The rental cash flow for all of 2015 was the best ever in my history of a landlord. I had several apartment turns, but minimal vacancy between the turns. I am hoping that my last (half) year of working at my full time job goes well, and the cash flow continues for many years to come.
I am still working on procuring the next rental, and we have run into some title issues that are being addressed. I have the property locked in, but it’s not final. It should produce a solid 15%+ cash on cash return, with room to spare. It should also add an additional ~$500 a month to my rental cash flow.
I was able to save a record amount in my 401K, IRA, HSA and after tax accounts. All my tax deferred accounts were maxed out. I saved enough for me to live on for a few years…
Rents Collected
January 2016 rents were slower than normal, although all but one rents were deposited by the 5th of the month. No major expenses were noted, and the phone has been very quiet in regards to any maintenance items. I did quite a bit of maintenance earlier, so perhaps that helped.
One of my tenants got their car repossessed, so it is a bad sign. It is a couple making over $80K per year, without kids. Otherwise they are solid. They have great credit (or used to have), and always pay on time.
Mortgage Payoffs
I am still in the process of paying off another rental mortgage. The mortgage is at 5.375% and I have been paying an extra $4,000 per month towards it. In 2015, I paid an extra $24K towards the principal balance, so my normal monthly payment now has $355 a month allocated to principal. When I started it only had $241. Only $135K left to go!
Hopefully by the end of 2016, I can pay at least another $50K towards the mortgage and then I may wrap it up with my Home Equity Loan (HELOC) or my investment account. Using the HELOC eliminates the larger mandatory payments and saves quite a bit in interest. I will continue to make large payments against the HELOC, which should be at 1%+ interest savings.
Upcoming vacancy
Most of my leases have a 45-day clause for move-out notices, although my new leases say “two calendar months” notice. That covers the short month of February that would be in violation of Minnesota Rental Law if I had a 60-day notice period.
I did have one tenant give notice for the end of March, so I will need a tenant on 4/1. It is a single person living in the unit, so it should be an easy turn. He is also in the military, so hopefully he knows how to get things spotless and inspection ready. Since we are in the middle of January, I should be good until at least 4/1 for everyone else.
When he moves, I will attempt to get another $95 out of the unit.
2016 Rent Increases
I have identified several units that will get a $25 rent increase this year. Some of my units are under $1,000, so the goal is to get those units up to at least that level. With three bedroom apartments renting all around for over $1,500, I should be able to get at least $1,000. Some of these higher priced units are larger and have more amenities, but a $500 savings, every month, will buy a lot of amenities for a tenant.
My average is $1,067 in that area, and an extra $100 per months adds up. It will increase my average by ~$11, which does not seem like much, but it all helps. It will still be a great deal for the tenants.
I hope everyone had a great 2015 and will have a solid 2016 too.
What was your 2015 financial year, and cash flow like?
Congrats on a great year, Eric! It’s amazing that you only have about 6 working months left. I’m super jealous. What’s the first thing you have planned for when you hit retirement? Going on a fun trip somewhere? Margaritas for breakfast? (Oh wait, that’s alcoholics, not retirees.) 😉
Maxed out your tax-deferred savings plans, paying down debt, increased cash flow, and six months until retirement. What a great way to wrap up the year. Congratulations!
George Lambert
Author, What You Must Know BEFORE Becoming a Greedy Landlord.
Thank you George!
And, I even saved more than all those combined in my after tax account. I am soooo ready to leave my FT job.
Sounds like a solid 2015! Good luck with your last six months of work 🙂 I’m curious how you picked your exit date. I assume it was at least partially to frontload your retirement accounts for the year.
I look forward to reading your psychology posts on how you’re enjoying retirement, particularly from this quote of yours: “Yet, if I am only able to save 10% of what I do now after retirement, it will feel like I am going broke.” I can definitely relate to that feeling! Is your girlfriend retired or planning on retiring as well?
Thank you Leigh!
My exit date had some science to it. I wanted to get Bonuses which come in February. I wanted` to max out my $24K in my 401K, I contribute 75% so that is around the end of February at the earliest, or possibly the end of April if I get a $0 bonus.
At around 6/25, I have 1,000 hours worked, so that is another year of pension. It amounts to another $100 or so a month at 65. Not a lot, but good longevity insurance. And an annuity of that amount would cost at least 10K.
If I work July 1, I get paid for that day, plus pick up 1.66 days of vacation. Also, any other healthcare benefits/subsidies for July. That’s almost 3x pay for a day of work. I won”t be working that hard by then anyway.
Working July 5, I get paid for July 4th, which is a holiday, so double pay that day. So, work two days in July, get paid for five.
…But I really have not thought about all of the details.
The GF is also thinking about retiring. She will only be 45, and her finances are real good, but she will have to rely on me for a few years.
wow, the mortgage payment avalanche effect is awesome. I didn’t know you could use HELOC to your advantage that way. 1% savings on interest on $150K is $1500/year. That’s pure cash right there. I’ve learnt so much from you ever since I’ve found your blog.
Please keep ’em posts coming!!
Thank you for reading Vivianne!
Every mortgage I pay off beings a lot more cash flow. Almost as much as another rental purchase. I like the HELOC as it is a easy way to get money, but I hate too use it as it encumbers my own home. It’s a great way too get short term cash though!
Congrats on a great year.
Thank you!