January 2014 Cash Flow Statement


Another month, another cash flow report! As I’ve mentioned many times before, I always look forward to writing up this report. 2013 was a very successful year of investing, and I’m greatly looking forward to building up the rental portfolio even further in 2014.

Last month, I dished out $350 worth of gift cards to tenants to show my appreciation for their timely payments throughout the year. In general, I approach real estate investing as something that can be mutually beneficial to both parties. As a landlord, it’s my responsibility to provide my tenants a quality place to live at an affordable price. If things go wrong, I need to get the issue fixed as quickly as possible. And it needs to be done right.

In return, I expect each tenant to pay on time and take good care of the property. I typically perform a home inspection once each year for my local properties. I still need to ask and find out what my out-of-state PM’s do. For the most part, things have been going well, and I’m comfortable with rewarding good behavior. $350/year is a small price to pay to help safeguard against vacancy. Hopefully the tenants appreciate the gesture and want to continue living in my properties for awhile.

With that said, here’s the report for January:


Rental Property #1: Bay Area

Rental Property #1 continues to perform. I was able to collect rent on time this month and there were no maintenance costs. Bills this month were purely due to PITI and HOA. As such, I was able to operate at maximum potential for this month. Total net cash flow collected was $479.82.

Rental Property #2: Bay Area

Similar to Rental Property #1, this property also continues to perform well. Rent was collected on time and there were no issues that popped up this month. The only change for this month was the increase in HOA dues. HOA at this community was already extremely expensive, and rates went up another $12.00 this year. HOA dues are now $318/month. Accounting for that adjustment, this rental also operated at its new maximum potential, cash flowing $348.92.

Rental Property #3: Chicago

Rental Property #3’s performance is still divided. The first floor tenant continues to pay on time, so there are no issues there. On the other hand, we have the second floor tenant, who hasn’t made a payment since October of last year. Yup, another month, and another non-payment from her again.

At this point, you’re probably wondering why I haven’t started the eviction process… Actually, we came very close to starting… My PM sent out a final notice in January, and had attorneys at the ready to start the eviction process. After about five days or so, the PM informed me that the tenant’s mother phoned her and asked the PM if she could make the repayments for her daughter. The tenant’s mom said she would send a check out in early February, repaying all of the debt and bringing the tenant’s balance back to $0.

Honestly, I don’t have very high hopes of collecting the missed rent. And I do believe we will proceed with the eviction process in February. However, since I am collecting 92% of the rent from Section 8, I’m in a better position to be patient. If the above scenario doesn’t manifest, then I will be done playing games. At that point, it will be about principle, and I will want her out of there. But we’ll see…

Total cash flow for Chicago came out to be $775.34.

Rental Property #4: Indianapolis

Rental Property #4 has been performing well, and this was another smooth month. Rent was paid on time, and there were no expenses outside of PITI and the 10% PM fee. Also, I did receive an annual bill from HOA this month. I elected to pay it all at once, but for accounting purposes, I will partition out that payment over an entire year. The HOA bill was $150, or $12.50/month. All in all, I was able to collect $518.18 this month.


The four properties are performing well and I just need to resolve the tenant situation with the second floor tenant in Chicago. Total cash flow this month for all properties came out to be $2,122.26. Alright, now we’re cooking, and finally over the $2,000/month barrier!

In order to achieve that, though, each property had to be firing on all cylinders. So, although it is nice to hit that mark, I’m not going to make too big a deal out of it. With rental properties, it’s inevitable that repairs and vacancies will eventually happen. That’s why my goal for this year is to get to $3,000/month in net cash flow. Gotta keep creating more breathing room for myself. I’m thrilled with the progress thus far, but still have a lot of work to do before I can confidently say I’ve reached early FI…

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Good work in January – I really enjoy following your progress as you get closer and closer to your $3k/month goal!
Have you considered putting together some sort of beginner’s guide for real estate investing? Maybe your story about how you got started and things to watch out for to help true beginners? I’d be interested in that.


Awesome and congratulations for breaking through the $2k per month barrier! It will only be a matter of time when you are pushing $3k a month!

Out of curiosity, but are you plans for accounting for maintenance expenses. Say your roof needs to be replaced on the house in Chicago, how do you plan on reflecting that in your cash flow statement? Push it through in the month it occurs? Perhaps showing a monthly “maintenance allowance” is another option?


I’ve been reviewing your property cash-flow and your cash-on-cash returns for the Bay Area properties is a fraction of the Midwest properties, which is to be expected. Did you purchase the Bay Area properties to geographically hedge yourself? The low taxes and returns in Indy make me want to buy up the whole city. 🙂


Please get rid of your tenant that is not paying rent. And get rid of the PM for letting this go so long. As I recall, she is a section 8 tenant. Send a letter to the Section 8 office, and that should help. There are also many social services that can help her pay. Imagine what your life would be like with most of your tenants in this low caliber range. This is a common Section 8 tenant behavior, along with having a felon boyfriend moving in.

Plan on 10% of rents for maintenance, and 5% for vacancy. Also include ~8% for property management, even if you manage them yourself. If you are managing property for free, I have some you can manage for me. The rest is actual cash flow and your Return on Investment (ROI).

Some advice: Stay with solid tenants. Understand the relationship between credit scores, income and rent payments. Know credit score distributions, so you know if you have an above average tenant or not. (658 is the average tenant credit score). Know that when a PM makes more money, you make less. A PM makes the most money on a sub-par tenant, you make the least. They make money when they get a tenant, when they evict, when they schedule maintenance and when they refill your apartment. You make the most when you have a long term tenant.

Done by Forty

So inspiring to read this, and educational, too. Thanks for your guidance and I’m looking forward to following in your path here. Cheers!

JC @ Passive-Income-Pursuit

What great numbers here. Almost all the properties firing at full efficiency. While rental #3 isn’t collecting full rent, since it’s section 8 that’s great for you because you’re still cash flowing some ridiculous numbers from there. $700+ per month is incredible. I thought HOAs were bad here in Texas but $318 per month is crazy. All in all a great month on the cash flow side. When is #5 expected to close?

The First Million is the Hardest

Pretty solid cash flow on all 4 properties. If you haven’t written about it yet, I’d be interested in reading how you manage your out of town properties. Finding trustworthy PM’s etc…


You probably already know this but you can get “landlord” insurance to protect against abandonment or eviction:


From running some numbers, it doesn’t look like it makes any sense for the section 8 housing since the rent is subsidized but for your others rentals, I think it may. Since most of your Chicago rents if not all are less than $1200, annual premium per unit per year is $250. If you purchase this policy, you’re deductible is first month’s lost rent, but they do cover the cost of eviction and 6 months lost rent. It seems like most evictions in Chicago take 3 months so the number would play out like following:

$1100 (deductible) + $250 (premium) + $1100 (lease-up for new tenant) = $2450

Without the insurance, losses would be as following:

3 months x $1100 (lengthy eviction) + ~$950 (eviction legal fees) + $1100 (lease-up for new tenant) = $5350

$250 per unit per year is a small price to pay for some piece of mind. Food for thought. 🙂


Is there a plan to deleverage? Using a year’s worth of $2k could go a long way to knocking off the smaller mortgages and thus getting you closer to your $3K goal.


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