December 2014 Cash Flow Statement


It only seemed like yesterday when I acquired my first rental property. And now, just like that, another year has gone by! This is the last cash flow statement for 2014… Let’s see how we did!

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 December:


Rental Property #1: Bay Area

Rental Property #1 caps off 2014 on another high note. No issues reported, and rent was paid on time. This is something that I’ve come to expect from this property, but something I don’t take for granted. I’ve been very fortunate so far, and lucky enough to have hit a home run with my first rental purchase.

Property taxes were due this month… The cash flow statement this month reflects the new tax assessment.

Total cash flow for the month was $447.15.

Rental Property #2: Bay Area

Rental Property #2 also had an incredible year, and was able to follow the high standards set by Rental Property #1. Similar to Rental Property #1, I’ve been reluctant up to now to raise rents on my wonderful tenant here. However, because I recently completed a cash-out refi (which will increase the monthly mortgage payments beginning in March), I will have no choice but to increase rates next year. The lease expires in May, so that will be the most opportune time to do so. Until then…

Property taxes were due this month… The cash flow statement this month reflects the new tax assessment.

Total cash flow for the month was $358.67.

Rental Property #3: Chicago

The first floor tenant (market rate) paid on time and was the sole source of income again this month.

The second floor tenant moved out in October, so one of the units has been sitting vacant for a few months now. This obviously has a huge impact on the bottom line…

I was informed by my PM this month that a tenant has been secured for Unit 2… Although I put in a specific request asking for a market tenant (similar to Unit 1), the PM went ahead and assigned me another Section 8 tenant.

My request was put in very early during the eviction process, but unfortunately, I’m assuming the PM forgot about it… Since I was so preoccupied with the new job, I made the mistake of not following up on the status of this unit every week…

Again, with out-of-state investing, it’s no walk in the park. If you are going to rely on a PM (and it’s not run by family/friends), you’ll just have to accept the fact that you won’t always be the #1 priority… The PM has hundreds of other units to manage, so you won’t always get the attention you expect (or deserve)… Further, just because it’s urgent for you, it does not mean that your issue will be addressed immediately.

These latest experiences just highlight the true reality of out-of-state investing for me… When I first started, I thought that by having a PM in place I would spend less time managing these units.

I was wrong.

I spend infinitely more time managing my out-of-state properties than I do my local ones… This is something to seriously consider if you are contemplating investing out-of-state; you will have another side job that you may not want.

Without income being generated by Unit 2, this property just about breaks even this month… It is slightly in the red.

Total cash flow this month for Chicago came out to be -$107.75.

Rental Property #4: Indianapolis

Rental Property #4 has been a solid performer for awhile now. The new PM does an excellent job of collecting rent on time, and usually by the 4th of the month, I can see it posted on my online portal.

Unfortunately, they do seem to keep nickel and diming me for maintenance issues. I was hit with another $100 maintenance bill this month for them to replace some air filters, and unclog some pipes.

Since I haven’t worked with the PM long enough to know if this will be a recurring theme each and every month, I am going to reserve judgement for now… I can’t say I’m too happy with the maintenance issues that seem to crop up so frequently… But on the other hand, their ability to keep me in the loop of all issues and consistently collect full rent on time is a blessing.

Finding a high quality PM is never an easy task!! In this case, if they can keep doing a wonderful job of collecting rent on time each and every month, I will be reluctant to change companies again…

As I’ve learned first-hand, evictions and vacancies are what ultimately hurt the most with rental properties. Although being nickel and dimed isn’t ideal, there really isn’t a way around this, unless you elect to self-manage the property yourself… PMs are business too, and they make money when you have issues, unfortunately.

Again, this is the price you pay for investing out-of-state…

Total cash flow this month for Indianapolis came out to be $418.18.

Rental Property #5: Chicago

Rental Property #5 continues to do well, and I am fortunate to have both a high quality market tenant, and a high subsidy Section 8 tenant.

Rent was collected on time, and there were no maintenance issues this month. When these Chicago properties have no issues, the cash flow is tremendous!

The key for me moving forward is to figure out how to minimize expenses and to keep quality tenants around…

After all expenses, total cash flow this month was $1,123.34.


This month was a solid month for cash flow. After all was said and done, I ended up cash flowing $2,239.59.

Cash flow improved this month after a problematic November… It’s been a few months since I eclipsed $3,000/month, but hopefully things will get back on track after the new tenant on Rental Property #3 Unit 2 moves in.

For 2014, the rental properties averaged $2,773.76 each month in net cash flow. Overall, I’m pleased with the results, and I’m hopeful things will get better over time.

For 2015, I will have to get creative and find ways to keep the cash flow in tact… I’ve completed a cash out refi for Rental Property #2, so cash flow will suffer in the short-term as my mortgage payment goes up starting in March. As mentioned above, I will need to raise rents on that unit to offset the loss in cash flow.

Also, I’m in the process of completing a cash out refi on Rental Property #1. Similar story, I will need to raise rents on Rental Property #1 to offset another reduction in cash flow.

Readers may be wondering why I’m electing to refi at the expense of cash flow. For me, the reason is very simple — we are currently in an upmarket and I want to lock-in my appreciation gains.

However, I have no desire to sell any of my Bay Area properties (I used to). By performing a cash out refi, I will be able to reclaim all of my initial investment capital… and much more! Essentially, I will own and control two prime Bay Area properties but have none of my own skin in the game… I will be playing with the house’s money (no pun intended) moving forward.

