rental titles frequently, the algorithm will increase it. We like to call our little homes “cottages,” but sometimes we change the way we present the location and decorations to keep things fresh.

  • Be cute, but don’t break the bank

Having cute furniture goes a long way. However, most of our furniture comes from thrift stores and goodwill, so we recommend going to a few different stores over the course of five days. You can find everything you need very cheaply.

I like to stay neutral with big things like sofas and comforters. Also, people love plants.

  • Management company is worth it

I use a management company and they do the cleaning and coordination with the renters. The company also helps you find furniture and prep your property. That’s the only way my rental unit actually generates passive income.

Before joining the company, I worked with my fiancée as a tag team, and it really felt like a part-time job. But now it’s almost completely interference-free. No need to worry about guests or problems. All processed. She may spend two hours a month on the rental, but only to make sure bills are paid and so on.

We will bear 30% of the management fee. — 20% property management fee and 10% cleaning fee for a total of 30%. Cleaning fees are based on the number of individual reservations per month, with a 20% administration fee based on the total number of reservations. It varies considerably from month to month.

My mother actually works for the management company I use, but I recommend using a management company that specializes in short-term rentals. It’s not cheap to use one, but it’s worth it for me because you don’t have to do much real work.

Get into the real estate game sooner than you think

On average, this tiny house earns $3,500 a month. And when you pay the maintenance fees, the mortgage, and the mortgage on the tiny house, you’re basically breaking even. But I can live in the house without a mortgage.

Pouch

Added a porch to attract renters.

Steph Douglas



I have since purchased two more small homes behind the rental property.

Many believe that there is this huge barrier to entry into real estate. However, the government wants to buy a home for the first time, and in some cases offers incentives. So you can put 3% or 5% down, but not really that much.

If the median home price is $500,000, that 3% is about $15,000. And we need to account for closing costs of about $10,000. So I think you need $25,000 to get started.

Partnering with others is another way to make home buying more affordable. I am with my fiancée, mother and sister. Beyond just asking people for money, I put a 50/50 on the house to make sure we all benefited.

From there, you can rent it to a roommate, Airbnb it, or rent out a lawn space to park your RV. Then use the money you would have used for rent to buy another house.

There are so many ways to get creative, but the power that comes from eliminating mortgage payments and rent cannot be overemphasized. Then you can use that money to buy more properties.

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