The rents were almost all collected and deposited by 1/5/2015, so the rental cash flow was consistent with previous periods. I do have one tenant that paid $400 for the first installment of the rent. The same tenant seems to struggle, but since she has been there for a while, I let it ride. Any new tenants I took in over the past few years, they must pay late fees.
So, as has been the case for a considerable time, all rents were collected in a timely manner.
I paid down my HELOC loan that I used a portion of to pay off a mortgage last August. What started as a $50K loan is now down to $4K. It will be paid off at the start of February 2015, just as the intro interest rate of 1.99% expires. I saved about $3,800 in interest in 2014 by paying off the mortgage, and will have an additional $13,740 in annual cash flow because of it.
January 2015 Rental Cash Flow
All rents were collected and deposited in the bank by Monday January 5, 2015 with the exception of $525 from one of my renters. She paid $400 on the first (or second?) in cash, but needed another week for the remaining $525. She was one of my renters that I inherited with the purchase of a property, and has always paid in full, typically buy the 10th. I do not charge her a late fee, as I was not really doing that for a few years after I bought the property.
A note to prospective landlords, always charge a late fee and you will avoid pate payments. All my tenants that came in the past 3-4 years pay a late fee, even if only a day late.
Current Vacancies
My duplex in West St Paul continues to sit vacant. I have been changing the ad every seven to ten days, lowering the price or changing the text just a bit. The price started at $1,300, all utilities included, which was ~$85 higher than it was. Listing the unit at $,1300 scares a lot of tenants, and makes it hard to complete with places that are advertised at lower prices and the tenant has to pay utilities. So, I have adjusted the price a bit, and it now stands at $995 + $225 for utilities. $1,220 total, which is about the same price as it was. I see that Section 8 will pay $1,270, but it is not worth the extra $50.
I also have deleted the ad, and immediately re-posted it on Craig’s. That gives a fresh date on the ad for anyone that is looking at how long it has been on the market. The traffic has picked up considerably, and I hope to get it rented, and a deposit in hand, by month end. I am willing to wait for a great tenant, as great tenants look for a place 6-8 weeks before they have to move.
I have had a considerably increase in interest since the first of the year, and have even turned down a few people. Dealing with a headache tenant is not worth it.
Vacancies Coming
I have three tenants that have sort of given notice. One has started looking for a house. The other two have notified me to help them find a home. I have a real estate license, so that will be an extra bit of income for me if I can help them. Last year when I received my license, it was one of the things that I knew would help increase revenue and make tenant turnovers less painful.
Maintenance Log Updated
I updated my maintenance log to include approximate times in minutes for each event. It does not include any trivial events that I immediately forget, or even questions that tenants ask about things unrelated to their tenancy, like computer problems or applying for credit. It also does not include maintenance items related to apartment turns, answering question from outside apartment agencies if tenants move, taxes, filling out Certificate of Rent Paid (CRP) forms, etc. Or even HOA Presidential or management duties that I perform.
It appears that it takes about 5 hours per month in my initial short analysis to handle emergency and maintenance calls, or about 12 minutes per unit, per month.
Last Minute 2014 Expenses
I was able to prepay several items such as Insurance and buy some supplies that I know I will need for 2015 improvements. Not a lot of expenses, but maybe $3K to $4K that would have been spread out over the next few months. That allows me to expense the items in 2014 and offset my income.
In 2016, my income will be much lower, as I leave my full time job, so it will not be as much of an issue then.
What was your cash flow for the month? Are you investing for your future in a 401K, IRA or other savings vehicle?
Sad to say, our area does not allow late fees.
Great strategy with the RE licences! One stop shopping, rent or buy…
Thank you for the comment Rich!
If they do not allow late fees, can you give a discount for rent paid on time? Or set up auto-draft(s) and charge for drafts that do not happen, like a bounced check? What do other LLs do for late rent?
Here in MN, we can charge up to 8% of the rent, but our evictions costs are the highest in the nation.
