October 2013 Cash Flow Statement


Another month has gone by, so it’s time to put together another update on everyone’s favorite topic — cash flow! Last month, I started this new category, which will be updated on a monthly basis. The first time around, I did not include property taxes or insurance information on any of my Bay Area properties (Chicago property has an escrow account to account for this each month).

This month, I actually paid the first installment on Rental Property #1, which is due in December. Rather than putting the entire lump sum in the “Expense” section for this month, I decided now was a good time to just go ahead and divide the annual payments by 12 and just keep tabs of it every single month. So, even though in reality I’m paying the property taxes and insurance in lump sum intervals, for the sake of accounting, I will just average everything out into monthly payments. Like with the Net Worth updates (that are currently using Zestimate), I’d like to be able to eliminate the month-to-month fluctuations as much as possible. This will make it easier for everyone to see what the true monthly cash flow is, on any given month.


Rental Property #1

As mentioned above, I paid the first installment of property taxes for Rental Property #1. This came out to be $2353.51. This was a huge increase from last year, and more than I was expecting. This is another reason why many real estate investors don’t encourage buying properties that are “too valuable”. The property taxes will kill you… as I’m slowly learning. Luckily, even though the monthly payments are now an outrageous $392.24 each month, the property is still cash flowing. Right now, this property is bringing in about $423.36/month after PITI (principal + interest, taxes, and insurance). True, the cash-on-cash returns are not so great, but I’m not too worried over the long run. The property has appreciated about $100,000, and the rental demand is extremely strong in the South Bay Area. Over time, I believe I can either sell it and do a 1031 exchange, or keep it long term and raise rents. Market rate for rent is about $2300/month, and I’m currently renting it out for $2130/month.

Rental Property #2

I haven’t yet paid the property taxes for Rental Property #2, however, I did receive the bill. Property taxes for this rental come out to be $303.07/month. After accounting for all PITI bills, the monthly cash flow is $360.92/month. This is a bit lower than Rental Property #1 because the HOA is a lot higher, coming it at $306/month. Also, I only put 20% downpayment on this rental. Again, I don’t expect my Bay Area properties to cash flow much (the first few years), but I still believe this was a solid investment. It’s located in a fantastic area, and this property has also appreciated close to $100,000. It’s currently renting for $2150/month, and I believe market rent is now also around $2300/month. This property has been firing on all cylinders so far, and I lucked out to land some great tenants.

Rental Property #3

The problem child of the bunch. Well, actually, the first floor tenant has been superb. It’s the second floor tenant that’s driving me nuts! As mentioned last month, this tenant has been flakey on rent, and owed quite a bit going into October. She reasoned that her circumstances had changed, and she was facing financial difficulties. Fair enough, so the property manager and I decided to give her some time to straighten out her situation.

Turns out, she was able to get into contact with Section 8 and request a change in assistance. Previously, she was responsible for paying $464/month, or roughly 40% of the rent ($1158). This month, she was approved for more assistance, and is now only responsible for $94/month. Section 8 is helping her and will pay $1064/month. Baring any additional government shutdowns, this new agreement will basically assure me 92% of the rent each month. As an investor, that’s a pretty sweet guarantee of being able to collect rent on time!

So, this month, I collected $1064 from Section 8. In addition, they also went back to September and retroactively credited me an additional $370, since they only paid me 60% last month ($1064). Even better, the tenant came around and paid an additional $300 to cover her dues from the previous months (August was prorated), and this month. Lastly, the outstanding tenant on the first floor paid her $950 portion on time, per normal. All in all, Chicago brought in $2684 this month in gross rent. After all expenses, it cash flowed $1487.53. Now that the glitches have been resolved, I’m hoping things will start to normalize next month.


Total cash flow for October was $2271.81. The bulk of it was due to resolving the rent issues from Chicago. The Bay Area properties continue to perform well, and I’m very pleased with the overall cash flow progress. The spike in property taxes for Rental Property #1 concern me a bit, but I’m confident I’ll be able to raise rents in a few years to offset any more increases. In conclusion, October was a great month for cash flow!

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6 years ago

Wow! Fantastic month for the cash flow. To think you will be increasing further by the end of the year with the next property closing. Not to mention, with Sec 8 providing some level of rent guarantee, and the limited assurance that the tenant can’t trash the place too much without risking losing her voucher, you should be set to go with this property for many years to come. Given your cap on acquiring properties due to a lack of rental history, what is your plan going forward? With the additional cash flow you should be able to start stockpiling… Read more »

Financial Samurai
6 years ago

Ahhh, nice. Makes more sense to amortize the prop taxes over the year.


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