August 2014 Cash Flow Statement

Leverage

I was of the country for most of August, so this was a really good trial run to see how passive the rental properties really are! Since I was too busy out having fun, I basically entrusted everything to my fabulous tenants in the Bay Area, and to my property managers out-of-state. Let’s see how the properties performed this month…

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 August:

August_2014_Cash_Flow

Rental Property #1: Bay Area

Rental Property #1 was solid again this month, and rent was collected prior to my trip to Japan. I didn’t receive any text messages or e-mails from the tenant while I was away, so I’m hopeful things are still going smoothly here. This tenant is consistently awesome, and although cash flow isn’t spectacular, the peace of mind (lack of headaches) really make this unit a winner in my book.

Total cash flow for the month was $447.67.

Rental Property #2: Bay Area

Similar to Rental Property #1, this property also keeps on performing. Rent was also collected on time, prior to my vacation. No complaints here!

Total cash flow for the month was $344.76.

Rental Property #3: Chicago

The first floor tenant (market rate) is spectacular, and basically on par with my Bay Area tenants. Rent payment is a bit more sporadic here, however, and I don’t always collect early in beginning of the month. The good news is that she has never missed a month’s payment. Sometimes she pays around the middle of the month, but this tenant does take the responsibility to pay the $25 late fee, which she did again this month. I do wish she would consistently pay in the beginning of the month, though, as it really isn’t in my interest to nickel and dime her.

The second floor tenant (Section 8) again chipped in $200 this month in rent. She is being served an eviction notice, which I paid $922 for last month. Maybe she thinks these drip payments will make a difference and help her stay? I’m not sure how long this process will drag out, but her move-out date was set by the courts to be on October 28. I am hoping to secure a much better tenant, next time around.

When running cash flow numbers, I originally budgeted 10% of monthly cash flow towards vacancy reserves. I will learn from this eviction experience whether or not that percentage is adequate or not. My guess is that 10% is insufficient (especially for out-of-state investing in Cook County), and I’m anticipating the entire eviction costing me a lot more than that… More clarity (and answers) will come as I navigate through this eviction process.

Rental Property #3 is back to being cash flow positive! 🙂

Total cash flow this month for Chicago came out to be $739.69.

Rental Property #4: Indianapolis

Rental Property #4 has stabilized and I’ve been able to collect rent on time consistently since the new tenant moved in. August was a great month, and uneventful. Just the way I like it!

Total cash flow this month for Indianapolis came out to be $518.18.

Rental Property #5: Chicago

The first floor tenant is Section 8, and her portion is only $110. Section 8 covers $1,098, or the majority of the rent. This tenant doesn’t pay consistently each and every month, but she did pitch in $100 this month, which is nice. She basically paid off her balance in full last month, so I am very glad she is back on track. Her monthly tenant portion is $110, but I am not going to squabble over a measly $10. Consistent payments are all that I am asking for…

The second floor tenants are market, and they have been consistently excellent. Like my other market tenant, they always pay each month, but not necessarily on time either. The good news is that they also do take responsibility seriously and pay the $25 late fee.

One thing I’m observing with these Midwest properties is that rent collection on the first of the month (or even 4th) is not a slam dunk… Even with great market rate tenants, I’m seeing this as a common trend… rent keeps arriving in the middle of the month. This is something that takes some getting used to, especially for someone who lives in and invests in the Bay Area. In contrast, my Bay Area tenants have never paid later than the 5th of each month… I have never collected a late rent fee in the Bay Area…

But in the end, as long the tenants pay off their balance in full each and every month, that’s all that really matters. Actually, I’ve collected quite a bit of rent in the form of late fees, which does pad the cash flow numbers. Still, I would gladly give that up to be able to collect rent at the beginning of the month. I actually have a policy of giving my out-of-state tenants a $20 discount each month if rent is collected before the 4th. Sadly, not a single tenant has taken me up on that offer…

Anyway, cash flow for Rental Property #5 was spectacular again this month.

After all expenses, total cash flow this month was $1,215.34.

Summary

Total cash flow for August came out to be $3,265.64. I was able to clear $3,000 this month, which was a relief after failing to break that mark last month (eviction and attorney fees chewed up $922 of cash flow). Overall, things are going well, although I will need a few more months to stabilize unit 2 in Rental Property #3.

With that said, it is interesting to note that I haven’t increased my cash flow since I closed on Rental Property #5 back in late February of this year. It’s been awhile since I’ve invested for cash flow… Now that we are getting closer to the end of the year, I can say that I don’t anticipate making any more cash flow moves this year to help boost the semi-passive/passive income… Instead, I’ve actually been going off on a tangent, focusing more on appreciation plays… Lots of details to follow soon on this topic.

My goals for the remainder of the year will be to stabilize my existing units, and to focus on rebuilding cash reserves. Also, since I start a new job in a few weeks, most of my focus and attention will be concentrated on getting settled in.

Still, the end goal of early FI will always depend on cash flow (gotta pay the bills somehow), so that’s something that can never be fully ignored! I’ve been on a break, but hopefully we can come up with some new strategies to help increase the cash flow in 2015!

Fight on!

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Cash Flow Statements (2015 Recap)February 2015 Cash Flow StatementDecember 2014 Cash Flow StatementNovember 2014 Cash Flow StatementSpecial Agent Dividend Recent comment authors
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No Nonsense Landlord
Guest

I just posted my cash flow and rent collections. 23 for 24 rents deposited in the bank by 9/2, and the last one on the 5th. I have one vacancy.

It’s all about tenant quality, nothing else. Income will tell you the tenants ability to pay, credit score will tell you the tenants ability to pay.

Upgrade your tenants and your life will be easier and more profitable.

No Nonsense Landlord
Guest

Correction: It’s all about tenant quality, nothing else. Income will tell you the tenants ABILITY to pay, credit score will tell you the tenants DESIRE to pay.

writing2reality
Guest

First off, congratulations on another great month of collecting over $3k of positive cash flow. It is interesting that you are focusing more on appreciation plays given your current proximity to FI. Do you think this is the result of your new commitment to staying in the work force longer than originally anticipated? Given your new signing bonus and increased salary, I would image you would be able to generate enough capital over the next few months to pick up another property and get you that much closer to the passive income required. Either way you go, you’ve set yourself up for success in the long-term, and I hope you continue to experience that success.

A Frugal Family's Journey
Guest

Love seeing all that green on your cash flow statement. Well done FI Fighter. Great seeing fellow bloggers success in their personal journey!

Keep it up…Best wishes! AFFJ

Retire Before Dad
Guest

FIF,
Do you use a rent automation service? I’ve been using Rentmatic since I started renting my place and in three years I’ve never had a late payment. It takes the bank a few business days to process it, but I know on the first of the month whether or not the payment is good. Simplifies my life quite a bit. Only costs $4 a month (per unit).
-RBD

Sam
Guest

Crossing the $3k figure is great!

Do you really escrow your property taxes every month?

Special Agent Dividend
Guest

Some great numbers there and hopefully the new tenant will be better next time around after the current one is evicted. I have one investment property that keeps me busy and always nervous on the positive cash flow, so I can’t imagine how you do it with so many.

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