This month was full of issues. So let’s jump right into it.
A lot happened this month with Rental Property #1. Here are the main points:
- Tenants extended their lease by another year and raised rent to $1200!
- Lease renewal incurred a 25% management fee ($300)
- Major deck repair
First, The Good News
The tenants extended their lease another year and in the process, we raised the rent up to market rate. They’re now paying $1200 a month.
My PM charges a 25% renewal fee so $300 was taken out this month. Thankfully, the usual 9% monthly management is not added on top of this. So you can look at this 25% charge as being made up of the 9% usual monthly management and then the 16% for drafting a new lease and working with the tenant to sign another year.
Now the bad …
Early in the month, this property had a clogged sink and a few window screens that needed to be replaced that our maintenance guy went over to fix. While attending to those items, they noticed that the deck was in need of repair. Specifically, the lattice around the deck was extremely weakened and in some places was even missing. Given that a family with little children live there, the last thing I would want is a child or anyone for that matter, to fall right through.
So what’s the fix?
First off, the remaining lattice needed to be completely removed as it provided no safety function in its current state. Instead of installing another lattice, the PM’s maintenance guys placed balusters spaced appropriately around the entire deck. These were not only safer, but should last much longer than a lattice structure. The guys screwed down loose boards as well while they were there. Total work took just more than 1 day to complete.
What was the final cost?
Supplies cost $132 and the total labor came out to $364 for a total cost of $496 to repair the deck.
Here’s some after photos.
Aside from the deck, the last maintenance item was a new front door lock that needed to be replaced. How did this happen? Who knows. The tenant will say that it just broke, but it’s anyone’s guess.
So here’s the roll up cash flow summary for rental property #1.
Despite the increase in rent to $1200, with the deck repair, lease renewal fee, and additional maintenance needed this month, I’m in the red by $347 this month. Ouch. Though if you look at March’s cash flow statement where I was up $475, I had sufficient reserves to cover these expenses this month.
If you recall from March’s update, the tenants in this property were planning to move into a house of their own. They had planned to move out in April and agreed to pay 2 months of rent as an early termination fee. I had then gone to Japan feeling reassured that we’d have a 2 month rent cushion to find a replacement tenant.
Well…that was just too good to be true.
Instead of moving out by the first week of April, it seems that my tenants decided in keep living there for most of the month. They paid April’s rent in full, but became silent with my PM as the month went on. It seemed that they were trying to get out of paying the 2 month early termination fee.
By the last week of April, my PM sent someone to check out the house and they had completely moved out. They left the property in good condition and just left the keys on the counter.
While I was hoping to receive $2500 (2 months x $1250) in early termination fees, I instead got 0. Okay, not quite. We are keeping the $1200 in the security deposit so that helps.
It’s now May and we are marketing the property out at a market rate of $1295. Hopefully, we’ll find good quality tenants very soon.
So here’s a summary of April’s cash flow.
I’m in the green by $421. Looks like a standard month based on the numbers, but it was far from one.
Net cash flow from both properties: $74