October 2014 Cash Flow Statement

by FI Fighter on November 16, 2014

in Cash Flow


The holiday season is now just around the corner, so I will start having to think about what gifts to give my tenants this year. Overall, it’s been a pretty solid year for cash flow, as each rental has managed to stay in the green. For that, I am most thankful! At the conclusion of the year, I will tally up all the numbers and calculate the total return for the year.

Not everything is peachy though, as I am currently battling an eviction and will have to address a vacancy in the upcoming months. Nonetheless, I should be able to weather this storm, as the overall portfolio helps compensate for any transient non-performers.

The results are presented “as is” for each month. If something breaks and I need to spend money on repairs, those charges will show up as an expense for the corresponding property. If there are no issues, no expenses are reported. So, although I do set aside a portion of the net income for vacancy and maintenance reserves (which will inevitably happen), I don’t account for them in this report.

Here’s the report for October:


Rental Property #1: Bay Area

Rental Property #1 Continues to fire on all cylinders. Another month with no news to report. If anything, the tenant has started to pay rent earlier, as the last few payments have arrived before the first of the month. No complaints from me; that’s something I can get used to!

Total cash flow for the month was $447.67.

Rental Property #2: Bay Area

Similar to Rental Property #1, this property also keeps on performing. These two Bay Area units have set the gold standard for the rest of my investment portfolio to live up to. Easier said than done.

Total cash flow for the month was $344.76.

Rental Property #3: Chicago

The first floor tenant (market rate) paid on time this month, per usual. She paid towards the end of the month, which is typical, but is kind enough to tack on the $25 late fee.

The second floor tenant (Section 8) is being evicted, so this is the last month I will be receiving CHA subsidy for the unit. Her final $857 Section 8 payment came in, but it was essentially nulled out by yet more legal fees, to the tune of $750. The second floor tenant hired a defense attorney to represent her in court, and I had to pay the attorney fees after all was said and done. The good news is that the eviction is now complete, as she vacated the unit at the end of October. So, I can finally move on from this mess as we start getting the unit rent-ready starting in November!

Yes, there will be more fees to come — rent-ready and tenant placement. So, as you can see from my own experience, an eviction/vacancy can really hurt your returns. Going into out-of-state investing, I used to budget aside 10% of gross rents to cover for eviction/vacancy, but as I’m learning, that number is too conservative. Realistically, (I’ll know at the end of the year when I run all the math), I’m guessing that an owner should set aside 15% as the bare minimum. Luckily, these Chicago 2-flat properties cash flow well enough where you can basically break even if one unit is vacant.

Total cash flow this month for Chicago came out to be $139.69.

Rental Property #4: Indianapolis

Rental Property #4 is now under a new PM. This was my first full month using the new company, and right off the bat I had to deal with a minor repair item! Not a great way to get started, but that wasn’t even the bad news for this month.

The property tax bill came in this month (due in November), and the property was re-assesed at a much higher number (~$2000 total over an entire year; around 2%). Further, since I’m an out-of-state investor, I don’t qualify for any in-state or homestead deduction benefits. The new tax bill is about double what the previous homeowner was paying! I’m going to have to look into this more carefully and figure out if there is anything I can do to petition the tax hike.

My escrow account was set up using the previous year’s tax numbers… which is altogether misleading since this isn’t going to be anything close to what I’m paying, moving forward. I had asked the seller repeatedly about property taxes, prior to purchase, and everyone (including the lender) assured me that future taxes (even for an investor) would be pretty close to the previous year’s number… Yeah, right…

Unfortunately, I didn’t do enough due diligence, so starting next month, the new tax hike is going to eat into my bottom line. Pretty frustrating, I must say, but my own fault. Luckily, I do have some buffer on this property…

Here’s what the new numbers should look like, factoring in the higher taxes, 15% for vacancy, and 10% for maintenance reserves.


The above returns aren’t going to set the world on fire, but they are decent, especially since they don’t factor in things like principal paydown and depreciation.

The calculation of my cash-on-cash return is not so straightforward (in case you wanted to run the numbers yourself), since the loan was only for $86,000, but the purchase price was $95,000. I worked out an agreement with the seller where I would cover the appraisal difference up to $88,350. My total cash in the deal was $29,000.

Going into the deal, my preference for out-of-state investing was to maintain at the very minimum 10% cash-on-cash return. Preferably, closer to 15%… but that was probably wishful thinking, even two years ago. As you can see, reality doesn’t always mimic what you see on paper, which is why it’s so very important to add extra padding in your calculations.

With that said, in today’s environment, it’s going to be tough to find > 10% cash-on-cash returns in most markets (on quality properties). And that’s a strong reason why I’ve stopped aggressively pursuing out-of-state rental properties. The returns aren’t there anymore. In my mind, once the returns drop below 10%, the risk/reward profile is too great for my own comfort level.

Total cash flow this month for Indianapolis came out to be $357.53.

Rental Property #5: Chicago

Both tenants paid on time this month and Rental Property #5 is doing excellent right now. The income produced in Chicago really is incredible when both units are occupied and the tenants are paying on time. I really couldn’t ask for anything more from a cash flow standpoint.

After all expenses, total cash flow this month was $1,190.34.


