Shampoo and Booze Episode 10: We Bought Another Rental!

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Yes, that's correct. We have been looking for a few months and we finally bought a second rental. We are very excited. Check out some photos below to see what we saw (lots of cool potential, nice view, solid bones). Also see how insane it is that people rent houses in our area in this condition. The horror, oh the horror!












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80 comments:

  1. Congrats guys! That place is going to look awesome when you're done with it. Looking forward to listening to the podcast

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  2. Wow! Love those windows! Looks like an amazing place. I hope you guys will do progress photos as you do the renovation. Congrats!

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  3. Congrats guys!! The place is awesome! Can't wait to see how you guys transform it.

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  4. Do you guys have a general idea of how much money you're going to put into it within the next 6 months?

    We're in the early stages of getting prepared to buy our first house so the idea of looking at a house and knowing (or trusting an inspector on) which parts are potential money sink holes are super mystifying. If you could address in a future podcast (or here in the comments) some examples from your previous purchases on how you got up to speed with demystifying potential repair issues. Did people point things out to you and say, "see this? it means x, y and z which could cost between $XXX & $X,XXX to fix" which informed you on how to see things in the future. My biggest question is always, how do you know you're not buying a money pit? What are the elements that make a house a money pit and how do you avoid them (or embrace them)?

    I wish I had a better language in regard to talking about buying & fixing houses. I love AffordAnything.com, it really inspires me to do what you & Paula are doing. Are you guys familiar with Afford Anything? She wrote a great 4 part article about an apartment that she had been doing 1 year leases on and turned it into an AirBNB. I love that she is transparent with her money and her effort.

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    1. I follow Paula's blog. She has great info though her approach is different from ours. She's all about monthly rentals vs our rent-by-the-night model. She makes about $6k/year a home passively. We're aiming for $40k/year with active management. Different strategies and lifestyles.

      If you've read her posts when she buys a house (I think she's up to 5?), she mostly knows what the issues are. But she's also written about how they uncover rotting wood and other issues that unexpectedly need to be fixed.

      If this is your first home purchase, it's smart to get a home inspector. He/she will see stuff you don't. And anything the inspector misses, you just deal with it. Unless you're buying a huge giant house, anything can be fixed for a reasonable amount. More square footage just means more potential issues.

      On this new rental, we'll probably spend about $30-40k renovating. This will include new windows, AC/Heat, metal roof, deck, kitchen and bath. But this also means that we'll bring up the quality of the whole house way up. We're adding another 30 years to the house with this investment. We also don't like to cut corners because it allows us to charge more per night for the rental. Good luck!

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    2. $30-40K doesn't sound insurmountable. You give me hope. Thanks!

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  5. Love it!!!! Can't wait till we can rent it!!!

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  6. The view is incredible! Looks like it won't need as much work as the farmhouse, right? So you can probably have this one up and ready for renters really soon, maybe.

    I am envisioning that Jay has a detailed project plan for the renovations and a timeline for everything.

    Congratulations - this is SO awesome!!

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    1. Much less work, but we're still going to invest in some big ticket items (roof, etc) so it can last another 30 years without little maintenance. We're hoping we can rent it in six months.

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  7. Wow! That's so awesome. Congrats to you both! All your hard work is showing in such a big way. Can't wait to see it when you're done with the renovations. Love the barber chair.

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    1. you know i already put the barber chair on ebay!

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  8. Congratulations! The "bones" of this house are great, and the view is wonderful.

    Guys, I wonder if you could touch on "big picture" finance.
    What i mean by that: what are your strategies for retirement? Are you investing in real estate instead of retirement funding, ie IRAs, 401ks, etc,
    Also, given what you know now, do you think a college degree is a good investment (or up to a point.)
    Many thanks, and again, congrats!!!

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    1. Sure. Here's a quick big picture. Ryanne is 36. I'm 42. Our goal is to own outright several income generating properties. We hope to have them completely paid off in 5 years. Then we'll own the assets plus make money each month. We are slowly building up IRA's, mainly for tax relief purposes. Retirement for us means having no debt with some income generation. If we can get to the point where we can invest our money in an index fund. All the better.

