March 2015 Cash Flow Statement

by FI Fighter on July 22, 2015

in Cash Flow

Leverage

I am very behind on these Cash Flow reports and for that I apologize. For the longest time, I was waiting for a Section 8 payment from CHA to come in for Rental Property #5. There was a mix up that occurred which caused the payment to go missing for about three months…

Now that the issue has been resolved, I can finally get back to updating the report for March!

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 March:

Cash_Flow_March_2015

Rental Property #1: Bay Area

The refi for Rental Property #1 took effect this month, which explains the dip in cash flow. Until I am able to raise rents on this unit later this year, this will be the cash flow for a typical month. Luckily, the unit is still in the green, although my margins have decreased to an absolute minimum.

No issues this month, although my mortgage increased by $416.80. That’s the price you pay to pull out ~$100,000, I guess…

Total cash flow for the month was $30.35.

Rental Property #2: Bay Area

Similar to Rental Property #1, this property keeps on performing. Unfortunately, in the short-term, it’s going to be a cash flow negative property until I am able to raise rents later in June.

Again, that’s the price you pay when you do a refi and want to pull out ~$100,000 in cold hard cash. Overall, my experience with this property has been tremendous, so I’m not too worried with the squeeze right now. Market rent has appreciated considerably since I purchased this townhouse, so I am confident that the future cash flow prospects are very bright.

Total cash flow for the month was -$130.64.

Rental Property #3: Chicago

When it comes to my out-of-state rental properties, collecting rent on time can be a bit more challenging than compared to my Bay Area properties. In the past, I used to update these Cash Flow reports in somewhat “real-time”, so missed rent payments would always seem to show up.

Now that I am a few months behind on these updates, it actually works out much better from an accounting perspective; the time lag gives my late-paying tenants ample time to catch up…

The first floor tenant is wonderful, and she’s very good with paying on time. The Section 8 tenant on the second floor, however, tends to pay in lump sum amounts at the most random times…

But without getting into specifics, I am just glad that these type of tenants finally do get around to paying the full amount… In the past, I’ve collected a hefty sum of $25 late fees from these tenants, who for whatever reason don’t seem to mind paying… To try and encourage them to pay more frequently (and on time), I’ve adopted a practice to strip away any remaining late fees as soon as they get current on their balance. Sure, I could keep on sticking the late fee on them, but I would really prefer not do so… I’m not trying to punish my tenants too severely and ultimately, I just want them to pay their rent… If anything, the late fees only discourage them even more as they watch their balance sheets continue to swell up…

The last thing I want to see is a frustrated tenant give up completely… which would force me to have to go through the eviction super expensive route, again.

In my experience, it definitely has not been an easy task in collecting consistent rent checks each month from my Section 8 tenants… Fortunately, when they finally do come around to paying their portion, the cash flow from these type of units in Chicago can be tremendous (see below):

Total cash flow for the month was $926.18.

Rental Property #4: Indianapolis

Rental Property #4 is my only property that is owned free and clear, so I guess you could say that it has become the one that I worry the least about. The lack of mortgage gives me a much greater degree of peace of mind, even when things are going bad…

This month, I had another huge maintenance bill of $650 to replace a water heater… There was a maintenance charge of just over $100 a few months back to “repair” the water heater. That obviously did not work as planned, as the PM informed me this month that they had to swap out the old unit this month.

Such is life…

Total cash flow the month was $84.75.

Rental Property #5: Chicago

Rental Property #5 is doing well and the cash flow gains are wonderful when everything is firing on all cylinders. As I mentioned at the start of this report, I had an issue with CHA this month in getting rent collected for my Section 8 tenant on the second floor.

Apparently, the unit fell into abatement this month because the unit failed the annual CHA inspection. Well, the repairs were made by my PM and the unit later passed re-inspection, but the rent never resumed! Days turned into weeks, which turned into months, and still no progress…

After experiencing 3-4 months of collecting no rent from CHA, I started to get a little worried. You know what they say about government entities, right? They move slow as molasses…

Luckily, this issue FINALLY got resolved and the rent checks started flowing in again!

Total cash flow for the month was $1,206.47.

Summary

Tallied up, the total cash flow this month for all rental properties came in at $2,117.11.

As readers will be able to observe, my cash flow margins have begun to shrink drastically, starting this month. With another cash out refi taking effect (Rental Property #1), my margins have been compressed greatly.

However, since I am not dependent on the cash flow immediately right now, I’ve accepted the consequences of taking “a step back” in the short-term, to hopefully help propel myself “two steps forward” in the long-term.

Breaking even (or losing money) on a property is never a good feeling, but I will confess that having lots of cash on hand is an even more liberating feeling. The cash out refis served their purpose, and although I haven’t found an investment vehicle to jump straight into, it is very reassuring to be sitting on a huge pile of liquid ammo that is ready to deploy whenever the next wonderful opportunity presents itself.

It the meantime, we will have to live with what we’ve got…

2015 Cash Flow Summary:

March 2015: $2,117.11

February 2015: $2,056.28

January 2015: $2,758.91

 

2014 Cash Flow Summary:

December 2014: $2,239.59

November 2014: $1,459.84

October 2014: $2,479.99

September 2014: $3,008.02

August 2014: $3,265.64

July 2014: $2,778.24

June 2014: $3,129.87

May 2014: $3,152.58

April 2014: $3,381.28

March 2014: $3,800.20

February 2014: $2,467.62

January 2014: $2,122.26

 

2013 Cash Flow Summary:

December 2013: $1,892.55

November 2013: $1,317.70

October 2013: $2,271.81

September 2013: $1,932.28

{ 1 comment… read it below or add one }

1 No Nonsense LandlordNo Gravatar July 22, 2015 at 10:48 am

The great features of Section 8… There are some positives, but the negatives generally out weigh the positives. Hopefully you did not get docked much rent? Was it the tenants damage that caused the inspection failure?

It’s great to see the cash flow reports again. It all takes time, but as you get more properties and less mortgages, the cash flow comes in nicely. It’s never quite passive though.

I have a water heater that I am going to replace in the next few weeks. It’s still OK, but getting ~15 years old. Change it now, not when I am on vacation somewhere warm in the winter…

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