Business with little start-up capital: Texas girl buys mini-houses and rents them out

Steph Douglas, owner of 29 houses and apartments for rent, and co-founder of Open House Austin, told the publication Business Insiderhow buying just one house allowed her to start a thriving business. Next - from the first person.

Photo: IStock

I bought my first house in 2013 in Austin, Texas, when I was only 24 years old. I didn't even think that I would ever buy another one, but now I have 29 apartments and houses for rent.

When I bought my first house, I taught high school math and didn't have a very high income—started with $43 and ended my 000-year career with about $7 a year.

At one time I decided to rent out part of my house for rent, and since then I have been using the property to generate income for myself.

For example, the tiny house in my yard fully covers the mortgage on the house my fiancé and I live in.

Started by sacrificing my space

When I bought my first house, I rented out part of it. Then, as soon as she moved and bought a second house, she rented it out on a long-term basis. But even in my second home, I rented a room through Airbnb.

In the end, I got tired of sharing my space. I had to sacrifice my personal life, and I'm tired of it.

That's when I switched to tiny houses - they became the best way for me to earn money without sacrificing my own space.

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People often overlook their yards, but there is valuable rental space there.

My first tiny house was a converted garage already in the yard. But be sure to make sure you live in an area where you are allowed to rent out part of the yard. You can check this on your city.gov, like Austin.gov.

Preparing my garage for rent took a lot of time and resources. I found that buying ready-made tiny houses was a much better option.

Tiny house with all the finishing work inside cost $89

I bought a pre-built, fully finished tiny house from a local company called Creative Living Solutions for about $89 including shipping and fixing (which secures the tiny house in place).

First I paid 20% of the installment, or about $18, then took out a loan for the remaining 000%.

We pay real estate taxes on all properties, I also paid a tiny house tax of 6,25% on the purchase, just like when I bought a car. Utilities average around $125 for electricity, water, sewer and trash.

The tiny house had just about everything—counters, a refrigerator, and a microwave. All that's left to do is plumbing and electrical. So we added connectors to our lot and hooked up the tiny house. In addition, a tiny house was sheathed to cover the cinder blocks and wheels. All these additional services cost us about another $10, which we took from our savings.

After delivery, the tiny house was ready to be rented out within 10 days.

I was afraid that people would not want to rent it, but orders poured in

We rent it for a short time, it is booked from 80 to 99% of the time. About 90% of our tenants come from Airbnb, but we also use Booking.com and VRBO.

Here are some of my top tips for making money from your small home.

Be fair and flexible in pricing

Some people don't want to cut prices, which is why they lose tenants. My tiny house costs between $79 and $200 per night depending on demand. I came up with my price through trial and error and used an unofficial formula.

If it's not booked in 5 days, I drop the price by $10 per night. If it's still not booked the next day, minus another $10.

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Every time you change the price, the algorithm moves you up in the search. As a result, you will not only attract more people with a reduced price, but more people will see your ad.

Change the name of your online listing often

Change the name of your ad from time to time - this also raises it in the algorithm. We like to call our tiny house "The Cottage", but sometimes we change how we describe the location or decor to give it a certain freshness.

Make the interior cute, but pay attention to prices

Having beautiful furniture is of great importance. But most of our furniture comes from second hand stores or Goodwill. I recommend visiting several different stores over the course of 5 days and you will find everything you need at a very low price.

I like to neutralize large items like sofas and blankets. But then spice them up with throw pillows and things that are easy to swap out as trends change. In addition, people love plants - even artificial ones.

The management company is worth it.

I use a management company - she does cleaning and coordination with tenants. The company also prepares the property by looking for furniture. This is the only way to make your rental properties generate passive income for you.

Until we hired a company, my fiancé and I did all the work together, and it really felt like a side job. But now we hardly interfere. I don't have to worry about guests or any problems - everything is taken care of. I put in maybe 2 hours a month and that's just to make sure my bills are paid.

We spend 30% commission on management

I pay 20% for property management and 10% for cleaning, so that's 30% in total. The cleaning fee is based on how many individual bookings I receive per month, and the 20% management fee is based on the total amount of the bookings. It may vary slightly from month to month.

In fact, my mother works in a management company whose services I use. But I recommend using the services of a management company that specializes in short-term rentals. It's not cheap, but for me it's worth it because I hardly have to do any real work.

You can get into real estate sooner than you think

On average, a tiny house brings in $3500 per month. I pay management fees, my mortgage, and the tiny house mortgage.

I have since bought two more tiny houses. Many people think that there is a huge barrier to entry in the real estate market. But the government is interested in you buying a house, and in some cases encourages it. You can make as little as 3% or 5% deposit - and it really isn't that much.

If the average price of a house is $500, then 000% of that amount is about $3. And then you have to factor in costs, which is about $15. So you need $000 to get started.

Partnering with others is another way to make home buying more affordable. I was the partner of my fiancé, my mother and my sisters. Instead of just asking people for money, we bought a house 50/50.

Purchased properties can be rented out, turned into an Airbnb, or rented out a lawn so people can park their RVs. And with the proceeds from the income, buy new houses.

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