2015 has been a great year in terms of rental cash flow. It is the first year I have actually tracked rent increases, vacancy and next year’s potential increases. I have always tracked income and expenses, but as I get close to retirement, I think it is a great exercise to track these other things.
I also signed a purchase agreement for another building. I was not looking for another rental, and this one sort of came up. It is a bit outside my normal purchases, and will add a few extra dollars to the bottom line. Hopefully, in due time, it will be one of the greatest purchases I have ever made… I will give a short briefing in this report, and save the rest for a more detailed post in the future.
Rental Cash Flow
The November/December cash in-flows were solid. I did collect one late fee in November, from a long time tenant that typically pays on-time. He has a girlfriend that he should just borrow the money from, and pay her the late fee, but instead I collected it. December’s rents were all deposited by the 4th of the month. All of them.
No Room at the Inn
I do not have any vacancies at this time. I had a turn for the end of November, and had it filled on December 5th. It was a couple that I approved, sight unseen, that were temporarily living in Canada. They had great credit scores, college degrees, and good job prospects. They actually moved without a job, but based on their degrees, and credit scores, they should be able to find word.
People with solid credit scores will go without food to pay the rent. That is not the case of people with bad credit.
In the recent months, I had a turn on 10/01/2015, 11/15/2015 and 11/30/2015. A nice time spread between turns, and hardly any vacancy between them. And I added another $135 per month with the new rents.
My Rental Vacancy Statistics
In 2015, I had 11 new tenants out of 24 for a turnover rate of 46%. My average tenant stay is now 26 months. My vacancy rate was 1.83%, as I had ~160 unpaid rent days where I was vacant. This would have been even less if I could have turned my West St Paul unit faster.
I took 120 days on my West St Paul turn, but 30 of that was paid by the deposit, so I only count 90 days vacant. I also had to store some things for 28 days before I discarded them, as that is MN state law. Another reason I only count 90 days on that turn.
Rents are up
I had to give up a $50 pet fee in November, as the tenants gave away their cats. I suspect that the extra $50 a month for the pets was too much. I did add another $25 for the addition of a dog in another unit, so it offsets the loss just a bit.
Overall, rents are up $1,080 a month over last year, and I have a bit of room to go in 2016. I did not raise rents by more than $25 a month, and now they average $1,072. Factor in my mortgage I paid off last year, and my own personal residence mortgage, and I am doing better by over $3,600 per month over the middle of 2014. I did not track the rent increases for 2014, so it is higher than that. I can certainly use that cash flow in retirement.
| Date | Prev Rent | New Rent | Difference | 2015 Vacancy Days | New Tenant? |
| 01/01/15 | $1,050 | $1,050 | $0 | 0 | No |
| 01/01/15 | $1,045 | $1,045 | $0 | 0 | No |
| 01/01/15 | $1,075 | $1,075 | $0 | 0 | No |
| 01/01/15 | $1,050 | $1,050 | $0 | 0 | No |
| 01/01/15 | $1,050 | $1,050 | $0 | 0 | No |
| 01/01/15 | $1,100 | $1,100 | $0 | 0 | No |
| 01/01/15 | $1,100 | $1,100 | $0 | 0 | No |
| 01/26/15 | $1,210 | $1,270 | $60 | 21 | Yes |
| 01/26/15 | $1,270 | $1,295 | $25 | 0 | No |
| 03/15/15 | $1,050 | $1,100 | $50 | 0 | Yes |
| 03/15/15 | $1,150 | $1,100 | ($50) | 14 | Yes |
| 04/01/15 | $925 | $950 | $25 | Increase | No |
| 05/01/15 | $1,025 | $1,100 | $75 | 0 | Yes |
| 05/16/15 | $1,100 | $1,150 | $50 | 0 | Yes |
| 06/01/15 | $1,075 | $1,150 | $75 | 0 | Yes |
| 06/01/15 | $975 | $1,000 | $25 | Increase | No |
| 06/01/15 | $995 | $1,020 | $25 | Added Pet Rent | No |
| 07/01/15 | $1,000 | $1,025 | $25 | Increase | No |
| 07/01/15 | $925 | $950 | $25 | Increase | No |
| 07/01/15 | $950 | $975 | $25 | Increase | No |
| 07/01/15 | $1,020 | $1,150 | $130 | 15 | Yes |
| 08/01/15 | $995 | $1,025 | $30 | Increase | No |
| 08/01/15 | $900 | $1,100 | $200 | Increase | No |
| 09/01/15 | $1,025 | $1,050 | $25 | Added Pet Rent | No |
| 09/01/15 | $895 | $1,020 | $125 | 90 | Yes |
| 10/01/15 | $1,025 | $1,125 | $100 | 0 | Yes |
| 11/15/15 | $1,095 | $1,100 | $5 | 15 | Yes |
| 12/01/15 | $1,100 | $1,050 | ($50) | Pets Removed | No |
| 12/05/15 | $1,045 | $1,125 | $80 | 5 | Yes |
| Total | $25,000 | $25,730 | $1,080 | 160 | 11 |
New Rental Purchase
I did sign a purchase agreement this past week, and I will close around the 20th of December. It is sort of a turnkey rental, and once I actually close I can give more details. It is not the investment that I discussed in an earlier post, it is an entirely new concept for me. It may be slightly more risky, but my risk is highly mitigated. And my returns should be near 15% annually.
