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Dome Rentals: A Much Needed, Profitable Project

by Freda Parker

Return on Investment

by David B. South --July 2002

Return on Investment or ROI is what we make on what we invest. If we buy a $30,000 rental unit with our own money and rent it for $435 per month ($100 per week), we receive 1.45% per month ROI. This is a net return, if we have no costs of renting, such as vacancy, depreciation, interest, maintenance, management, etc. If we could get 1.45% per month with no costs, we would be doing nothing short of fantastic.

But renting always has costs. If we can hold the costs to 20% of the income, we still get a very nice ROI of 1.16% per month, or nearly 14% per year (80% of 435 is $348. $348/$30,000 = 1.16%). This is especially good in today's investment climate.

In the next step, we factor in borrowed money -- a complicated, but not impossible, process. Let's say we made a down payment of $10,000 of our own money and we borrowed $20,000 from a bank at 9% interest, with a 15-year pay out. Our monthly payment on the debt will be $202.85 -- principal and interest. After costs and payment, we have $145 per month. This results in a monthly ROI of 1.45% on our initial $10,000 investment, plus repaying the loan in 15 years. So, no matter how you look at it, you have an actual ROI of 2% to 3% per month on the $10,000.

If part of your initial $10,000 can come from sweat equity -- your do-it-yourself labor or sweat -- the numbers get even more interesting, since your ROI can get much larger.

When evaluating a rental, or any project, you should shoot for a minimum ROI of at least 1.5% to 2% per month.

In my experience, the larger the rental complex, the smaller the ROI will be. Check it out. Simply divide the monthly rent less expenses by the value of the property.

"If you build them, they will rent." Monolithic's President David B.South has been saying that since mid-2000 when the company first began planning the building of an experimental complex of dome rentals.

Project I: Dome Park Lane

In February 2001, Monolithic Holdings, Inc., a then newly formed subsidiary, opened its first rental facility: Dome Park Lane. Its 17 units include furnished Monolithic Domes with diameters of 16, 20 and 25 feet that provide living space for not more than two adults and a child and even smaller Monoquads designed for just one person.

"The idea that governed the whole planning of Dome Park Lane and really became our goal was to provide clean, secure and -- most importantly -- affordable housing for low-income individuals," David says.

That idea or goal came about because of media reports and information on the Web about the growing, nationwide shortage of affordable housing. People particularly affected, in both rural and urban areas, included single men and women with minimum wage jobs, single mothers, senior citizens with inadequate or no pensions, and victims of work layoffs or company downsizing.

As this crises grew, it generated more concern and more reports, so that now our federal government, virtually every state and many cities have websites with information about their housing shortage and what, if anything, they are doing about it.

Texas, especially its small towns in rural areas, was no exception. In some places, cheap motel rooms that were neither clean nor safe, were rented on an almost continual basis. "Obviously the need was and still is there," David says.

Consequently, rental fees at Dome Park Lane were made truly affordable. They range from $67.50 per week for the smallest Monoquad to $110.00 per week for the largest dome. That fee is less a $5 to $10 discount for on-time payments and includes utilities.

But despite its low rental fees, Dome Park Lane consistently shows a profit!

Anne De Moss, property manager, says, "We quickly had a waiting list for Dome Park Lane. Vacancies are rare. The units do not remain unoccupied for any significant length of time."

Project II: Secret Garden, Italy

Experience with Dome Park Lane spurred the establishment of Secret Garden, Italy an equally successful, gated complex of four, 20-foot diameter units in the center of the small, rural town of Italy, Texas.

Project III: Secret Garden, Morgan Meadows

But the largest project, Secret Garden, Morgan Meadows, a complex of 56 Monolithic Domes is yet to come. Each Monolithic Dome Io20 will provide 314 square feet of furnished living space. The overall design of the complex calls for groups of eight cottages in a gardenlike setting. And since America's housing shortage is far from over, Morgan Meadows will also provide clean, secure accommodations at reasonable rates, fill a need and still be profitable.

How The Rentals Work

Monolithic's rentals are classified as residence inns. They therefore operate under motel, hotel, or inn rules rather than apartment rules. This classification has some important advantages. For example, renters at a residence inn can pay their rents daily or weekly. Unlike apartments, there is no demand for first and last months' rent and security fees, making it far more affordable and easier for the renter. On the other hand, should problems develop, the renter can be told to leave; 30-day eviction notices are not required.

Most units include a bathroom with shower, basin and toilet; a kitchen with stove, refrigerator, table and chairs; a furnished sleeping area; heating and air conditioning.

According to Anne De Moss, renters at Dome Park Lane and Secret Garden, Italy are asked to pay their rents on a weekly basis. She says, "If they pay on time or in advance, which most do, they get a discount. The Friday before is the deadline and we have a drop box, so they can actually pay late Sunday night because I wait till Monday morning.

"They can pay by check, cash or credit card," Anne continues. "We can arrange to debit their account and that way they get the discount automatically." In 18 months of operation, she has had only one check bounce.

Anne maintains a waiting list and simply calls the name at the top of the list when a vacancy becomes available. If that person is no longer interested, she calls the next one. She says, "It usually doesn't take more than one or two calls."

Screening is limited to asking about the number and ages of people wanting to live in a specific unit. "We don't want overcrowding," Anne says. "We know that a 20-footer cannot accommodate four adults or even two adults and two children. It's just too much."

But Anne does not do financial screening or ask for references. She does, however, ask for a 48-hour notice if renters decide to leave.

With Dome Park Lane, Anne says, they learned the need for very specific rules. Currently, Monolithic's Rules and Rental Agreement contains 23 rules, that Anne reads, one-by-one, to each prospective renter. "There's no two ways about it," she says. "They know what the rules are. Their signature acknowledges an understanding of those rules and they get a copy."

Monolithic has also designed its own Residence Inn Contract, a document that gathers vital data, such as the renter's drivers license number and emergency contact information.

"So far," Anne says, "our biggest problem has been smoke odor." Monolithic's rules allow smoking in units designated as "smoking cottages." But the smoke does leave an odor that necessitates using a cleaning-deodorizing solution called Odor Killer to wipe down the cabinets and walls.

Useful Links:

Related Articles:

Related Websites:

In addition to the above, many other websites maintained by individual states and cities offer information on their programs. A web search using the words "housing shortage" or "low income housing" should produce the web addresses.

 


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