Dome Rentals: A Much Needed, Profitable Project

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.

Why:

The Monolithic Dome rentals are designed and built to solve housing problems. There is a huge portion of our population that traditional construction does not help. Two thirds of all those that rent housing in America are one or two to a household. Of those 40% make less than $8 per hour. They live on the edge, they need help, and it can not be furnished with traditional housing.
Traditional housing is built for families. Traditional rentals are built for families. Some are smaller for the one or two but most are not. Traditional rentals are built using HUD guidelines as to room sizes and construction. They have traditional power bills, fire hazards, and in a word are traditional.
The hotel industry has known for a long time there is a need for the “extended stay” units. They are everywhere. Many are high end and serve as retirement hotels. Many are motels in “less than desirable” condition in out of the way locations. They are not designed for extended stay it just works that way. In general most of these units are expensive to heat and cool. The fixed cost are relatively expensive and must be passed on in the rent prices.
In a few places SRO's (Single Room Occupancy) have been built or converted from other uses. These are the modern equivalent of the “Boarding House”. SRO's are often found in the large cities such as Chicago and New York. Most are not designed as SRO's but converted from hotels or old office buildings. They suffer from high fixed costs.
Monolithic construction is more expensive than traditional rental unit construction on a first cost basis. It therefore can not help in the low cost arena based on size built. So the decision was made to look at the size and uses of the low cost housing. First as anyone knows the U. S. Market has gone crazy with building bigger and bigger and bigger. Large sizes have been institutionalized. Only in America do we build homes in halves. One half is to be used in the day and the other in the night. Why? Why? Because we can and have been able to for decades. But the need is so great to provide housing for less we must rethink some of our traditions. And we must provide such housing at an affordable price to all segments of our economy.
Who are these that need the less expensive housing? They are the HIDDEN. Where are they hiding? -– in plain sight. For fun try and experiment. For the next few days count all the people you see and or interact with in the service sector. They are cashiers, waitresses, cleaning personnel, delivery, store clerks, janitors, lawn and landscape, students, and on and on. Make a count and it will astound you to verify that they make up such a huge portion of our population. They are honorable great people. They are your sons and daughters, cousins, parents, newly weds, etc. They need a clean serviceable place to put their heads at nights – one that is safe, secure, and affordable for them on their income level.
So Monolithic made the decision to make their own guidelines for construction. The United Nations years ago published a guideline for world housing. It called for a habitation to have 28 square meters (302 square feet) of space for a family. The chinese use one ping (6 ft. x 6 ft.) per person. These are small spaces but we find that properly designed they work well in the developing world. Monolithic decided that one or two people could get along well in 314 square feet and later revised it to 200 square feet if more affordable. These sizes would not work under traditional home guidelines, but they would under hotel/motel guidelines. Hence the plan to build extended stay hotels, motels, or cabin camps. We now have 80 of these renting and another 36 under construction. Most of the time we have a large waiting list of potential renters.
In the past to make rental units affordable we have a bunch of government programs, subsidized rent, Section 8 vouchers, subsidized interest, etc. Monolithic decided to forgo government participation to help solve this problem. By building Petite (defined as small and nice) units can be made affordable to construct. By using Monolithic technology maintenance and utilities can be kept to a minimum. The useful lifespan of a Monolithic structure is so long the amortization (or lack of depreciation) helps keep them affordable. And they are the safest buildings on the planet. As they are small and tough tenant damage is kept to a minimum.

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 $72.50 per week for the smallest Monoquad to $125.00 per week for the largest dome. That fee is less a $5 to $10 discount for on-time payments and includes all utilities paid.

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.

Project IV:

This project in now underway in Dawson, Texas. When finished, it will have 80 plus units. Eighteen of these are being finished now.

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:

Housing Assistance Council - www.ruralhome.org
National Low Income Housing Coalition - www.nlihc.org
H.R. 3995 - The Housing/Affordability for America Act of 2002 - www.liscnet.org/whatsnew/bfrspeech1.shtml
National Rural Housing Coalition - http://www.nrhcweb.org/news/index.html
Harvard's Joint Center for Housing Studies - State of the Nation's Housing 2002 - www.jchs.harvard.edu

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.

177 Dome Park Place - Italy, TX 76651
Tel (972)483-7423 - Fax (972)483-6662
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