The past few months have been pretty busy. The rental cash flow has been as expected. I have had several turnovers, and some other maintenance issues to take care off. Luckily, all is well and the rentals have moved forward for another month.
Hopefully you have had a chance to look at some of my other cash flow posts and have been following my retirement countdown. As I get more detailed in my own retirement dashboard spreadsheet, and add more check points and cross checks, I realize this next year of working is mostly an exercise to put the final nail in the coffin of the cube farm.
So here is how the past month went…
Rental Cash Flow
The rents were all deposited in the bank or in hand by 7/3. That is 24 for 24. I still have another $250 yet to collect, which I can expect to receive on Friday. I have one tenant that always pays in two payments, so it is somewhat expected, but not desired. So maybe it’s closer to 23.6 for 24.
All Rental Units Are Full, except one
With the exception of my one remodel I am doing, all units are full. When you have a vacancy, there is always some work to do. It may be some additional cleanup, a touch up of paint, changing a faucet or something that will save time for the next turnover. Once the tenants move in, it is infinitely more difficult to fix things. There is extra coordination, all fixes have to be the same day (or you have to re-coordinate with parts and extra time), things may have to be moved out of the way, etc.
I have stated to show the unit to qualified renters, but no takers so far. After a bit more remodeling and a more completed look, it should ‘sell’ better.
Upcoming Vacancies
No vacancies other than my unit I am working on are on the horizon. Although that could change within the hour. I had one tenant looking for a home, and she decided to wait for a bit. I suspect that it will likely be next year when she moves. So I put that vacancy off for a bit.
Major Expenses
I am replacing the range in my vacant unit. I had a gas range, and I am changing it to an electric range. No small children will turn the gas burner on slightly and create a gas leak. The electric range will be the same as most of my other units, so I can swap parts and stock the most common parts that go bad. I use a Tappan TEF351EW self-cleaning electric range.
My trash company charged me an extra $120 for stuff that I threw in the dumpster. I will be disputing that amount as my dumpster should be able to be filled with broken down couches and torn down mattresses without an extra charge.
I will likely pave my parking lot. I received several bids, and it appears to be more expensive that I thought. Likely it will be ~$13,000 to get it done. I did explain that to my commercial tenant, and she agreed to pay an extra $200 a month. Her rent has been the same since 2009. I am hoping that my residential tenant, when filled, will be an extra $100 per month.
Of course, I still have mortgage payments, insurance, HOA fees, utility bills, property taxes, etc. that all add up quite a bit.
Rent Increases
I have been giving out a few rent increases, the first I have done in many years,. With the economy getting better, expenses going up, and housing prices rising, there is room to increase rents. That is one way rental income keeps up with inflation in retirement.
| Date | Prev Rent | New Rent | Difference | 2015 Vacancy Days |
| 01/26/15 | $1,210 | $1,270 | $60 | 21 |
| 03/15/15 | $1,150 | $1,100 | ($50) | 14 |
| 03/15/15 | $1,050 | $1,100 | $50 | 0 |
| 04/01/15 | $925 | $950 | $25 | Increase |
| 05/01/15 | $1,025 | $1,100 | $75 | 0 |
| 05/16/15 | $1,100 | $1,150 | $50 | 0 |
| 06/01/15 | $1,075 | $1,150 | $75 | 0 |
| 06/01/15 | $975 | $1,000 | $25 | Increase |
| 06/01/15 | $995 | $1,020 | $25 | Added Pet Rent |
| 07/01/15 | $1,020 | $1,150 | $130 | 15 |
| 07/01/15 | $925 | $950 | $25 | Increase |
| 07/01/15 | $1,000 | $1,025 | $25 | Increase |
| 07/01/15 | $950 | $975 | $25 | Increase |
| 08/01/15 | $995 | $1,025 | $30 | Increase |
| 08/01/15 | $900 | $1,100 | $200 | Increase |
| Total | $770 | 50 |
Other Notable Expense Items…
I received a refund on the quadcopter from Amazon and ordered another. That new one did not ship on time, not even within two weeks, so I cancelled that order. I ordered another one, and that one has indicated it has shipped. So, maybe before winter I will have it.
How was the cash flow for your month? Have you experiences any rent increases, either as a landlord or a tenant?
My one occupied rental paid 4 days early this month. The student condo I just bought now has 3 people ready to move in on August 1. They paid their security deposit in 3 checks and one bounced this week, so I’ll be having a talk with that guy. I wanted them to send me rent in one check, but I may have to get separate checks so I can force this one guy to pay rent in certified funds. Maybe the other two can still send me one check and this one guy can send me a money order.