Rental Maintenance Items
It seems like I had a bunch of small hitter maintenance projects in the past few months. Nothing too expensive, but I am not 100% sure I captured all of the items in my maintenance log. I do not list all the items on the apartment turns, nor the expenses, but an apartment turn will probably run $500 or so depending on what I replace. The latest one was a bit higher, as the tenants were not as good. If I hired out everything, it would have likely been $1,500 or so. The tenant was there just over 3 years.
In the latest apartment turn, the one I can still (somewhat) remember, here are a few items that I did.
- Replace bathroom fan
- Replace vanity faucet
- Replaced tub drain assembly with a toe push drain assembly
- Replace thermostat
- Replace range
- Replace all mini-blinds
- Replace cold air return registers
- Install vinyl under kitchen and vanity sinks
- Clean kitchen sink aerator with CLR
- Shampoo carpets
- Unclog vanity sink
- Change Locks
- Fix laminate on counter top edge
- Fix towel bar that was removed
- Install eight light bulbs where missing
- Touch up paint
- Fix several bi-fold closet doors
- Clean, clean, clean
Hopefully you are getting ready for the holidays and not worrying about cash flow to enjoy yourself. Did your cash flow improve over last year?
Congrats on the new building! Can’t wait to hear more about it. 🙂 Great job on the rent increases and your big cash flow bump, too! That must feel awesome.
Thank you for reading!
It’s really been a great year, hopefully it can continue for a few more years! As soon as I close, I will write a post about the new purchase.
Just out of curiosity, do you have a checklist of things you look for when you do a turn? How many of those things were charged back to your tenant as part of the damage deposit? Also which of those things were just done as normal maintenance, or did they need fixed? For example was the bathroom fan not working? or do you change them out on a regular basis?
Thank you for reading!
I charged the tenant $410 for cleaning, missing light bulbs and missing keys. Most of the replacement items were maintenance items. The range was too dirty to be cleaned, and not a self-cleaning stove. I only charged the tenant $50 as it was almost 5 years old.
I replaced the vanity sink faucet as the handle was loose. I attempted to tighten it, but the screw stripped and I made it worse… It was a cheap faucet, I only use Moen faucets now. The bath fan was not working, I replaced a fan only unit with a fan/light combination unit. That was a better fan as the washer/dryer in this unit is in the bathroom. The machines block some light near the tub and the fan/light will help that.
I do not have a list, other than a mental one. If I have a loose cabinet door, faucet handle, towel bar, etc. I fix it. Never wait until things break, they will happen at a bad time, The tenant will be in place and if it takes more than a few minutes to fix, it becomes a headache. Kids get in your toolbox, somethings take multiple days to fix if they need to be mudded/sanded/painted, etc.
I, too, am looking forward to reading about your new exciting investment.
It looks like if your tenant is below market (which looks to be around $1100 for your units), then you raise rent about $25/mo for existing tenants. That seems reasonable, as tenants can’t expect to pay below market rents forever, right? Then when they vacate, you can raise up to market. Looks like you’re also trying to push rents higher when you turn them, up to about $1150. Am I reading this strategy correctly?
As soon as I get it locked up, I will make a post. I did hit a snag today, a pesky lien on the building. Not insurmountable, but needs a different twist.
I have units with washers and dryers, and some have coin-op washers. Some have common area washers that are free. Each one is priced different. $1150 average would be nice..!
When I rent, I adjust to what I think is market, and lower the price every seven to ten days until I get a tenant commitment. A month vacant is worse than $50 lower rent. So, sometimes, depending on the year and how much other things I have going on, I want a fast rental and do what it takes to make it happen.
Man, the $50/mo pet fee is amazing!!
I only charge a 1-time pet fee. wow 1.8% in vacancy is wonderful. Minnesota is a great state where unemployment rate was never higher than 5% during the financial collapse. You pick the right state to retire and invest in rental property! 🙂
I used to do the one-time fee, but I decided that an extra $25 is accepted by tenants and more lucrative. It is a great state, but it still takes a bit of knowledge (and skill) to keep rentals properties occupied and in great condition.