      It's difficult to say that education is a bad thing. Ryanne and I both graduated from college with only $20k in loans each. Anything bigger debt seems suspect to me. I just had a liberal arts education so didnt learn an actual skill...more just learned how to learn. Did I need? Who knows. When I was 18, I thought going to college was what I needed to do.

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    2. Thanks Jay. Appreciate your feedback and candor. I am raising two kids, both tweens, and trying to decide gow to best set expectations for them. I no longer believe that college at any price --- or even very high price-- is the right answer. I find your business and life strategy very interesting and an interesting hedge against globalization. Thanks again.

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    3. The fact that you're asking these questions with your kids in mind is great. Some people do great going to school and learning a profession. We need doctors, engineers, pharmacists, etc.

      We're just art kids who make things up as we go along!

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  9. Love the view. Congrats. Let the fun begin

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    1. Thanks Ronnie. Just saw that you're from Barnstable. Mass in the house.

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  10. Hi guys, OMG this place is so awesome! AND I get all you are saying, and love your approach! SO very happy for you! WOW you go! :) Hay my 2 cents lol, if you can save any of the wood bones? I love that Howard's Restore a Finish for real wood and then the beeswax conditioner after to polish and soak the wood. Good luck with this, I just signed up, also me on eBay, love you both! Blessings, health, wealth and more to both of you! Thank you for always sharing! Sometimes I wish I was younger! lol so I could do this too! Apparently only in my dreams, but that is okay, I am living through your work and fun and passion about all of this! :) I am grinning here, so happy for you! Kat :)

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  11. I've got an idea, start a house cleaning business. You can hire even one cleaner for you growing rental portfolio and since you are in a rental area you should be able to pick up a few other accounts. Have other landlords pay to clean your houses. Thanks to the great shows!

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    1. This is an awesome idea. We're still in the stage of not wanting to hire people. Seems like more stress and not less. But if we could get over that hump, we have thought of even starting a rental management company that would include cleaning.

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    2. Or just charge a cleaning fee for every person that books a rental. Then on the days you need to hire someone you'll have an abundance of money for that without losing your rental income.

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    3. yeah i think one of the houses is going to get a cleaning fee soon to help us juggle the cleaning.

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  12. Congratulations guys! That place has so much potential, can't wait to see what you guys do with the space :) Thank you for sharing your journey with us.

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  13. Congratulations - amazing views! Hope you have some "before & after" photos when you are done. And that old barber/dentist chair is awesome - hope you keep it and make it fit in somewhere!

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    1. oh no, that thing is already on ebay!

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    2. Oh my gosh, I just found the listing. That is one of the coolest ones I have ever seen - good luck with it!

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    3. yeah it's a beauty. i hope someone buys it, so i can get it out of the house before we start work! i love the green.

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  14. Wow love it . you guys are a inspiration and hard workers good luck with the new rental looks awesome. Mark

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  15. Absolutely beautiful. Congrats guys! Looking forward to see the progress.

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  16. Did the people leave ALL that stuff? Chairs, bookcases, tv, books?

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    1. Yep, we bought the home fully furnished. It's been a rental since 1998 so it looks like it's same decor and furniture from then. This is why Ryanne says she can't believe someone rented this. It's pretty junky.

      25% of the stuff we'll keep.
      25% we'll sell.
      25% we'll try to either gvie away, or unfortunately throw away. Anyone want some old couches?

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    2. haha, jay's math is off. we're going to get rid of most of it. and try to sell some of it. the rest gets donated.

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    3. I'd like to see you keep a record of how much money you get from the items sold. - Maybe it could be a line in your weekly numbers on the other blog.

      Crystal

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    4. yes, since stuff will be selling in the usual manner (mostly ebay), that will be listed on our weekly numbers. if we sell something through craigslist, we'll add that over there too.

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  17. Could you stagger check-in/check-out times enough that you could do both houses in the same day, if necessary?

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    1. This is another strategy we've thought of. Might be the one we use. I know we'll figure it out. It's a luxury problem if both rentals are booked back to back to back.

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    2. Just another thought since y'all seem interested in the economy of your area, from what I've picked up on as far as your interest in revitalizing downtown, etc., is if you hire a local cleaning business to clean the rentals you will be stimulating yr local economy and giving people jobs. Just a thought if things get too hectic. Some independently owned cleaning companies will really work with you and often have great work ethic.