We can charge for NSF. A discount for paid on time is an option as well. but we find sending the “official” landlord-tenant board notice on the 2nd works very well. It explains that they must pay or move out within 15 days. If they are late again, they can be evicted for “consistent late payments”. At least here it is (relatively) cheap to evict, although we can’t collect a damage deposit. If there are damages you have to go the civil route. Another good reason for requiring a good credit scores to rent your units…because you can’t get blood from a stone!
“you can’t get blood from a stone!”
Very true. I generally do not like to rent to job hoppers either. If I ever have to get a garnishment, it is near impossible to get. But credit score weeds out the low quality renters and makes life easier.
Just wanted to let you know your talk of fourplexes makes me really want to invest in one down the road, at least a duplex. We still just have our one renter but I’m enjoying the rental income and trying to think of ways to fast-track things so we can increase our rental income. But for the most part our retirement savings are in our 401k right now. Looking to increase that this year.
Thank you for the comment!
Let me know if you need help buying it, I am a Realtor. Or if you want help to run the numbers.
Lates !!! Many, well I have 9 units I sold and carry the mortgage so they can pay late fee and be up to 60 days late , but 3 units are rentals. One rental hasn’t paid anything, he said work and material delayed a job so 16 th I get half, he could be asked to move, but he’s been there 5 years. But also my Vegas $745 mortgage is making 398 payment 16th. And 2 properties I sold to a guy who I should have made sure he had capital, he’s 2 mo behind in mortgage . One smart thing I did was , I hold what I call reverse quit claim deed. I have a notarized quick claim deed and once 91 days behind I take property back. I’ve lived and learned, best to sell a rental to owner occupied, not investors. Worse case scenario is I take the property back. Let me add more, ok, the lancaster mortgage I hold had a heater issue and the buyer changed the central heating to a wall heater. Big mistake in my opinion, re routing gas lines etc…… If property comes back to me which I am sure in a year or so it will, now I have a property altered for the worse. These are things we don’t think about. Upsetting though. I use to sell rental single family homes allowing 90 days late before foreclosing, now my notes are 61 days and I record the quit claim they signed. All in all notes keep me from being a landlord and doing repair. One is horrible and 1 always late, 7 pay on time always. Note I did most of this in 2014 because I had major medical issues,5 surgeries and almost died, so carrying notes was last resort to avoid lump sums of cash and maintain a cash flow.
Thank you for the comment! Those are great tips and stories. Hopefully you are feeling better.
I worked for a guy in AZ who snatched up 15 houses for $50K a piece in 2010 with some partners. I would have invested if I had any money back then. Maybe in a few years…
Thank you for the comment!
Hind sight is 20/20. I wish I would have bought more too. If only we could go back in time and do it again.
I love that you have your license, so at least you have a chance of getting a commission if a renter leaves. I could see you coming out way ahead, when your good renters put themselves in a position to buy.
Thank you for the comment!
I figured it was one way to help the renters, and make some money when they leave.
I bought 4 in vegas, 4 in Lancaster and 3 mortgages on 3 more. and 2 in Hesperia , so 10 total cash, resold most after they went up 300 percent and carry at 8 percent, key is to make sure mortgage is near same as what it costs to rent. I do 30 years and i’m happy over all. I FEEL BETTER, thanks for asking. I just think people don’t take paying bills serious. society as a whole is changing, I am paid by end of month and I ‘m just focused on that. Keep in mind things are regional. I bought 4 homes at bottom in 2009, where as vegas hit bottom in 2011, so I was Blessed to get to each area when they where at bottoms. There is opportunity and money to be made at any moment if you are creative and look around. I have a goal in increase my income by 2k per month. Yes it’s a small goal for 2015, but most are just trying to preserve capital, so this goal seems in line for the times. Pick of a triplex every year and in 10 years you have 40 UNItS. think small,goal and stay patient. I admit, you must have a gut for it all though. THANK YOU, love your SITE !
Thank you for the comment!
You definitely have a lot of experience and wisdom on the subject! “There is opportunity and money to be made at any moment if you are creative and look around.” That is 100% true.
