Welcome to the September 2018 rental income report! Gross rents were the same as last month, as I STILL had one vacancy in my duplex. Oh yeah, I guess I should address the elephant in the room.... This month, I was at NEGATIVE cash flow. Yup, fun times. 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 SEPTEMBER 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. BUT, my property manager conducted their 6 month interior/exterior inspection (LOVE that they do these), and there's a little water damage in my living room ceiling. So, I'm expecting a repair expense next month. Other than that not-so-great-news, it was a straight month where I took full rent and paid my mortgage, property taxes, and insurance: Income Gross Rents: $995 TOTAL: $995 Expenses Mortgage: $346.25 Property Taxes: $216.32 Insurance: $44.50 Property Management: $89.55 Repairs: $0 TOTAL: $696.62 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 vacant and on the market for rent. Here's where things get interesting. I paid my first mortgage AND I paid off my renovation. This property was in pretty good shape overall when I closed on it, but still needed a little work to get the vacant upstairs unit up to speed and on the market for rent. A lot of basic work was taken care of (general painting, landscaping, new outlet covers, fixed flooring, new bathroom fan, two new garage door motors). It wasn't too bad AND luckily I asked for $4,500 back in credit at closing to pay for these repairs. Here's how it breaks down: Income Gross Rents: $850 (only 1 of 2 units rented) TOTAL: $850 Expenses Mortgage: $654.36 Property Taxes: $221 Insurance: $60.50 Property Management fee: $85 Repairs: $6,918 TOTAL: $7,938.04 Credit Credit at closing for repairs: $4,500 Income ($850) - Expenses ($7,938.04) + Credit ($4,500) = Cash Flow from My Third Property: -$2,588.04 FULL PORTFOLIO CASH FLOW: -$2,289.66So, you can see, my portfolio is VERY MUCH in stabilization mode. But, repairs are taken care of now and getting a new tenant to fill my vacancy will be amazing and should get me back on the positive side of things next month. Remember, real estate is a LOOONNNNGGGGG 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! -Tyler
6 Comments
umair
10/14/2018 07:38:54 am
Tyler, good luck. You are doing amazing so far. Keep up the high spirits
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10/14/2018 03:15:37 pm
Thanks Umair! Negative cash flow months are all part of real estate. Luckily I planned for these renovations!
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Rick B.
10/14/2018 08:46:36 am
Nice work, just keep buying smart and moving forward.
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10/14/2018 03:17:03 pm
Thank you Rick! You bet I'll keep moving forward!!
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Jason F.
10/14/2018 05:29:17 pm
Not sure if you’ve listened to the Jason Hartman Creating Wealth podcast. He likes to say that you need to know how to “keep score” when investing in real estate. Yes the cash flow is great but its not the only way you get paid in real estate investing. I remind myself of that in those negative cash flow months. Keeping score being — “inflation induced debt distraction”, appreciation, depreciation, mortgage interest deduction, tenant paying down the loan and of course — cash flow.
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10/14/2018 09:38:22 pm
You're 1,000,000,000% right Jason!
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