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I’m still playing catch up and trying to get back up to speed on things. It’s almost February and I haven’t even posted my Goals for 2014 yet. I’m slacking and must snap out of it! Here’s an update on the cash flow income for December.
Without further ado:
Rental Property #1
Rental Property #1 continues to perform very well. The tenant was current every month for 2013 (and 2012), which leaves an awesome impression on my mind. 🙂 To show a token of my appreciation, I awarded this tenant two gift cards for the Christmas holiday. The first gift card was $100 for dinner at the Cheesecake Factory. The second was a $50 gift card for gifts at Amazon.com. Both expenses show up on this month’s report, but even then, the property still cash flowed over $300, so I’m more than happy to do it.
Rental Property #2
Similar to Rental Property #1, this property has been performing well all year. Granted, this particular property doesn’t cash flow too well, but that’s partially due to the fact that I only put 20% downpayment on this rental. Further, I rented it out below market price. So far, I haven’t regretted the decision because I landed some awesome tenants who always pay on time each and every month. Similar to the first rental, I elected to give these tenants two gift cards for Christmas. The first card was $50 to Black Angus and the second was a $100 gift card to Amazon.com. Having great tenants is very important to me… I will do what it takes to keep them. I believe good behavior deserves to be rewarded.
Rental Property #3
The first floor tenant in Chicago has been outstanding. She has been current each and every month, and that’s always music to my ears. Since she has only been living there for about half a year, I decided to award her a simple $50 gift card to Amazon.com.
The second floor tenant, on the other hand, hasn’t paid rent since October! I’m a pretty patient guy, but even this is starting to get a little ridiculous. All I get are excuses after excuses after excuses. This has got to stop at some point, and we are getting closer and closer to starting the eviction process. Luckily, this is a Section 8 tenant, so a large portion of my rent is guaranteed each month. In this case, 92% of it, so I still collected $1064. Bad news for her, no gift cards!
Overall, I’m still very pleased with the performance of my Chicago 2-flat. Getting over $800 in cash flow is a-ok in my book!
Rental Property #4
I paid the lease up fee last month, so December was the first month where I got to collect a full month’s rent for Rental Property #4. Awesome! It feels good to finally have all properties firing on all cylinders. The tenant paid on time, and there were no maintenance issues this month. So, the only bills were the mortgage/escrow and property management fee. I pocketed over $500 this month which is something I can very much get used to on a monthly basis. Fingers crossed!
Summary
Total cash flow for December was $1892.55. That’s pretty cool, I think. I’m getting closer to hitting the coveted $2000/month mark.
Once Rental Property #5 closes, I should be in well excess of that. By the end of 2014, who knows, maybe we’ll be right on the cusp of $3000/month. Of course, a lot of things would have to go right to make that happen… So, let’s not get carried away and dream too far into the future. Still, $2000/month in the short-term would be a wonderful achievement. Let’s do it!
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{ 24 comments… read them below or add one }
Sounds like you’re pretty close to being able to call it quits if you wanted to go for semi-FI and find a job with a lower income 🙂 2013 was so awesome that I can’t wait to see what 2014 brings!
Leigh,
Yes, I’m also totally excited for 2014! Getting to $3k/month is my immediate plan. If I can get there, the semi-FI thing will look a lot more realistic. Can’t wait!
Take care!
Awesome! Sooo close to 2k!
CI,
Yes, so close! Hope to clear this hurdle next month since the gift cards were just a one time expense.
Cheers!
FI,
great income and great progress. Good luck in your 2014 goals! And good luck on closing #5. Looking forward how that changes your cash flow once closed and your first rental starts rolling in.
Martin,
Thanks! Best of luck to you as well in 2014. I’m definitely looking forward to closing #5 and getting some more passive income rolling in.
It’s been awhile… I don’t like droughts 😉
Take care!
Looking good FI,
A few more units likes these and you could live in Southeast Asia for a while, and figure out what you want next in your life. By leveraging up you’ve been able to generate a large amount of cash flow in a short time. Good work. Have a great week.
-Bryan
Bryan,
Yes, a few more units and I may very well be on my way to SE Asia! I’ve heard stories of people taking sabbaticals to Bali, only to return back to the States totally transformed and recharged. In many ways, I want this same spiritual enlightenment. I love the States, don’t get me wrong, but I’ve been living here my entire life. It’s time to see something new and grow as a person.
All the best!
Looks like you are well on your way to hitting your mark! Congratulations!
Moneycone,
Thanks! Appreciate the support!
So inspiring. These are the sort of figures we’re hoping for when we purchase our first rental. Thanks for sharing!
Done by Forty,
That’s so exciting. Don’t hesitate to send a PM if you want to go over strategies, cash flow numbers.
Best of luck to you on #1! It’s gonna be an exciting time 🙂
FIF,
Very impressive numbers here. Inspiring me to get more aggressive on my real estate and borrowing activities. Cool about the gift cards too. My tenants are getting married soon and I want to give them a nice gift.
I just wrote about my real estate cash flow for the first time today. I’m interested in your take if you get a chance to check it out.
-RBD
RBD,
Thanks! That’s nice of you to give a wedding gift, I’m sure they’ll appreciate it greatly.
