Holy crap has it been busy. And I thought last month was busy. It was also expensive, and might have even been a bit negative on the cash flow side of things… There were a few repairs, and continuation of my remodel on a unit that was vacant. As always, rents came in on-time, but I added a couple of upcoming vacancies that will be coming due.
When life throws you lemons, you make lemonade. Rentals are not always fun, but I can assure you they are profitable, if you can manage them right.
Rental Cash Flow
The rents were all deposited in the bank or in hand by 8/5, except one. I had one tenant that claimed to be having some financial difficulties, but paid on the 4th. My continually late tenant paid on the 9th. Always late, but always there. 100% of August rents were collected, except for my vacant unit.
All Full for September!
The remodel was completed, and I rented the unit for 8/29. I did not collect an extra 3-days’ worth of rent, I decided to give away the three days as a tenant incentive. The rent is $100 more than the previous tenant were paying. The unit got quite a bit of work completed on it during the last month. It caused me to take a day of vacation to complete a few things.
If you want to be successful in real estate, you need to spend money. Take a day off your real job and save some, or just hire it out (and be disappointed…). This job took ~4 months in total, only 3 months no rent paid, working ~12 hours a week.
Impromptu Kitchen Remodel
Around the beginning of August, after the new tenants had already committed to the unit with $1,000, they asked me if I would help them with a dishwasher. The unit did not have a dishwasher and they asked me to assist with the purchase. I figured it would not be an issue, but I hate portable dishwashers. They are expensive and always in the way. I also had another quality tenant that looked at the unit, declined to rent, and commented “We have never lived in a place without a dishwasher”.
I analyzed the kitchen layout and decided to install a built-in dishwasher. I only had 21” base kitchen cabinets, and both of those were end cabinets, so I could not just swap a dishwasher for a cabinet. They do make 18” dishwashers, but they are non-standard and expensive too. I decided to install a 24” dishwasher. I do not want to scramble for a replacement when this dishwasher dies, and have limited options when I am in a bind.
I had to remove all the cabinets and counter-tops. The new setup made the old counter tops obsolete, as they were too short. I had to remove lots of plaster and replace it with Sheetrock so I could run some electric lines. I split the water supply to the kitchen sink so that I would have a separate shutoff for the kitchen faucet and dishwasher. I installed a new circuit breaker and ran a new electric line for the outlet for the dishwasher. While I was doing that, I added a GFI outlet next to the sink and a light over the sink.
Since I had all the cabinets removed, I decided to install a new Allure vinyl floor that looks like tile. There would be no easier time to put this floor in than right now. I put the cabinets back in, made a dishwasher panel for the end of the cabinets, and installed new counter tops. I buy stock counter-tops and cut them to size and cut out the sink hole.
Here is a list of what I accomplished, as I can remember…
- Installed 50 amp outlet and electric stove
- Installed allure flooring in kitchen and trim
- Installed dishwasher (including electric, water supply and discharge)
- Installed kitchen outlets and kitchen light
- Installed additional hand rail on basement stairs
- Replaced water heater
- Replaced all light fixtures
- Replaced new shut-off valves for washing machine
- Replaced new washing machine hoses.
- Replaced stair treads going to basement
- Replaced ~10 window screens
- Repave parking lot
- Fixed furnace exhaust
- Fixed furnace drain line
- Fixed kitchen sink leak
- Fixed tub drain main line
- Fixed leaking toilet flapper valve
- Fixed plaster coming off in hallway
- Fixed washing machine D7 error
- Unclogged bathtub
- Replaced tub drain pipes
- Painted ceilings
- Painted all walls
- Raised low-voltage wires from utility pole to building mast
- Re-stain and polyurethane on all window ledges
- Cleaned up a lot of junk
All units will have 100% of rent collected for September. I have not had that for a few months.
Upcoming Vacancies
I did get notice that two tenants are leaving. One tenant gave notice in mid-august, so they owe rent to the end of September. I have already received a deposit and re-rented the place for October 1, at an additional $100 per month. I had just bumped the rent on the existing tenant by $30, so it is $130 more than last year.
Another tenant that just/will got married is buying a home. She went with a realtor who is a family friend, so I did not get a commission. She owes rent until 10/31, as she gave notice in late August and has a 45-day notice period. Had she purchased a home through me, she would have saved a month’s worth of rent and received $500 too.
Major Expenses
Yikes! It was expensive. In addition to the remodel, I had a few other expenses. Luckily I can use a credit card to push some expenses to the next month, and have enough cash flow to cover all of the expenses, and more. I always pay the credit cards 100% in full, by auto-payments, every month.
I repaved a parking lot at one building. The asphalt and work was $11,600.
I purchased a couple more vacuum cleaners to leave in my 4-plexes to make life easier to clean them, the expense for both was ~$375. I use a Shark Rocket, which is light and can be used on stairs easily. A powerful rotating brush and strong suction. I now have one for every building.
