Too Rent or Not to Rent? That is the Question…

As Jen and I are nearing the end of our renovations to our house, we are starting to make some moves on some positive cash-flow real estate investments. We recently put our lots up for sale. If we were to get what we are asking, we’d be about four hundred percent gain on both properties. Although, buying lots on speculation for future growth is sound, it is also a multi-year tying up of money. We have watched people around us utilize rent as a positive cash-flow medium. My daughter and son-in-law have not only invested into the nightly rental business through one of the well-known nightly rental apps, but they have also been successful at renting long-term to renters. I have a cousin that runs a successful business that has nightly renters lining up for more and more availability. They have asked if we’d be interested in buying a house in their housing addition and allowing them to rent out to fishermen. It is an intriguing idea and one, that on paper, looks pretty lucrative and certainly something that is more positive in the positive cash-flow and more plausible in recovery of investment. We haven’t done anything since retiring that has been a negative thing, but we have taken money off the table as working money for ourselves. Certainly, long-term growth, but we wonder for who’s benefit, our children or ourselves?

I certainly have no problem with our kids profiting from our life and lifestyle after we are gone. Can’t take it with you as the old saying goes. But we should not align our lives around making sure they’re set for life. I think it a much better notion to live life to our fullest, create and build our estate or business or whatever it becomes. For sure, an LLC for our future is a must and transfer of ownership to the LLC on all properties, including our main house, to make a lot of sense and probably a prudent solution to our worried minds. In other words, you never want your property or business to be in a situation where people can sue you and have access to your personal property. It is much harder to sue and much easier to protective with a limited corporation of some kind.  I remember years ago, one of my workmates taking a course in the virtues of an LLC. He had even taken one step further and incorporated in Nevada as it was the friendliest of states in protectionism towards LLC’s. It used to be Delaware many years ago, and I think maybe this is something to add to the long list of questions as we seek answers to hopefully ease our minds and make us more knowledgeable on the ins and outs of property ownership and management.

When we retired, we had dreams of what retirement was going to look like. Anyone would be nervous heading into the unknown, but we have always done fairly well in these situations. Everything has been right on track for that vision with the exception of a money-making activity that didn’t involve alarm clocks and schedules. I’m pretty open to anything as longs as it doesn’t rob me of my time. I worked for over forty years; the rest of my time is mine. But that doesn’t mean I have to sit idle and watch the trees sway and the birds fly from my rocker on the porch. We’re two reasonably smart people with the ability to accomplish anything we set our minds too. And setting our minds is exactly what we are trying to do. We want an income that we don’t have to declare as hourly income and we can avoid affecting our pensions by constant turnover of any profits as re-investment. There is this law with all of them where there is a cap to your earnings when drawing pensions like Social Security or my OPM government pension. Beyond the cap, depending on the amount above the cap you’ll start losing portions of our pensions. That amount of earning isn’t very big, something like twenty-eight thousand each. It’s not devasting if we did. It’s just that we worked a long time to get the luxury of being paid not to work. Now if I could turn a profit that was large enough to make it a point of not caring, well, maybe I’d have to rethink my ideas on the subject. For now, though, until I could prove other possibilities to myself, I’ll still press the need of not making too much money. Sounds stupid, but it is a real thing and more people who are retired are faced with it than you probably imagine.

So many questions and so many things to ensure are in place to make an investment into a rental. First and foremost being honest of intentions with the mortgage company. Agreeing to the twenty percent down required, ensuring a good warranty deed without encumbrances, having a good understanding of the number of days a year rent is possible and making sure that it will cover the mortgage, interest, insurance, taxes, management fees, cleaning fees, HOA fees, etc. Then how many days do we get to enjoy the property and how much time will we have to perform maintenance and improvements? I certainly have a lot more questions than I do answers, which means I have some real work to do that I’ve been avoiding. I know forming an LLC is essential and something we need to get moving on. Renew our approved purchasing power from the mortgage company and make sure we understand their rules and reinvestment incentives offered. Work, work, work. Geez, this is starting to sound like a real job, but maybe that’s what I need. A purpose to give me some satisfaction with myself and spare time. There isn’t much, but what I do have is bugging me that I have no outlet to fill the need of productivity. I’ll get there, just need to put my nose to grindstone and line things up. I’m pretty sure that for a little effort now, I’ll get my freedom back and I’ll turn the question of “Rent or Not to Rent” into a statement to others and not an uncertainty in me.

The big question now is this about this house we looked at today. We missed an opportunity two years ago and for a price that was much more plausible. Then we looked at another house and made a bid on it a year ago, not coming even close to an agreement. We even bid on a trailer that simply the best move was to donate the trailer and tear the outbuildings down and start from scratch. I think now we are glad that didn’t come through, but it did finally sell and the man that bought it is ripping everything out and building a barn-dominium. What we discovered is that we’d have been deeper into that project than the current solid pier and beam house we are thinking about. The fact of the matter is that it provides everything our fishing cousin and husband need and with a little deck creativity could be one of the coolest outdoor living spaces on the lake.  I like the idea of not spending much money after purchasing it. And on the flip side, (get it, the flipping homes reference) building a multi-tiered deck system with enclosed screened spaces, outdoor shower, covered areas, and finishing the wraparound porch, we’d be able to get our money back and more with the rental income and others paying it off for us. So easy to think about, but I know there will be a hiccup somewhere that we’ll have to overcome or simply deal with. Getting buyers for the two lots we are holding would free some things up and allow us to do pretty much anything we want to do to this place of consideration. Literally the only thing to do to the inside is paint a color Jen likes, decorate, and put a cute shower curtain up. Outside would only need to be painted, not because it needs it but because I don’t like the blue color. What would be cool is to paint it some color that blends better to the natural surroundings. As long as it isn’t yellow, blue, red, or purple or any of their variants, I’ll be happy. It does have a red metal roof, so I’ll have to deal with that, but for conformity, the separated garage should be the same color coordination including the roof. And why is it no one stain-protects their decks? A pecan-colored stain sprayed on would take so little time and protect for a lifetime. It’s almost like people want the weathered look because it is some normal thing for lake living, well, in come the Coloradans, we’ll dress up anything we get. Again, I’m thinking we can’t let another one slip through our fingers. But I’m waiting on Jen to say go ahead or that she wants to pass. My mind is made up, but I like to defer to her as she’ll have the creative process and with everything else in our lives, she is the leap forward person and I’m the conservative, except for property investment. My part is easy, write checks and build, stuff I love to do, hers takes a little more vision. I guess in the meantime, what would be a good name for the LLC? Will-Bow Collective, Jen-Bud Investments, JBEJTKC Group, or the old idea from twenty years ago, Seven-Hearts Ranch Investments? Maybe some other catchy name like all the grandkids initials? I wonder if there is some phrase using only the initials of the fifteen of us. I like word grams; I’ll have to work on that today. I see a lot of discussion happening today and maybe, by the end of the day, we will know the answer and move forward with all the necessary steps. I’m excited and hoping I don’t need my five o’clock beer because I’m frustrated, but instead because I’m pumped up and excited. Time will tell!