September 2013 Cash Flow Statement

by FI Fighter on October 1, 2013

in Cash Flow

Leverage

I used to combine my monthly passive income statement into the monthly expense report. Lately, I’ve been thinking it would be a better idea to dedicate a completely separate section to cover the ever important report of the CASH FLOW statement!

Also, it seems the report will just keep getting longer and more complicated as I continue to buy more properties.

Here is the cash flow statement for September 2013:

September_2013_Cash_Flow

Rental Property #1

Rental Property #1 continues to perform and meet expectations. In a previous post, I mentioned that the tenant decided to extend the lease for an additional 2 years. The original rent was $2090/month. After agreeing to the terms, I actually learned that the tenant wanted to add a pet dog. Due to the extra maintenance costs associated with the pet, I let her know that the rent would have to increase slightly to accommodate. We agreed that an additional $40/month was fair. So, the new rent (which took effect in September) is now set at $2130/month.

Rental expenses were mostly standard for this month, with just the mortgage and HOA bill due. However, there was an issue with the garage door springs, and this required removal and replacement of two sets of springs. This set me back $180 for materials + labor. It was a bit pricey, but it does come with a full year warranty. All in all, Rental Property #1 cash flowed $715.89 this month. The first round of property taxes will be due in December, so that’s something to watch out for.

Rental Property #2

Not much to report here. Rental income was $2150/month, and I only had to pay for mortgage and HOA this month. As such, the property cash flowed $685.66 this month. However, property taxes for this property will also be due soon, so I have to keep that expense in mind.

Rental Property #3

The out-of-state property closed in July, and I started collecting full rent in August. It is now September, so I would have loved to have this property firing on all cylinders at this point. Sadly, that is not yet the case.

The first floor tenant has been awesome so far, and has been paying rent on time every month. This accounts for $950/month. It’s been money in the bank. 🙂

Unfortunately, the second floor tenant has been wildly inconsistent (well, consistent in a BAD way) with her payments! This tenant’s rent is subsidized, and Section 8 covers 60% of it. Section 8 is also money in the bank, so I was able to collect $694 of the $1158/month I’m owed. This tenant has failed to pay any rent so far, and still owes me for August as well.

Obviously, things aren’t working out with her, so I’ve been in communication with the property manager to sort this mess out. The property manager sent the tenant an eviction letter to try and get a response from her. Fortunately, she responded back and let us know that she is working with Section 8 to reduce her amount owed each month. Her circumstances changed, and she is requesting Section 8 to take care of 90% of the rent. So, this petition is in process as we speak… once the dust settles, I’m hoping Section 8 will reimburse me for lost rents for August and September. Also, I’m really hoping Section 8 will step up and take a larger portion of the monthly rent. If they will cover 80% to 90% of the monthly rent, I will be able to sleep much easier at night. 😉

For September, I was able to collect $1644 in rent. After paying for the mortgage, property management (8%), landscaping, and escrow account (funds held for annual property taxes and insurance), the property cash flowed $530.73. This isn’t all that bad considering the second floor tenant still owes me $464 for September. Hopefully this will all get sorted out by next month.

Summary

Total cash flow for this month is $1932.28. Granted, a large portion of this income will be used to pay for property taxes next month, but it was a relatively good month. Just one major repair, and a tenant rent situation that needs to be ironed out.

It’s landlording… what do you expect? 😉

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{ 15 comments… read them below or add one }

1 PullingmyselfupNo Gravatar October 1, 2013 at 7:43 am

I have yet to hear a good long term success story with renting to subsidized renters. I never have but my neighbors that have ended up getting missed payments and their property is not taken care of as well as non subsidized renters.

Have you had better success in the past?

Reply

2 FI FighterNo Gravatar October 1, 2013 at 9:13 pm

Pullingmyselfup,

This is my first experience with Section 8, and so far it hasn’t been good, but I’m going to be patient before making a judgement call.

There are some benefits, though, like having a portion of the rent guaranteed. In this situation, if Section 8 agrees to subsidize more of the rent, it actually makes things easier for me since even if the tenant misses their portion, the impact isn’t as significant. You would think that the tenant would be on top of paying rent on time… after all, the waiting list for Section 8 can take many years. Why would you want to risk losing your housing benefits when so many others are waiting in line to get a crack?

