It’s been a few months since I last purchased a property, and I must admit that I’ve got the itch again. Realistically, my next purchase is at least a few months out, but buying another rental is what I’m working towards. I’m doing my best to keep up the frugal habits, and trying to re-invest any excess cash flow back into building up the next downpayment fund.
Here’s the report for April:
Rental Property #1: Bay Area
Rental Property #1 continues its stellar performance this year. Another month, and some more cash flow coming in. Rent was collected on time and the tenants seem happy, which is always good. PG&E (the local utility company) did contact me about needing my approval to install some free energy efficient lightbulbs throughout the house. PG&E is pushing this energy-reducing initiative right now, and they were even kind enough to replace the old refrigerator with a newer model that consumes less power. No cost to the tenant or owner. How could I say no to that?
Total cash flow for the month was $447.67.
Rental Property #2: Bay Area
Similar to Rental Property #1, this property also continues to shine. No news is good news! I wish all my rental properties were as hands off and “boring” as Rental Property #1 and #2.
Total cash flow for the month was $344.76.
Rental Property #3: Chicago
The first floor tenant (market rate) renewed her lease this month and agreed to stay around for another year at the same rate, $950/month. Woohoo! I was thrilled to keep her and had absolutely ZERO interest in increasing her rent. I made sure to harp on that point over and over again to my PM. I don’t like losing quality tenants!
The second floor tenant missed payment again this month… This wasn’t the first time, and I’m pretty certain it won’t be the last time. She didn’t give an explanation and the PM had much difficulty getting in touch with her. Oh boy… not again. This tenant is only responsible for $94/month, as the remainder of her rent is covered by Section 8. I collected $1,064.
This tenant can’t ever seem to pay rent on a consistent basis. Her lease expires in August and I have no interest in renewing it. Even with the heavy subsidy from Section 8, I still feel like I can do better, and am willing to start anew with a new tenant. Losing $94/month really doesn’t impact the bottom line much, but with this tenant, it’s about the principle now. I don’t want to keep a tenant around who refuses to pay rent on time. If she can’t get her priorities straight, then I don’t want her staying long-term. I have expressed this concern to my PM and they’ve agreed to start marketing the unit as soon as they are allowed to. I will need to keep close tabs on this as I want to minimize the number of days the unit sits vacant.
Even with a PM in place, real estate investing will never ever be fully hands off. That’s why I like to call it semi-passive income, and not passive income.
Total cash flow this month for Chicago came out to be $871.13.
Rental Property #4: Indianapolis
Rental Property #4 wrapped up the eviction this month. The tenant officially moved out and my PM took back possession of the property. Since I negotiated a 1 year rent protection guarantee at the time of purchase, I avoided having to go out-of-pocket. The PM cleaned up the property, got it rent-ready, and started aggressively marketing it towards the middle of April.
I received my owner’s statement at the end of the month. The PM held true to their word, and I was not charged a penny for any of the make rent-ready expenses. Further, I don’t have to worry about any lease-up, or marketing expenses. With the rent guarantee in effect, I simply collected the $1,075 portion that the tenant normally pays.
Total cash flow this month for Indianapolis came out to be $518.18.
Rental Property #5: Chicago
This was my second full month owning Rental Property #5, and so far so good. Both tenants paid on time and there were no extra expenses that popped up this month. That’s excellent news for me, and I’m crossing my fingers, hoping that I secured some more great tenants in this building.
The first floor tenant is Section 8, and the tenant portion is only $110. Section 8 covers $1,098, or the bulk of the rent. As long as the government subsidy doesn’t change, I won’t have to worry about collecting the majority of the rent for this unit. Recently, I learned that the Section 8 portion a tenant receives CAN be subject to change, and isn’t guaranteed for a full year. If a tenant improves their financial situation, or earns more income, Section 8 will revise their subsidy. On the other hand, if a tenant loses their job or faces increasing hardships, Section 8 will step in and provide more assistance. So, it goes both ways, but this is something I need to keep track of. Previously, I thought the Section 8 portion would be fixed for the portion of the tenant signed lease (1 year).
The second floor tenants are market rent, and receive no Section 8 assistance. Their rent portion is $1,250. There are three working adults living here, so I do feel somewhat more at ease with this situation. Hopefully, they keep paying on time and enjoy living in this unit. I would love to secure some more quality tenants. I can never have enough of those!
After all expenses, total cash flow came out to be $1,199.54.
April marked the second full month where I’ve had five properties (seven units) rented out. Total cash flow for the month came out to be $3,381.28. The rent collected this month was less than what I collected in March, since the March Cash Flow Statement included pro-rated rents from February for Rental Property #5. April’s numbers are more reflective of where everything stands now with seven cash flowing units basically operating at maximum efficiency. So, in a best-case scenario, I’m able to clear $3,000/month in semi-passive income.
My early FI target fluctuates regularly, as I can never seem to make up my mind, but I would like to be over $4,000 before calling it quits in corporate. There are still a lot of moving pieces and variables (1031 exchange?, HELOC?, rent increase for Bay Area properties?), so we’ll see how close I can get to that “final” figure… I have one year, roughly, to figure it out.