It’s nice to hear from a landlord’s perspective. Having been a renter in the past, and now selling our home and planning on renting for about a year, it’s interesting reading about your experiences. Best wishes on all of your future renters and I love that you got your realtor’s license. Strategic move! 🙂
Let me take everyone full circle here. I was once a welfare mom , yes, had a child when I was 19 and no support network, so I was on section 8 for awhile. I know what it’s like and so many gave me a chance and I always paid on time. It was just lack of help, but what I did have I budgeted. also I didn’t use drugs or drink. SO I know this group first hand, but I was a rare person in the group. Then in my 30s I got my real estate license and bought my first home, and4 years after buying my first home I bought my first 4 plex in 2002 and just in time to play the market run up. I bought and sold a few rentals over 5 years. If they went up 6 figures I left and took profits. I’d sell one and keep one. 12 years later I was sitting in 14 rentals and many I paid cash for. I happened to be in the right place at the right time.
I”m a rare story, I have 4 kids, live in a million dollar home and I am very careful with money because I learned it early on. I did go look at rentals for the first time in 2 years. THIS WEEKEND, I have a cash offer on a triplex and I’m not excited because the markets moving down in some areas, stocks are all over the place and sometimes waiting makes us more money than jumping in at the wrong time. I’m still thinking about paying off my house and I go round and round about doing it.
Investing is a mindset, to be brave and to be confident in your work. I will say having done this 14 years, I’ve never seen so many people struggle, so rent collecting is more of a chore. I have two thoughts when I think of paying off my home. FIRST, 370k could probably but me a unit that flows 3500 a month, where as 370 would only save me 2000 a month by not having a mortgage. However if rents are unpaid or we happen to go through a 2nd mini great depression I’d do better reducing debt instead of buying into headache. It’s a hard call.
I have a brokers license now, I will always keep it current, I sell my own properties and I do not buy using my license, I don’t because I go to listing agents and they work hard for me and it’s easier to get a good deal on property when the listing agent goes up to bat for me. When I sell I do save a ton though, so I sell my properties myself. Well I list them myself and get listing side, the agent who brings in a buyer also gets paid. It’s easy to put a house on the MLS even services charge 150 and let you list your own property. The one doing most the work is the one who finds the buyer anyhow.
Right now I’m arguing with another HOA member who just bought in our 3 unit beach complex, I struggle with new people that want control, and yes I am controlling because I have experience. This is a new buyer who wants to reinvent the wheel. I may need to sell because all signs point to never ending headache, amazing how one person can make my life horrible and a big complex is easy. WHY, because I can control the outcome. Some things become not worth the headache. Controlling what you own is a nice thing 🙂
sorry for ranting but I hope this gives some of you more hope. Get your foot in the door and it comes down the numbers. If the numbers work, do it.
You are certainly impressive! Keep up the great work!
That is very interesting about tenants being scared of higher listed rents that include utilities. We are in the process of putting all the utilities in the tenant’s names with our new 4 plex instead of just raising the rent. They seem more receptive to that. They were getting a steal from the previous landlord who had inherited the property. I believe the philosophy was anything is better than nothing. It seems that the tenants realize they were paying too little and I hope they will stay on.
When a tenant searches for property, or lists them in price order, a higher rent priced gets missed or goes to the bottom. Most properties do not include utilities, so it makes it appear as though you have a very high price if you include the total price in the ad. Of course, in the lease, it’s all included in one price.
Interesting analysis. I like seeing all the details laid out there. I am not in a position to become a landlord, but I might be taking on a tenant in my home (will be in the basement) soon.
Thank you for the comment!
Anytime you take on a tenant, you take on risk. Especially in your own home. Be sure to get a high quality tenant.
Hi there
Wow, I wish I could be in your position soon blogging about my rental cash flow. That’s going to be somewhat years away but I will look to you for my end goal.
Thank you for the comment!
It takes time. Buy right is the first secret. Having great tenants is the second.
Every post I read gives me more inspiration. Our goal is to find a duplex to purchase and use as rental property. I’ve been toying with the idea of getting a real estate license as well so that I am better educated on real estate in general because right now I know zero. Would you recommend that for someone just getting started?
A real estate license would give you a discount, but I would join a local RE investment club. Watch and learn what properties that the investors are pitching. Try and buy wholesale, not retail, you will bet the best deals.
Read this post too.
Thanks so much for the suggestions!
Anytime! I am here to help!