With the cash back out for both properties, this will equate to ~$200,000 in NEW ammunition to invest with (although a large portion will be earmarked for cash reserves). Most likely, I will invest the proceeds into dividend growth stocks, as I will no longer be able to qualify for loans without a steady W-2 income. As you are well aware, at my age (and state in life), I’m not afraid of taking on debt, which will only increase with the refinancing. Rather, I’m fixated on acquiring as many assets as possible. Assets rise in value over the years… Debt will only decrease as my tenants pay down my mortgages. This is my dual prong strategy for building wealth (not cash flow).

So, to secure my financial future indefinitely, I am taking aim to stack as many assets as possible. To be more clear, one very important thing I’ve learned is this:

To build wealth, accumulate as many APPRECIATING assets as possible. The earlier you do this in life, the wealthier (and more thankful) you will be later on.

The key word is APPRECIATING… which I’ve just recently learned this year. Thus, my gameplan moving forward will change from my previous strategy of investing purely for cash flow (2013-2014)…


2014 Cash Flow Summary:

December 2014: $2,239.59

November 2014: $1,459.84

October 2014: $2,479.99

September 2014: $3,008.02

August 2014: $3,265.64

July 2014: $2,778.24

June 2014: $3,129.87

May 2014: $3,152.58

April 2014: $3,381.28

March 2014: $3,800.20

February 2014: $2,467.62

January 2014: $2,122.26


2013 Cash Flow Summary:

December 2013: $1,892.55

November 2013: $1,317.70

October 2013: $2,271.81

September 2013: $1,932.28

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11 Comment authors
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FI Fighter, even in a down month, greater than $2,000 is still pretty solid.

Chasing appreciation, to me, is a fools game. I certainly wish you the best of luck as you head off into this new direction. Given your health issues, I would have thought you would have find a way to maximize your leverage in order to increase cash flow, not decrease it. Appreciation, even if it occurs, only helps fund life when a property is sold or leverage is increased.

This is also a theme with your equity stake in BABA – certainly fine for a growth investment, but not one for providing passive income.

I’m interested to hear your thoughts on this shift in direction.


Wow. Incredible! That was solid rental income that you are making. Wish you luck with your recovery!



No Nonsense Landlord

“I spend infinitely more time managing my out-of-state properties than I do my local ones…”

This is due to tenant quality, not distance. If you have a paper trail about non-section 8 tenants, find it. Why it was vacant so long waiting on a section 8 tenant is a mystery, they are a dime a dozen.

“I was hit with another $100 maintenance bill this month for them to replace some air filters, and unclog some pipes.”

Clogged pipes, unless it was a plumbing malfunction, should be a tenant responsibility. The same with filters.

As someone who cash flows almost $12K a month after all expenses, I can assure you it is all about tenant quality.


Yikes this makes me a bit nervous with my plans to hear your experiences now. However, I’m going to move forward as planned so far so good.


I also live in the Bay Area, Peninsula to be exact (the highest prices of the Bay Area).

I have a couple questions. Your mortgages seem awfully low in comparison to the rents, unless you are buying somewhere in san jose or fremont. And even then I would have to assume these are interest only loans, is this the case?

Also, Your cash flow is before taxes, although you can’t plan for maintenance and turnover, taxes are a sure thing. I think you should automatically take out 45-50% depending on whatever tax bracket you’re in, state and federal combined.

Lastly, saying you refinanced to pull cash out and have no skin in the game.. I’m not sure where to even begin. Did you live in the Bay Area during 2008? Home prices dropped 50% and rents dropped 30-40%. I can assure you, until you actually sell the property, you haven’t locked in any capital gains, like you say in your post. “Don’t count your chips while you’re sitting at the table”. Just because you did a cash out refi doesn’t mean you took your chips off the table, on the contrary, you added more chips.

Overall, I am impressed with what you’ve been doing, but the way you talk scares me a little bit that you don’t full understand real estate investing. You’ve been invested during the best market cycle the Bay Area has seen, and have only been in during the upswing.

Asset Grinder

Good job with the juggle. As long as those checks keep coming in it will be all good. I hate repairs 🙁

Even Steven

I’m not very familiar with Section 8 requirements, but can you object all together? I would think that it is your right as a property owner.

Midwestern Landlord
Midwestern Landlord

FI Fighter,

Bottom line, in 2012 you made a great decision to invest in real estate. Just look at your average rental property cash flow for 2014 of $2,773 / Mo ($33,276 annually). In order to create this income stream utilizing a stock investment account (assuming the 4% rule), you would need $831,900. That’s what I love about income producing real estate; it speeds up the process for all of us that don’t want to work until we are the typical retirement age. This does not include the additional benefits including principal reductions, appreciation, tax advantages, etc.

Obviously real estate investing is not for everyone. There are people that I know that do not want to have anything to do with being a landlord. To each their own. If it does not fit one’s personality, then they should not do it. And of course, there is some risk. Leverage risk, management risk, tenant risk, neighborhood risk, etc. However, there is also risk relying on a company for living expenses when they can let you go at any time for any reason.


Hey, I bit of the off-topic here. I’ve tried to send you a message, and got back the error “Mailbox quota exceeded”

Gen Y Finance Guy

FI Fighter,

It looks like you have a very nice Real Estate Portfolio. I have a few questions:

1) What is the maximum amount of leverage (debt) you are willing to take on?

I personally would be uncomfortable at anything beyond 4X by annual income (earned or passive). Also, you mentioned that you will no longer have any W-2 income. What kind of reserves do you have in the bank in the event things don’t go exactly as planned?

2) Do you have any other sources of income outside of your real estate portfolio?

I do like debt for the leverage that it gives. I personally think you are better off leveraging up after large market down turns and then focusing on cash-flow as the up market ages and eventually turns lower.

Curious on your thoughts?



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