January 2015 Cash Flow Statement

Leverage

I apologize for the delay in posting an update to the cash flow. My PM’s online portal has been down for a few days, so I was unable to login and verify expenses for the month. Luckily, it’s finally back up again, so I was able to tally up the numbers for January.

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 January:

January_2015_Cash_Flow

Rental Property #1: Bay Area

Rental Property #1 kicked off 2015 in style and made sure we got the year started off right. As typical, the tenant paid on time, and there were no issues to report this month. I couldn’t be more pleased with the performance of this property.

Total cash flow for the month was $447.15.

Rental Property #2: Bay Area

I completed a cash out refi for Rental Property #2 in January, so starting next month in February, the mortgage for this unit will go up to reflect the transaction. I’m going to miss the strong cash flow, but I had to do what I thought was necessary… In the long run, I feel like I made a wise decision to cash out, since the refi gave me access to ~$100,000 in fresh capital to close Rental Property SH #3 and payoff Rental Property #4 (the lender required this action since Fannie underwriting guidelines won’t allow for a cash out refi if you own more than four properties; it worked out ok since the interest on Rental Property #2 is 4.375% and for Rental Property #4 it’s 4.75%). For this month, there were no issues to report and I collected rent on time.

Total cash flow for the month was $358.67.

Rental Property #3: Chicago

The first floor tenant is amazing and always pays rent on time; I have no concerns with her, and she is as high quality as my Bay Area tenants.

This month, I finally got a new tenant on the second floor and was able to collect rent! After experiencing vacancy for a few months, you can say I was more than thrilled to finally have a new tenant in place. This woman is another Section 8 tenant, which was not what I preferred (because of previous bad experiences), and I think this was due to some miscommunication between the PM and myself, which ultimately led to this result. In hindsight, I should have followed up more regularly and made sure to keep closer tabs on the lease up situation… As I’ve mentioned before in the past, managing out-of-state investments (even with a PM in place) can be more work than when you self-manage. PMs deal with hundreds of clients, so they are prone to forgetting things and not prioritizing your most urgent needs…

Also, I had to pay a tenant lease up fee, which is equal to one month’s full rent of $1137. That was kind of a bummer, but at least I’m collecting rent on both units again. Overall rent was higher this month since the new tenant paid a $500 move-in deposit, in addition to her monthly rent portion. CHA subsidy is $771 and the tenant portion is $366. We ought to be rolling again next month…

Total cash flow this month for Chicago came out to be $200.57.

Rental Property #4: Indianapolis

Rental Property #4 has been performing well as of late. The tenant is great and has been consistently paying on time, which is always music to my ears.

But just like every month, I had another $347 maintenance bill this month. This obviously cuts into the cash flow quite a bit, so I’m hoping it’s just a string of bad luck. I do have some additional datapoints from another client who uses the same PM, and from what they are telling me, they aren’t being nickeled and dimed every month…

Thanks to the cash out refi, starting next month, I will no longer have a mortgage on this property. So, cash flow on this property should increase noticeably.

Total cash flow this month for Indianapolis came out to be $171.18.

Rental Property #5: Chicago

Rental Property #5 was a top performer in 2014, and this month got off to an excellent start. The second floor market tenant has always been excellent, and paid on time again this month.

Surprisingly, the Section 8 tenant on the first floor contributed more than her normal share, and basically got caught up on rent this month. She made an additional $500 payment this month, which wiped away most of her previous balance.

So, even though these Section 8 tenants don’t always reliably pay on time each and every month, I’ve learned to tolerate late payments, as long as the tenant makes an effort to get caught up from time to time. Large lump sum payments aren’t preferred, but I do appreciate them when they come in.

After all expenses, total cash flow this month was $1,581.34.

Summary

Cash flow was up this month, thanks to the extra payments from Rental Property #3 and Rental Property #5. Despite the lease up renewal fee, I was still able to pocket $2,758.91 in net cash flow this month.

2015 is now underway, and as you can see, my cash flow numbers really haven’t improved in quite some time. It’s been about a full year since I won Rental Property #5, and since then, I haven’t added any new cash flowing properties. I’ve completed three subsequent side hustle deals, but each one of those were partnership deals that don’t generate much cash flow.

Would it be nice to add some more cash flow properties? Absolutely! But I also have a substantial amount of debt to my name, so I must tread carefully. These days, I’ve been focused on buying stocks rather than more rental properties…

But as always, it’s important to keep an open mind. I’m not going to force the issue, but eventually (at some point in time), I would like to secure some more cash flow properties.

The local folks I talk to say they need about $10,000/month in cash flow to live comfortably in the Bay Area. 😉 If that’s the case, I still have a long ways to go!! I’ll need a few more market crashes and recessions to hit those numbers…

For now, I’m just hoping to have enough to travel overseas for awhile… I’ll have to tackle the Bay Area problem at a later time… One step at a time…

 

2015 Cash Flow Summary:

January 2015: $2,758.91

 

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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Rhys
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Rhys

Hey loving your updates! I check your site frequently

Sorry for being negative but I call bullshit on needing $120,000/year for living expenses. Just because others say you need it, who may not be able to live as an efficient lifestyle as yourself. Consider basing your goals off your own desires and situation, not others. You could already live off your investments quite comfortably by ere standards. Why put pressure on yourself to increase your investment returns so dramatically to $10,000/month?

Enjoy your opportunity for the freedom, time to devote to your other interests and health 🙂

writing2reality
Guest

Wow, I must have totally missed where you were paying off the mortgage of one of your properties! Trading some equity in once place to maximize cash flow in another. Not a bad strategy. I hope this works out well going forward for you as you can essentially debt snowball or recapitalize your cash position with the extra monthly cash.

No Nonsense Landlord
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Great job so far, but as you can see, rental income is subject to major swings in cash flow. The more units you have, the less risk. Low income tenants are by their very nature, are very risky.

Keep moving forward, keep some cash to work with.

Nuno
Guest

Your cash-flow is amazing. I’m a fan of moving averages, try to plot your 12 months moving average. the trend is awesome!

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