It may be a sign of trouble. Was the guys credit score decent? Maybe the other two should vote him off the island and get a new roommate? How about having all of them going to a bank and get a single money order?
They all checked out good and have cosigners. I know it’s not a good start, but I will have a talk with them.
It may just be a youthful mistake. Next time, get a larger deposit, not a co-signer. It is a lot easier to collect from the deposit than the co-signer.
Hi NNL,
I know you are a real estate investor with a long track record. I would be curious on your take on this article by Go Curry Cracker:
http://www.gocurrycracker.com/renters-for-life/
Sorry for posting an outside link, but I wanted to check with someone with an experience like yourself, to make sure that the assumptions made by GCC in his model were reasonable.
Here is a comment I left on the article. Similar to my post here.
You are 100% correct, renting is cheaper than buying, if you maximize the rental experience.
Rent only what you need now, you can upgrade later.
Rent close to your job, or where you frequent. Save commute costs and time.
No need to buy lawnmowers, snow blowers, rakes etc.
Move to where the jobs are, or the cost of living is cheap.
Of course, you are at a disadvantage in later years when many people’s home would be paid off. Or if you lost your job, and eviction is faster than a foreclosure.
Is that Tappan range the cheapest self-cleaning model you could find? What is it about that brand and model that you like so much?
It is a really cheap stove, but has self-cleaning. And looks decent. If not the cheapest, it is one of the cheapest. Made by Frigidaire. And seems to work OK. I only buy self-cleaning stoves.
Since I have quite a few of them, I can swap parts and fix them easily. I have worked on them, and there is not much to them. They have some electronics, so they do not look as cheap as the ranges without a clock.
Hey,
So I was in the process of evicting someone June 1st – they decided to leave of their own free will on July 1st. They had outstanding partial rent for May and June (Section 8 HUD tenants). They decide to call today saying they wanted their full security deposit back or else they would take us to court… After prorating the rent owed – the tenant would be entitled to about $750 of leftover security. Then Yesterday I actually enter into the apartment and you wouldn’t believe the damage.. Holes in every room – doors split in half – cracked tile and bathtub – stove not operating and bags and bags of clothes.
Let’s just say this tenant bit off more than she can chew – In the process to preclude her from ever receiving Section 8 again and filing a small tort against her.
Kind of off topic comment above, but the things we deal with as land “slum” lords is really incredible sometimes. May contact insurance to recoup some of these losses.
Hopefully August the unit will be rented again, but really glad to see your almost at full occupancy. Also good luck with the lot paving – although a large expense it really pays for itself in terms of maintenance and hassle.
-Rich
Be absolutely sure to send an itemized deposit settlement statement to them. Take LOTS of pictures, and hopefully you have pre-move in pictures. And you have an inspection report from Section 8 if you need it, from the pre-move in. Save any of the tenants items for the required period that are left behind.
What you state is not uncommon. I had to replace several doors when I asked my Section 8 tenant to leave.
That is why if you rent to Section 8, you need to have a solid credit score too. There should be no difference in a market based criteria, or a Section 8 based criteria. Credit score would be part of this criteria.
Be sure to send a C/D of pictures to Section 8, or better yet have them over to see for themselves.
Remember, your tenant can file a lawsuit against you and not even pay a filing fee. No attorney fees either. They just make a call and do not even have to show up in Court, their legal assistant will. Win, lose or draw, they cause you pain. You miss one item, and they win. It’s sort of like someone giving them a lottery ticket.
Let me know how your case goes!
Hey, thanks luckily we make and keep copies of every yearly inspection report. That family has been gaming the system for over 10 years (as she admitted previously). Fortunately, we have pre-move in pictures because the section 8 tenants before her decided to leave their crap everywhere as well.
Just got the certified letter for a court date 😉 – unbeknownst to her my best friend is a real estate lawyer who literally loves these cases. One lunch or dinner and his fees are paid and then I let him re-tort against her on our behalf.
Will keep you updated.
Rich
Thank you for the comment!
Pictures will be the key. It’s good you have a attorney, as your tenant will also likely have one. Even if you win, you will not get any money, but it will be a ding on the tenants record.
Glad to see you are under 1 year left until retirement, that is awesome! Keeping at close to 100% occupancy willl certainly help get the cash to escape the cube farm.
It’s getting closer by the day. Only one vacancy, and that one should be filled soon.
You are pretty conservative in your retirement estimates, which is good! But I was wondering if you thought you could do it with fewer properties than you have now. Do you feel you need a certain number of properties to have the safety net for inevitable vacancies, etc? Or is it strictly a dollars in vs dollars out situation?
