The Cash Flow Statement is my favorite update of the month! This is the post I most look forward to writing each month, since the results validate all the hard work I’m putting in. You can’t fake it, twist it, or lie about it… the results are what they are…The plan is either working, or not!
This month, we introduce Rental Property #4 into the fold, as this marks the first month I started collecting income for it. Since closing finalized on November 12, the rent for this month was prorated. The other properties are all still occupied and renting out as normal.
Let’s get to the results:
Rental Property #1
Rental Property #1 is performing as expected. I was able to collect rent on time this month, with no additional issues or surprises. The first installment of property taxes were paid last month. The second installment isn’t due until the end of April, so I’ll probably get to that payment sometime after Rental Property #5 closes. I’m probably going to need the extra funds to get through underwriting, otherwise my preference would have been to pay off all the property taxes in one go.
Rental Property #2
I paid the first installment of property taxes for Rental Property #2 this month. This property is continuing to perform with no news to report this month. That’s always music to my ears! Similar to Rental Property #1, the second installment of property taxes will be paid after Rental Property #5 closes. I need to hold onto as much cash as possible until I get through closing again!
Rental Property #3
Just when I thought I had all the kinks resolved, we go through yet another month in which tenant #2 misses a payment! This is starting to become the norm, which is unfortunate, and something that the property manager and I will need to get resolved ASAP. As mentioned in last month’s report, tenant #2 recently lost her job and had to petition with Section 8 to get her monthly rent reduced. Section 8 approved the request, and has been covering 92% of the monthly rent (since September), or $1064. The tenant is only responsible for $94, but still missed this payment. The last I heard, my property manager has an upcoming phone call with the tenant to go over her situation. It would be a shame if she had to be evicted, because losing that wonderful Section 8 voucher would be a huge blow for her own personal situation.
Tenant #1 continues to pay on time, and I have not had a single issue with her. She’s been terrific, and I was able to collect her portion of the rent, $950.
Total rent collected was $2014. Even with the missed rent from tenant #2, the property still cash flowed $871.13. Looking at the big picture, it was still a very successful month, overall. This is why I’m willing to be a bit more patient with this situation, and why I’m not jumping the gun to start an eviction.
Rental Property #4
Rental Property #4 is now leased for 2 years at $1075/month. Since closing didn’t finalize until November 12, I was only able to pick up rent for 19 days this month (starting November 12). The prorated amount comes out to be $680.83. However, unlike my Chicago property, this property manager charges a lease up fee (for a new tenant) equal to the first month’s rent. So, I actually owe them the entirety of this month’s rent, $1075. After subtracting my prorated portion, I owe them $394.17.
The agreement I signed with the property manager does state that the standard 10% property management fee is waived on a month where there is a lease up fee. So, at least for this month, I didn’t have to pay the PM anything. Starting next month, I will get charged 10% of the gross rent, and pay them back the remaining $394.17 balance I owe.
Also, it’s worth noting that I haven’t had to make any mortgage payments yet. The first mortgage payment, including escrow funds for property taxes and insurance, will be due in December. Keeping these expenses in mind (previous balance, mortgage, escrow), I’m anticipating December’s cash flow to only be slightly cash flow positive. Starting in January, Rental Property #4 should finally be cash flowing to its true potential!
Total cash flow for November was $1317.70. This is a bit lower than usual, as a consequence of the lease up fee I had to pay for Rental Property #4. It’s still a decent amount, though, and the cash flow covers 87.8% of my original early FI passive income target of $1500. I definitely can’t complain, but will look forward to better numbers starting in January. I know it’s a bit premature to be thinking too far ahead, but I really can’t wait until I close Rental Property #5. I anticipate that property being a cash cow monster, and it should easily add another $600 to $700 each month to the cash flow. If that happens, I’ll be well over $2000/month (even after factoring in vacancy and maintenance reserves). Exciting times ahead, so let’s keep at it! Forward march!