Total cash flow for this month came out to be $2,479.99. When each property is collecting rent, I typically clear $3,000 in a given month. Since I had to pay for legal expenses for Rental Property #3 Unit 2 this month, the cash flow took a hit. Next month, I will have a vacancy, so the cash flow will be down again. These types of months are good datapoints for me, as they give a more realistic indicator of what the true cash flow looks like.

At this point, it would be pretty tough for me to declare early FI and be able to say with full confidence that I have enough cash flow coming in each month to never have to work again. I don’t believe that to be the case, which is why I’m still working hard and hustling… Granted, I haven’t been too focused on cash flow since winning Rental Property #5 in February, as I’ve been caught up more with chasing appreciation deals these past few months.

But now that the side hustle deals are completed, I’m going to have to get back on the cash flow train if I’m going to realize my dream of getting to early FI. The tough part is figuring out where to invest capital, moving forward…

More partnerships? A 3-flat in Chicago? Dividend growth stocks? I guess anything is possible, so stay tuned! 🙂

{ 13 comments… read them below or add one }

1 A Frugal Family's JourneyNo Gravatar November 16, 2014 at 8:45 pm

Another month with all your rentals in the green is another great month in my book. Love that through rentals, your using other peoples money (OPM) to build your net worth. Way to go FI Fighter! Keep up the great work. AFFJ


2 FI FighterNo Gravatar November 18, 2014 at 9:57 pm


Thanks! There were some bumps in the road this month, but hopefully I can get those resolved in a timely manner.



3 Mr. FrugalwoodsNo Gravatar November 17, 2014 at 4:23 am

Hey, $750 and a relatively quick eviction sounds like a great outcome! I’ve heard of far worse! 🙂

Those are some tough numbers on the Indy property. Hopefully you can skate by for a couple of years and build up a buffer. Not a lot of room for error!


4 FI FighterNo Gravatar November 18, 2014 at 9:58 pm

Mr. Frugalwoods,

Yup, I’m glad the eviction is over. Now the next fun part… getting a tenant sourced. Unfortunately, that’s going to cost me yet more cash.

Good tenants are so underrated!

Take care!


5 DoneByFortyNo Gravatar November 17, 2014 at 6:30 am

Sorry to hear about the Indi taxes. I’ve noticed the same thing: a big tax hike (roughly a 100% gain) for when the property gets classified as an investment property.


6 FI FighterNo Gravatar November 18, 2014 at 10:00 pm


Yeah, it’s kind of a bummer seeing the new tax bill. I think the returns are still decent, but they sure don’t look as good as they did with the previous numbers.

A good reminder why it’s so important to perform due diligence and allow for a good buffer when crunching cash flow numbers.

All the best!


7 writing2realityNo Gravatar November 17, 2014 at 7:23 am

Tough month, but still cash flow positive! Are you planning on replacing your tenant in Chicago with a market-rate tenant? Seems like that is where you will get the best bang for your buck without dealing some some of the Section 8 headaches.


8 FI FighterNo Gravatar November 18, 2014 at 10:00 pm


I would like to find another market rate tenant, if possible. I have had better luck so far with them.

We shall see.

Take care!


9 FerdiSNo Gravatar November 17, 2014 at 9:14 am

This is fascinating to me… great job at keeping things cash-flow positive, despite the challenges with evicting tenants and an unanticipated property tax bill. Best of luck with these properties. We recently moved to a new home and turned our previous house into a rental property. Much to learn, still, so I’m liking your updates and perspectives.


10 FI FighterNo Gravatar November 18, 2014 at 10:01 pm


Thanks! Good luck to you too. Hopefully the new rental can help you generate some solid cash flow.

All the best!


11 No Nonsense LandlordNo Gravatar November 18, 2014 at 6:00 am

Do not sweat the legal fees, they are the cost of learning. I paid over $7K for one of my Section 8 tenants. She has since been evicted 4 more times by other landlords… I would never rent to a Section 8 tenant again.

Your Rental Property #3: Chicago will likely not be profitable after all expenses, at least for that one unit. Even with guaranteed rent.

It does go to show you the value of tenant screening. Some landlords get it, some refuse to do the diligence it takes and continue the ‘gut feel’ approach. Some do not understand the relationship between credit scores and risk to a landlord. And property managers never get it as their commission depends on any tenant, not a good tenant. They have ZERO risk.

If it makes you feel better, any amount put towards principle is like part of your returns too. You just cannot spend it.


12 FI FighterNo Gravatar November 18, 2014 at 10:04 pm


Thanks for the encouragement. This has been a bad Section 8 experience… I am trying to learn from this, and this is another reason why I decided to re-invest back into some higher quality Bay Area properties. Section 8 can be wonderful when everyone pays, but there are definitely more headaches involved.

That also ties into your point about credit scores and tenant screening. With the higher quality properties, this isn’t that difficult… With lower income properties, it can be very tough locating a tenant that passes the credit/background checks.

Principal paydown helps, but ultimately, my reason for investing in income properties was to generate income! 😉

Take care!


13 NunoNo Gravatar November 21, 2014 at 1:37 pm

Great month! You have your risk well diversified, so your biggest problem seems to be that in some months cash flow isn’t as good as others. But it continues highly positive!


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