In 1986, remodeler Roger Reynolds wanted to move out of his home office and establish a more dominant presence in the Lincoln, Neb., market where he works. He decided to rent space for an office/showroom, and found a centrally located 1922 Tudor-style building that had been a neighborhood grocery store. “But I didn’t want to rent it and have it sold out from under me,” Reynolds says. So, though he did not initially intend to, he purchased the building, and the investment has paid off.
On the first floor are the Reynolds Design + Remodeling showroom/office and two commercial spaces. The second floor has six apartments. “When the apartments are full, the rental income covers all our costs: mortgage, utilities, and insurance,” Reynolds says. “For the last 23 years, we’ve had ‘free’ showroom space.”
He and his office manager handle property management duties. “That got our feet wet being a landlord,” Reynolds says. “Since then, we’ve purchased two adjacent houses.”
One house has a detached four-bay garage that the company uses for storage and deliveries. Reynolds spent $20,000 to remodel the house to prepare it for renters. The second house needed $65,000 worth of work.
The buildings are owned by the company, so property maintenance and upkeep are business expenses. Reynolds’ field crew did the remodeling work, and staff continue to maintain the property. “It dovetails with our remodeling work. It works as filler in slow times,” Reynolds says, noting that the maintenance work has helped him avoid layoffs.
He advises other remodelers who are purchasing an office building to buy a property that provides another source of income: “We don’t have a $2,000 monthly rent payment and we’re establishing equity.”
Reynolds will make the final payments on all three properties in October. “I’m thinking of it now as a source of retirement income,” he says.
—Nina Patel, senior editor, REMODELING.