I don’t think the gift cards are much… and if you break down the numbers, it’s about $12.50/month in “vacancy-free” expenses. For my local properties, one real vacancy would cause me to miss over $2100 in monthly payments… No thanks! I’ll stick to the gift card/appreciation approach, instead.
All the best!
Wow, congratulations! Even more spectacular is that even after spending $350 in gift cards, you still hit almost $1900 of cash flow. Fantastic job! Bummer on the Chicago property and the second tenant. Tough call on whether the eviction costs justify the 8% of rent you aren’t receiving. On one hand is the cost issue, and on the other is the principle on not wanting to reward poor payment by letting her stay. Tough call, but at least you are cash flowing nicely!
writing2reality,
Thanks! That’s true, if you remove the gift cards then this month did exceed $2000/month.
Yeah, the second floor tenant in Chicago is kind of a bummer, but I’m not too surprised. I’d love to get it resolved ASAP… At the same time, I know all about the law of large numbers. Own enough properties, and you’re bound to get a lemon from time to time.
I’m just grateful Section 8 is bailing me out, in this case 😉
Cheers!
You are a cash flow machine! I hope to be able to add another rental this year to compliment my dividend income. How many total rentals are you targeting or a particular cash flow amount? I’m not sure if you mentioned that before.
AAI,
I love your strategy of diversifying. You have a spectacular dividend portfolio and a few rentals in the mix… the best of both worlds.
In regards to total rentals, my number for now is to try and get to 10. For cash flow, $3000/month is my minimum target… If I can get to $4000/month before I exit stage left, I’ll be very confident in the probability of success in early FI.
Take care!
FI,
You’re crushing it with the rental income. With that kind of cash flow I’d be highly considering quitting and working part-time and using the increased free time to manage properties and focus on hobbies and relaxation, etc. I can understand you might want to wait a little while, however, because your strategy differs from mine and includes a lot of leverage. With $2k/mo in dividend income my two-week notice is already submitted! 🙂
Keep up the great work.
Best wishes.
DM,
Thanks! I totally hear you on the risks of using leverage. I completely agree that if this was a dividend portfolio and I was generating $2k/month, I would be very close, if not already out the door!
With a dividend portfolio, your income stream is all but assured. Even better, it’s almost guaranteed to rise every year if you invest in dividend stalwarts such as: KO, PEP, PG, JNJ, MCD, etc. Exactly the type of dividend growth companies you have in your own portfolio.
For rentals, my confidence is not so high. You just never know when a vacancy or large CAPEX will show up… Missed payments are bound to happen as well. Being so unpredictable in nature forces an investor to have to strive for greater margin… What’s the magic number? Not sure anyone really knows, but my guess would be double what you would need for a dividend portfolio. So, maybe I need to get to $4k/month, to have the same equivalent.
Take care!
Congrats on your progress so far, but I see a very risky view.
Why do you let a tenant stay when they have not paid rent since October? As a former Section 8 landlord, and current landlord with 24 renters (and 15K per month in cash flow), you have a very fragile situation. One vacancy or two and the turnover expenses will kill the cash flow for a year.
I no longer rent to Section 8 renters. All market based rent. Most all over 700 credit scores, many over 100K in household income, some much higher. In 3BR apartments, 1100 sq ft. All self managed, including maintenace. All in addition to my full time job. You need to build up a lot more capital.
If you want to discuss how to reduce your risks, email me.
Eric,
Thanks for the comment, I always appreciate getting perspective from other investors.
You’re right, I do need to build a lot more capital, which is why my primary goal for 2014 is to hoard cash… not to keep on buying more rentals. My focus is risk mitigation for 2014.
In regards to tenants, yes, I definitely feel that a vacancy at this point in time would be devastating to my cash flow… which is why I’m so adamant on doing everything possible to prevent that from happening. With my local tenants, we have mutual respect… they pay on time, I reward them with gift cards at year’s end… and I have no interest to raise rents at this time. It’s worked out tremendously so far.
With respect to the Section 8 tenant… her rent in guaranteed for a year. So, if I start eviction now, I’ll still collect rent. If she stays in place, the same. Since she has been delinquent for so long, we are very well nearing the breaking point… my patience is starting to run out and I may start the eviction process next month.
Great job on building your portfolio of rentals! You are obviously someone who knows their stuff and how to manage tenants.
Your applicant pool seems extremely well qualified. That’s wonderful! I could probably screen that tightly with my local properties… however, not with the out of state stuff which is more geared towards low income. My portfolio of rentals is a blend right now… I guess I’ll learn over time what type of rentals are working out the best.
Take care!
Send a letter to the tenant threatening eviction, and send it to the Section 8 office too. They will make the tenant pay. Your property manager is slipping on this one, as they should have sent a letter by the 10th of October, not wait on it this long.
Why do you risk your financial independence for some low-life, entitlement mentality, sub-par tenant?
And never forget, a section 8 tenant can file a lawsuit against you for free, with a free lawyer. No court costs, no legal fees, not even the cost of a stamp to deliver the summons to you. Even if you win, you lose.
Eric,
Yes, letters have been sent (repeatedly) and PM is working with the tenant to get the issue resolved… There’s more to the story… but I may have a resolution to update soon.
The tenant hasn’t worked out, obviously, but I think calling her a low-life is a bit harsh. This entire situation has been a learning experience. I’ll take what I can from it and work to put measures in place to try and make sure it doesn’t happen again.
Thanks for the tips.
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