October 2018 - Income Report
Welcome to Jump In Real Estate's October 2018 rental income report! Gross rents were UP! Yup, all the way up! My units are now 100% rented. Phew. What a relief.
And...surprise! Here's the first sneak peak at the latest investment of mine. My Fourth Property officially closed on October 12th.
But, not everything is rainbows and butterflies...at least not yet. Cash flow still isn't where I want it to be...it's NEGATIVE for the second straight month.
See WHY below!
My First Property
I bought this single family house in December of 2016 and SOLD it in May of 2018. 2 Bed/1 Bath in a "C" Class neighborhood. NO OCTOBER INCOME. See how it performed HERE.
My Second Property
I bought this single family house in March of 2018. 2 Bed/1 Bath in a "B" Class neighborhood. It's currently rented to two medical students on a 12-month lease.
Another pretty smooth month as I had no repairs or maintenance expenses. It was a straight month where I took full rent and paid my mortgage, property taxes, and insurance:
Gross Rents: $995
Property Taxes: $216.32
Property Management: $89.55
Income ($995) - Expenses ($696.62) =
Cash Flow from My Second Property: $298.38
My Third Property
I bought this duplex in July of 2018. Both units are 2 Bed/1 Bath in a "B" Class neighborhood. The lower unit is currently rented to a young married couple and the upper unit is rented to a young professional.
ATTENTION! ATTENTION! This property is 100% occupied.
It took about a month to get the upper unit rented and it took a price decrease, but bottom line, I'm now collecting full rent on this property. Even with the price decrease on the upper unit from $900 to $875, I'm at least getting more than I originally expected and planned for. So, there's a huge win!
But, there were still a few last lingering repairs, which really cut into cash flow again on this property. On top of that, my property manager takes the 1st month's rent on any new leases. So, I really didn't make money on this duplex in the month of October. I lost money.
Gross Rents: $1,725
Property Taxes: $221
Property Management fee: $960 ($85 for Unit 1 + full month's rent for Unit 2)
Income ($1,725) - Expenses ($2,528.36) =
Cash Flow from My Third Property: -$803.36
My Fourth Property
This is an 80-unit apartment complex in Louisville that a group of partners and I purchased. It was acquired for $2.25 million and we're investing $1.05 million into it over the next 7-9 months. Cash flow isn't expected until July of 2019.
Well, I guess I'm throwing you all a little curve ball here. I JUMPED IN on a large 80-unit multi family with a group of investors. I'm really loving large multi-family right now because of the control you have with this asset class. In this case, we purchased a distressed property (under 60% occupied) and will be putting $1 million+ into it over the next 7-9 months. We'll raise rents on the units, which increases cash flow. And the beauty of large multi-family? The value of the property is largely based on income (NOI). SO, with us raising rents...we also raise the property value.
IF...and this is a big "IF".....everything goes according to plan, the property should appraise for over $4 million, we'll be ALL-IN for $3.3 million, and we expect 10% annual returns for the first few years. In 3-5 years we'll assess a refinance to pull most of our money back out. I'm excited to see how this all plays out over the next 6 months, 1 year, 3 years, 7 years...
FULL PORTFOLIO CASH FLOW: -$504.98
You can see my portfolio is still VERY MUCH in stabilization mode. But, with my units fully occupied and the last repairs taken care of (*knock on wood*), I should have a solid November. And once cash flow kicks in next year for My Fourth Property, the portfolio should be performing pretty well. Remember, real estate is a LONG GAME. We're all going to have multiple negative cash flow months over the years. It's just part of owning real estate.
***VERY IMPORTANT NOTE: even if I brought in positive cash flow after all my fixed expenses, I WOULDN'T TOUCH any of it! This income would all be going toward my next investment and any future expenses. I have a day job and side-hustles to cover my lifestyle expenses :)
If I ever get to the point where I actually want to take the cash flow (like when I head out and live #VanLife), I would still only take about half of the cash flow and save the remainder for future expenses. This is SUPER IMPORTANT! ALWAYS factor in future vacancy/repair/maintenance expenses. Make sure you know how to properly calculate cash flow HERE.
Let me know if you have any questions!