We’ll see… I’ll have more details next month.

Cheers!

Reply

3 FI PilgrimNo Gravatar October 1, 2013 at 8:10 am

That’s impressive. I like the new “Cash flow” format as well, makes it easy to concentrate on the investments!

Reply

4 FI FighterNo Gravatar October 1, 2013 at 9:14 pm

FI Pilgram,

Thanks! Yeah, I think it’s beneficial to separate the cash flow income from the regular W-2 income/bills. Definitely makes it easier to organize and track.

Best wishes!

Reply

5 IntegratorNo Gravatar October 1, 2013 at 7:02 pm

I’m enjoying following your journey into the real estate business. I hope the delinquent tenant comes good soon.

Reply

6 FI FighterNo Gravatar October 1, 2013 at 9:16 pm

Integrator,

Thanks! I’m doing my best to document all the experiences… I’m curious myself to know if real estate can help someone retire by age 30.

As far as the delinquent tenant goes… I hope so too! 🙂

Take care!

Reply

7 Progress TrapNo Gravatar October 2, 2013 at 7:28 am

I like the new format. I’d also be interested to see the mortgage lines split into principal and interest to get an idea of how much equity you’re building each month. Keep up the good work!

Reply

8 FI FighterNo Gravatar October 2, 2013 at 8:14 pm

Progress Trap,

Thanks! I do keep track of the principal and interest payments — that can be found on the “Properties” tab.

At the end of the year, I’ll tally the numbers up and report total principal/equity earned for the properties.

Cheers!

Reply

9 EvanNo Gravatar October 3, 2013 at 1:49 pm

Why don’t you just let your mortgage company just take care of the taxes?

Also, would throwing the “extra” money at principal be the equivalent of compounding since you are then saving on the interest?

Reply

10 FI FighterNo Gravatar October 4, 2013 at 10:18 am

Evan,

That’s what I’m doing for out of state properties, but in California, actually, I was never even offered that option. I think it’s customary in California to pay property taxes on your own?

Extra money towards principal isn’t a bad idea as it will lower interest payments… but at this point I feel like it’s more worthwhile to invest that money towards another downpayment. Interest rates have been sooooo low these past few years, it’s good to lock them in and allocate capital elsewhere. I’m not sweating 4% to 5% rates when I can invest elsewhere and get 10% to 15%+ cash on cash returns.

Cheers!

Reply

11 Financial SamuraiNo Gravatar October 4, 2013 at 8:37 am

Nice work on the cash flow! I didn’t break it down in my passive income post b/c it brings too many variables and don’t want to highlight the value of my properties. Best to keep things low key.

Dang I hate property taxes!

Reply

12 FI FighterNo Gravatar October 4, 2013 at 10:21 am

Sam,

Thanks! Yeah, sometimes I worry about sharing too much information, but the purpose of this blog is to be honest and open… it’s a fine line I guess, but perhaps you can share some wisdom and PM me some tips and things to watch out for.

Property taxes are killer… just checked my statements and it made my stomach churn…

Cheers!

Reply

13 Financial SamuraiNo Gravatar November 1, 2013 at 8:25 am

Thoughts on why not amortize the property taxes over 12 months to get true cash flow?

Reply

14 MartinNo Gravatar October 9, 2013 at 5:34 pm

Great success here. I am happy for you. When reading about your maintenance expense, one thing crossed my mind, how are you dealing with any future repairs of things not caused by the tenant? Are you creating a fund saving for larger maintenance or repair or is it covered by HOA?

Reply

15 FI FighterNo Gravatar October 16, 2013 at 7:16 pm

Martin,

Thanks for the support! Yeah, I’m setting aside funds for future repairs, maintenance. Generally this is about 5% to 8% of gross rents. So, a few hundred for each property.

Two of my properties do have HOA, so they take care of all roofing, fence, lawn, exterior paint, etc. I pay a standard HOA fee each month for those.

Cheers!

Reply

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