I certainly could do it with less. The idea is to be able to continue to save money, and ultimately switch to my portfolio for income as I sell the properties. So, I should be able to save a decent sum and let the portfolio accumulate for 5-7 years. Sell a rental every year at that point until they are gone.
If the market tanks, I can sit tight for a few years and not take withdrawals.
I got it. So you don’t want to live off the rental income forever. You want to use it to boost your portfolio and then sell them off. Makes sense.
My portfolio could probably support me in an OK lifestyle now, especially with SS and my small pension, but I never want to be in a position where I have to think about spending an extra $20. I should be able to retire in an income ~2x my current cube farm salary with the rentals and portfolio. Using just the rentals at first, and saving $3K – $4K a month plus growth, will hopefully double my portfolio value by the time I am 62.
Did you have this end goal in mind when you bought your 1st property? I am just now getting my rental portfolio started and I’m just thinking of how I will get the next one. Rental properties funding retirement is not on my radar at this point. At which point did you start to think in terms of this can help me retire early?
It was a goal to help me save, but not necessarily a retirement goal. Lately, the cube farm is less enjoyable.
When I was doing taxes for 2013, in 2014, I actually had to pay ~$10K to the IRS. Prior to that, I was always getting a refund. So it made me think, how much am I really making. I had one 4-plex paid off, and it was generating ~36K after the hard expenses. Plus I had the other properties. I have since paid off another 4-plex. I will likely pay off one more next year.
I calculated how much I need, how much I make, how much I spend, etc. I calculated everything about 5 different ways. I can add in depreciation to my tax return amount, and it was quite a bit.
So, I think I can leave anytime, but need a solid liquid financial base.
Excellence work you got there! I can only imagine how much work you put into the turn overs.
I also have been dealing with tenant turnover. When they move out, I raise rent to still be below market value. So, it’s a nice raise for me. Real estate investments so far have been one of my best investments.
Thank you!
Many of my turns are incredibly easy. Great tenants leave a place in pretty decent shape. A turnover is a great time to raise rents, provided the market supports it. Keep the best value in town to get the best tenants!
So intrigued that you’re continuing to work this year even though you’re all set, but looking forward to following along with your journey! We only have one tenant, who is a family member, so we won’t be raising the rent any time soon. We’re realizing that even a single property is a lot of work, though. Interesting to see how a much more professional landlord does things.
Once more year will solidify the plan. I have been investing a bit too, so my dividend stream is getting to be fairly solid too. Plus, that gives me a year to solidify my retirement journey and figure out what needs to be dine to hit he ground running when I get out of the cube farm.
I like to think of myself as a professional, but it’s really just a system. Anyone can do it.
You’ve been busy! What a drag to get charged by the trash company. At my old place, we’d always get dinged for having anything that didn’t fit inside a bin. Fortunately at my new place, they are much more lenient and haven’t charged me so far on the weeks when I have a bit of overflow.
I was able to get the extra charges reversed. All my stuff was in the dumpster. I had a cut up couch, a futon mattress, a fake ficus tree, etc.
You must be pretty excited about retiring soon! I’ve thought about getting into rental properties before, but the housing market where I live is pretty hot (all those rich foreigners snapping up properties for cash is driving up prices like crazy).
Thank you for the comment!
I am definitely looking forward to it. I just yesterday went to a retirement party for a few friends of mine that left the cube farm at the same megacorp. There will always be deals. Look for downtrodden properties for flipping.
Looks like you are really rocking and rolling with your units. No vacancies and rent in hand. What more can a landlord ask for. I’m still not keen on the real estate/landlord way to create a cash flow. I much prefer dividend stocks and REITs if I want real estate exposure. Thanks for sharing.
Thank you for the comment!
RE has been a great ride, so far. Where else can you get a 100K+ cash flow, with only a $750K investment? Almost 14%. Factor in self managing and doing my own maintenance, and it goes up even more. Like almost a 20% return. And that’s after accounting for 10% for maintenance, 5% vacancy, all my hard expenses, and mortgages.
Dividends are great, and at some point as I get older, I will be switching my income more to that side of the income stream. I will need more capital invested, perhaps as much as $4M. I am not there yet, but closing in fast.
Fantastic you increased cash flow by $770! Rentals are on my list of to acquire, good to see what success looks like and a 14% ROI.
Thank you for the comment!
An extra $770 is nice. I should be able to get another $250 per month for next year, maybe a bit more. When I do my own work, it’s a 20%+ return on investment. And the work is not too bad.