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    3. Very true. We need to get over the need to do everything ourselves.

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    4. I think y'all are doing a great job. Very inspirational.

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  18. Congrats on the new place. I love the Barber's chair. I am so happy you purchased a dishwasher!!!!
    My mountain condo also came furnished. Frequently 2nd homes/rentals are sold with the contents.

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    1. yes i love the dishwasher, it's an apartment sized one that is 18" wide. same as the ones we had in Amsterdam. i loved them, they were perfect for just the two of us.

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  19. Wow...very cool! Congratulations on the new rental. What a view! And, looks like the setup of the rooms is awesome too. Lots of work, but fun when you can really see the progress coming along.

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  21. I love the name of this channel and wanted to congratulate you on the house. You will have so much fun renovating. The view from those windows is absolutely amazing! Look forward to seeing the progress. Good luck with it!

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  22. I love it guys! This place is going to be amazing when finished. Ryanne, I get this Ralph Lauren design vibe when I looked at the pics. Plaids,leather, suitcases, deer heads, ski decor. Ahh! Woolrich blankets and a Christmas tree with the big retro bulbs! A wagoneer parked out front would be just picture perfect. I'm so excited for you.

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  23. Omg you guys this place is amazing. I love it.

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  24. Wow. How exciting. I have to say that I was so excited to hear about this that it felt as if I was the one that bought it. LOL. So cool for you guys. You come far since buying your first place...how awesome. Best of luck to you both in this new venture!

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  25. Good for you on the new/old house! Best wishes. The decor can only improve from here LOL. I may have to rent it when I go visit my Cape Cod Ebay buyer next year. Glad the dental chair will be gone. And Please no deer head in my bedroom. :-)

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  26. It's so gorgeous! It almost makes me want to move to your area of the country. Congrats, love the house and the views and especially love how happy Ryanne looks in the photo with the key in her hand.

    Congrats to you both.

    Crystal

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    1. almost makes you want to move here? you should absolutely move here!

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    2. I'm in southern Indiana - near the Ohio river. It's a LCOL area, with nice people and we have pretty scenery too. But, the views from my house are nothing compared to yours.

      Crystal

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  27. This house is absolutely gorgeous. It will be wonderful when you renovate it. Btw, you probably need to talk to your CPA but the financial gurus always say once you get houses to rent, to set up a separate lcc for each one. Just a thought.

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  28. Totally happy for you guys and totally jealous lol. When you said you were taking a trip to Ireland next year my mouth fell open. I have always wanted to go there esp after taking an ancestory DNA test a few years back and finding out I am way more Irish than I thought. I do think you'll eventually slow down on EBay. There's just not enough time to do it all. Or at least hire help. It may be one of those cases where time and hassle override the money. Just think of it as a return on EBay. Less stress to just take a return and lose a little money than fight a customer. But congrats guys. I'm excited to hear more! I think if you went into the rental talk a little on your other site it would bring more ppl over to hear the rest. Just my opinion. Good luck!

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  29. I'd like to know how difficult the mortgage loan process is when your primary income is selling on eBAy. Also, is it difficult to acquire homeowner's insurance since you will not be occupying the home during renovation? I also wondered if your primary source of income is actually your eBay income, or your video editing periodic work. I'm asking because another well-known eBay seller, on her blog, talks about the difficulty of obtaining a mortgage loan when eBay is your primary income. Love the house, even as is! Congrats.

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    1. Yep, eBay is our main source of income. When we do our taxes, that's where the money is for us. The other work we do + rental income is bonus.

      When we bought our first home in 2009, our income was a mix between eBay + occasional freelance work. As you mentioned, the bank didn't like that we had inconsistent income. We'd only been selling on eBay for a year so couldn't prove it was regular money. We ended up buying that first house in cash because a bank wouldn't give us a loan. It was a $70k foreclosure. We cashed out our 401k and IRA's to purchase it.

      Once we had our first home renovated, we could go to the bank with an asset since it was paid off. By this time (2011), we could show three years of our eBay income. Our bank now sees that we have a history of running a business. Usually three years of eBay income will convince them you're solid.