I replaced a dishwasher for one that was not working, ~$300. I will attempt to repair the 3-year old Maytag dishwasher that is not working…
Quarterly water bills, ~$1,100.
I replaced a through-the-wall A/C unit for a tenant that was not working. In addition, I also bought a spare one, so I can avoid waiting for a new one to get to the store. $950 for both.
The Association sent their invoice for the background checks I had submitted. $537.
Coming up, October property taxes… Building insurance. Yikes.
Rent Increases
As units get turned over, I have been increasing rent. I have also added some pet fees to existing tenants who recently acquired a dog. My rents are up almost $995 since last year, a 4.15% increase. Vacancy expense is still low at 2.20%
| Prev Rent | New Rent | Difference | 2015 Vacancy Days |
| $1,210 | $1,270 | $60 | 21 |
| $1,050 | $1,100 | $50 | 0 |
| $1,150 | $1,100 | ($50) | 14 |
| $925 | $950 | $25 | Increase |
| $1,025 | $1,100 | $75 | 0 |
| $1,100 | $1,150 | $50 | 0 |
| $1,075 | $1,150 | $75 | 0 |
| $975 | $1,000 | $25 | Increase |
| $995 | $1,020 | $25 | Added Pet Rent |
| $1,000 | $1,025 | $25 | Increase |
| $925 | $950 | $25 | Increase |
| $950 | $975 | $25 | Increase |
| $1,020 | $1,150 | $130 | 15 |
| $995 | $1,025 | $30 | Increase |
| $900 | $1,100 | $200 | Increase |
| $895 | $995 | $100 | 90 |
| $1,025 | $1,125 | $100 | 0 |
| $1,000 | $1,025 | $25 | Added Pet Rent |
| $995 | 140 | ||
| 4.15% | 2.20% |
Other notable items…
My alternator in my truck went out. $90 (eBay) and a big headache. I had to manually charge my battery every evening, and watch my usage of lights, etc., until the alternator arrived about a week later. I did save ~$200+ by purchasing and installing it myself.
I also paid $4,000 extra towards my mortgage that is at 5.375%. That takes ~16 months off the mortgage. I plan on paying an extra $4K every month for the rest of the year and into the first months of 2016.
Hopefully the rental turns will slow, and all will be quiet for the winter…
How has your projected cash flow been? Did you ever have a negative cash flow month, and actually planned it? Could you handle a one-time $10K increase in expenses and still be OK?
Really interesting; I have just one rental at $1290/month, but am eager to learn more.
Thank you for reading!
Keep following along, and reading the past posts. There is a lot of information here.
You did some nice improvements to the rehabbed unit. It is enjoyable making units nicer (outside of the cost). Do most of your units not have dishwashers? It looks like your rental market is relatively strong with nice rents per the rent roll. $995 is a nice monthly increase. I just sent out total rent increases of $850.
Thank you for reading and the compliments!
All my units have dishwashers, this was the only one. It was built in 1927, so it was not set up for it. Now it is all set up.
I still have a bit of room for rent increases, but try to keep tenants that are in with minimal increases. It was not that long ago, I was decreasing rents.
Thank you for reading and the compliments.
This was the only unit without a dishwasher. It was built in 1927, so it was not set up for one. Now, it will be easier to rent and show better.
I have a bit of room to increase rents still, but generally go soft on existing renters.
I hear you for a long while I didn’t want to “rock” the boat too much on rental increases. Then the market improved a bit and it was just time. Combine that with increases in maintenance, taxes, insurance, etc and it was a no brainer. When you retire from the workforce, I think you are going to find that rehabs, repairs, leasing up etc will be much easier to manage and less stressful. As I acquired more rental units, my day job started to get in the way of me managing my units to the fullest potential. Plus, who wants to work all the time?
My day job always gets in the way… It’s great money, and decent benefits, but I am having a hard time lasting the next 308 days. Paying down the one mortgage will also help get a better cash flow. As it is, it’s ~3x+ what I need.
Wow, that’s a lot of rentals to manage!
I was thinking of redoing my driveway, as I bought my house as a fixer last year with a nice crack running along the middle. Hmmmmm.
I’ve got an implied $500 rent increase for 2016 with house rental, and a $100 a month rent increase for my condo, also in the rental agreement. Everybody knows what’s upcoming, so harmony is kept.
Thank you for reading!
Great job on the rent increases. My rents are up $1000 a month over last year, but in $25 – $100 increments, not $500. My driveway was deteriorated and is also a commercial parking lot. Most of it was just crushed rock, and was not originally paved.
This is all very interesting, thanks for sharing the details.
Since you have a 5+% mortgage interest rate, would it make sense for you to refinance? Rates are so low these days.
I count 18 rentals in your list and I’m assuming this would be very time consuming, but maybe I’m wrong, what kind of workload does that require for you?
Thank you for the comment!
I have 24 rentals, only 18 has increases or changes. It takes 10-20 hours a month. Not always on my schedule. You can look at the maintenance log and see some of the tasks I have to take on.