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…