Welcome to my August 2016 cash flow report!
Each month I document how my rental properties (RP) are performing in order to track my monthly cash flow. I share both the good and the bad, as well as any lessons learned from investing in out-of-state rentals.
For these income reports, I’ll report everything as they occur. That means if no rent came in, there will be a big fat zero. The same goes if there were no maintenance issues for a given month. This is different from when I analyze a potential property that I’d like to invest in. Where in that case, you’d always see some estimated maintenance expense, as well as a vacancy loss, capex, and more in order to conservatively determine my estimated cash flow and cash-on-cash return numbers.
Without further ado, let’s jump into this month.
Here’s the roll up cash flow summary for rental property (RP) #1.
August rent paid! As of September, this same tenant will have been living here for 2 whole years! In the last year, however, this tenant has paid lately probably 6 or 7 times. Sometimes they’re just a few days late, other times it’s been a week, and on occasion about 10 days. I’m not gonna lie, every time the rent is not paid by the 1st, I get anxious.
Despite their lateness, in the nearly 2 years that this tenant has been living here, there has not been a single lost month of rent. After 23 months of living there, we’ve collected on all 23 months. Sure they’ve been late a handful of times, but at the end of the day, they keep making their payment so I’m happy for now.
The following maintenance items occurred:
- Hot water was out so the PM sent someone out to relight it and test it.
- Mailbox was moved after the tenant complained that water kept getting into it so we had it moved.
- Put in new railing that led to the basement and tightened a bedroom ceiling fan.
Obviously this is where self-managing would be much cheaper. I mean, even I can relight a water heater! This property is out of state, so I need to rely on someone to deal with the tenants and maintain the property. This is why I pay a property manager.
On the plus side, I spent none of my own time dealing with these tenant issues.
August’s net cash flow came out to $348.
So far, my new tenant has been good. They paid August’s rents back in July and they paid September’s rent a couple days before the 1st as well. So you’ll see the rent income below reflects September’s rent.
A tenant who pays early is always a good sign.
Here’s the roll-up cash flow for rental property (RP) #2.
No PM Fee this Month
While my property manager (PM) takes a 9% fee on all rental income, this month I was credited back one month of PM fees. Why? Well, if you recall from the month of May, my old tenants had moved out and I was returned my full security deposit. I questioned the PM on taking a 9% fee against the security deposit. Personally, I didn’t agree that the security deposit should be treated as rental income and therefore subject to a 9% fee.
After a few emails back and forth with the PM, they decided to credit me back this PM fee. Score! As a result, August’s management fee came out to 0! I was pretty happy about this credit since I was still recovering from a painful vacancy.
High Electric Bill
In mid-August, a large $158 utility bill came in and I certainly thought it was a mistake. The bulk of the bill was due to electricity. $137 of electricity to be exact and this was incurred during the last 4 weeks of my vacancy! I’m told the Midwest can experience some brutally hot summers. So it seemed that the A/C had to be running a lot.
Dare I say, all day everyday? How else do you rack up $137 of electricity?
When you’re showing a property to a potential tenant, you want the house to be comfortable. So the A/C needs to be blasting if it’s scorching hot outside. Though there are many ways you can still reduce the electricity used so you won’t be hit with a huge bill.
First, don’t leave the A/C on all the time. Turn it on only during times when showing the property. Rather then leaving it on all day, I’d suggest having your PM or leasing agent arrive 20 minutes before scheduled showings to then blast the A/C.
Second, what temperature is it being set at? If 65 degrees, then again your A/C will be on almost all the time. That results in a pricey electric bill. Instead, set it at a higher temperature. Energy Star recommends setting your thermostat at 78 degrees, which is like a pleasant spring day.
If you’ve seen my last couple of cash flow reports, you already know that turnovers can be costly. This was my first turnover experience with my PM, so lesson learned for next time.
Net cash flow for RP#2 for the month of August came out to $376.
In summary, both rentals have tenants and are cash flowing positive.
Net cash flow from both properties: $724
What do you all think of this month’s cash flow?