We are nearing the end of 2013! It’s crazy to think how fast time has flown by this year… At this time last year, I owned one property. Now, I have four locked down, and a fifth rental that is currently under contract. As the rentals accumulate, it’s getting more and more difficult to keep track of everything. Hopefully this update will help summarize all the important information.
Let’s get to it!
Rental Property #1
Scheduled Gross Income: $25,240
Less Vacancy and Lease Renewal: $0
Effective Gross Income: $25,240
| 13-Jan | $2,090.00 | |
| 13-Feb | $2,090.00 | |
| 13-Mar | $2,090.00 | |
| 13-Apr | $2,090.00 | |
| 13-May | $2,090.00 | |
| 13-Jun | $2,090.00 | |
| 13-Jul | $2,090.00 | |
| 13-Aug | $2,090.00 | |
| 13-Sep | $2,130.00 | |
| 13-Oct | $2,130.00 | |
| 13-Nov | $2,130.00 | |
| 13-Dec | $2,130.00 |
Total Operating Expenses: $7,191.58
- Utilities: $338.76
- Garage Door Repair: $180.00
- Property Taxes: $4,706.82
- Insurance: $286.00
- HOA: $1,680
Net Operating Income: $18,048.42
Less Debt Service: $13,129.32
Cash Flow: $4,919.10
Cash Flow (Monthly): $409.93/month
Principal Paydown: $4,450.69
Principal Paydown (Monthly): $370.89/month
Total Return: $9,369.79
Total Return (Monthly): $780.82/month
| Principal | Interest | |
| Dec-13 | $377.29 | $716.82 |
| Nov-13 | $376.11 | $718.00 |
| Oct-13 | $374.94 | $719.17 |
| Sep-13 | $373.77 | $720.34 |
| Aug-13 | $372.61 | $721.50 |
| Jul-13 | $371.45 | $722.66 |
| Jun-13 | $370.29 | $723.82 |
| May-13 | $369.14 | $724.97 |
| Apr-13 | $367.99 | $726.12 |
| Mar-13 | $366.84 | $727.27 |
| Feb-13 | $365.70 | $728.41 |
| Jan-13 | $364.56 | $729.55 |
| 2013 Total | $4,450.69 | $8,678.63 |
Rental Property #2
Numbers for Rental Property #2 are prorated for eight months. All numbers reflecting gross income, property taxes, HOA dues, insurance, debt service, etc. are for eight months since the property was not leased out until May 2013.
Scheduled Gross Income: $17,200.00
Less Vacancy and Lease Renewal: $0
Effective Gross Income: $17,200.00
| 13-May | $2,150.00 | |
| 13-Jun | $2,150.00 | |
| 13-Jul | $2,150.00 | |
| 13-Aug | $2,150.00 | |
| 13-Sep | $2,150.00 | |
| 13-Oct | $2,150.00 | |
| 13-Nov | $2,150.00 | |
| 13-Dec | $2,150.00 |
Total Operating Expenses: $5,960.21
- New Dishwasher: $314.29
- Leak Repair: $600.00
- Property Taxes: $2,424.56
- Insurance: $173.36
- HOA: $2,448.00
Net Operating Income: $11,239.79
Less Debt Service: $9,266.72
Cash Flow: $1,973.07
Cash Flow (Monthly): $246.63/month
Principal Paydown: $2,560.01
Principal Paydown (Monthly): $320.00/month
Total Return: $4,533.08
Total Return (Monthly): $566.64/month
| Principal | Interest | |
| Dec-13 | $324.09 | $835.43 |
| Nov-13 | $322.91 | $836.60 |
| Oct-13 | $321.74 | $837.77 |
| Sep-13 | $320.57 | $838.93 |
| Aug-13 | $319.41 | $840.09 |
| Jul-13 | $318.25 | $841.25 |
| Jun-13 | $317.09 | $842.40 |
| May-13 | $315.95 | $843.55 |
| 2013 Total | $2,560.01 | $6,716.02 |
Rental Property #3
Numbers for Rental Property #3 are prorated for five months. All numbers reflecting gross income, property taxes, HOA dues, insurance, debt service, etc. are for five months since the property was not leased out until August 2013. As mentioned in the Cash Flow reports, Rental Property #3 has had some issues collecting rent from the second floor tenant. Although there has been no vacancy, the tenant has missed portions of the rent, which lowers the effective gross income collected.