      In our case, it might also help because we deal with our tiny, local bank with three branches. They know us. They know our area. Relationships matter. This is different than dealing with Citibank through a mortgage website where its all just crunching numbers.

      And lastly, it feels like buying your first home is always the most painful. No one trusts you. You have no history. Unless you have all cash, it's a leap of faith.

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    2. I find home loans funny. There was a time where I couldn't get a Walmart credit card but I could get a loan for over 200,000 dollars from the bank. And that's what I did. Although in hindsight we settled too quickly on this house and we've already outgrown it. We bought it cheap so we could pay it off quick then they did their magic and turned it into a 30yr loan. So we're stuck here now.

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    3. you just summed up why the subprime mortgage meltdown happened.

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  30. Here's an idea to fill dead space where no one's renting. Why not raffle off a free night to your listeners or give away a free night to a blogger who will write about their stay. Free press.

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  31. OMG that is so cute!! Gratz on buying your 2nd good luck with it and hope it does Great!

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  32. Just lovely, and those awesome windows and that view!!! Does it connect into a trail network of any kind? Looks like a great place to go hiking/riding/x-country skiing in Winter. The place we are in love with currently (and are preparing an offer for) also has a spectacular view. They are also set up for horses with trails. We are thinking that offering a place where people can rent AND bring their horse might be a good niche in the airbnb market. It's hard to travel when you have horses - so we are hoping people would want to come AND bring their horse along. Will keep you updated. Great podcast - can't wait for the next one. Cheers, MM

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    1. There's National Forest across the road, a public Lake around the corner, and a River Outfitters a block a way where you can rent tubes/canoes to float the river.

      What kind of place are you considering buying? Would you own all the land that had trails, or would that be public land?

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    2. National Forest across the road - sweet deal you got for sure! The place we are looking at have some nice trails on the property itself (and nice open spaces too), but the area around there has lots of snowmobile trails (that actually go all the way to Canada!) that the current owners use for their own horseback riding excursions. There is also a lake in the town that you can also ride on trails around. And the view is likely not to change much because the closest mountain you can see is protected government land - kind of like in your case. We walked the property with the owners (14 acres), and it is just lovely. It is kind of similar to where you live - dirt cheap to actually live and not much going on in the town itself, but tourists (also from Mass and Canada etc.) come to the nearby areas for recreation as it is a big lake and hiking area in Maine. We are getting all our papers ready right now. The one surprising thing we have found is that several insurers will not insure log homes. Strange to me seeing how they have such quality construction - at least the ones we have looked at. Anyway, I am rambling on now - just so excited :-)

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    3. And is this specifically a rental property for you? or your new vacation home which will be rented when not in use?

      I just ask because the IRS sees any property that use personally for "x" days as a second home vs rental business. You'll need to fact check me of course and check the number of days, but the distinction makes a difference when you write off expenses on this new home.

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    4. Yes, we are talking to our accountant about these very distinctions and how to go about it. We would like to do a combined thing where we use it but also rent it out when we are not. We are also planning to rent out our own house during a large part of the Summer and stay at this other place because where we happen to live is walking distance to the ocean and beaches that tourists frequent in the Summer. We rented out our house (fully furnished) last year when we spent a year in Norway, and it was a great experience. I like the idea of flexible living and not be too attached to any place, but make any place feel like home.

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    5. If you afford the flexibility, then that's a great dream.

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    6. Yes indeed - and a great motivator to keep listing on eBay on the side. Everything is going towards that dream right now!

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  33. Now that you guys are multi-commercial property owners, have you considered putting one or both if your properties into an LLC to protect your personal assets, ie your residence? Just curious!

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    1. Not yet, but give us the pitch.
      --What's the argument to put our properties under an LLC? What scenarios would it protect us from? We have renter's insurance.
      --How would you apply for an LLC? How much would it cost us a year?
      --How would it affect doing our income taxes?

      We like to be smart, but we also like to keep things simple. There has to be good reasons to make things more complicated.

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  34. OMG THIS IS SO FREAKIN COOL! I am so excited!!

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  35. My question is, Is there a driveway in the back or do you have to use the stairs to get in?

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    1. Only the stairs. We can use our neighbors back driveway if necessary for supplies, but renters will need to walk up the stairs.

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