Scheduled Gross Income: $10,728.33
Less Vacancy and Lease Renewal: $270.00
Effective Gross Income: $10,458.33
| 13-Jul | $188.33 |
| 13-Aug | $2,026.00 |
| 13-Sep | $2,108.00 |
| 13-Oct | $2,108.00 |
| 13-Nov | $2,014.00 |
| 13-Dec | $2,014.00 |
Total Operating Expenses: $2,879.17
- Property Management: $836.67
- Property Taxes: $1,065.00
- Landscaping: $400.00
- Insurance: $577.50
Net Operating Income: $7,579.16
Less Debt Service: $2,992.60
Cash Flow: $4,586.56
Cash Flow (Monthly): $917.31/month
Principal Paydown: $783.62
Principal Paydown (Monthly): $156.72/month
Total Return: $5,370.18
Total Return (Monthly): $1,074.04/month
| Principal | Interest | |
| Dec-13 | $157.90 | $440.62 |
| Nov-13 | $157.31 | $441.21 |
| Oct-13 | $156.72 | $441.80 |
| Sep-13 | $156.14 | $442.39 |
| Aug-13 | $155.55 | $442.97 |
| 2013 Total | $783.62 | $2,208.99 |
Numbers Recap
At this time, Rental Property #4 is just getting started (second month collecting rent), so I decided not to run the numbers yet. To summarize, the three other rental properties are generating the following:
Cash Flow:
Rental Property #1: $409.93/month
Rental Property #2: $246.63/month
Rental Property #3: $917.31/month
Total Cash flow: $1,573.87/month
In addition to the cash flow, the rentals have paid down principal in the following amount:
Principal Paydown:
Rental Property #1: $370.89/month
Rental Property #2: $320.00/month
Rental Property #3: $156.72/month
Total Principal Paydown: $847.62/month
Total Return:
Rental Property #1: $780.82/month
Rental Property #2: $566.64/month
Rental Property #3: $1,074.04/month
Total Return: $2,421.49/month
In terms of pure numbers (not prorated), we have the following:
Total Gross Rent Collected: $52,898.33
Total Cash Flow: $11,478.73
Total Principal Paydown: $7,794.32
Total Return: $19,273.05
Summary
The numbers shown above are the actual 2013 results for each rental property. When I run my own projected numbers, I tend to be more conservative. To give you an idea, my monthly net cash flow estimates (2014) for four rental properties is $1,300/month. In actuality, Rentals #1-3 generated $1,573.87/month for 2013. However, the sample size is just for one year, and I am a firm believer that rental expenses are unpredictable, so it’s better to err on the side of caution. All it takes is one big expense to wipe away the cash flow…
2013 was a successful year. The cash flow numbers were great, and the principal paydown is just icing on the cake. The rentals are returning $847.62/month in combined principal reduction, which is not trivial (this will really add up over the years). Total return (cash flow + principal paydown) is $2,421.49/month. Over time, the principal reduction will keep on increasing as more of the debt gets repaid. Another reason why I’m such a big fan of utilizing leverage on multiple properties… The principal paydown gets enhanced by the number of properties owned, and this reduction is what will ultimately increase your net worth over time. “What you owe today, you’ll be worth tomorrow.”
When everything is done are you going to move to Hawaii? This seems to be your ideal place for what I see. I’m done with properties until 2015 but you never know. Happy holidays.
Charles,
Man, it would be awesome if Hawaii was possible! I haven’t thought too far ahead, but I would like to end up on a tropical paradise… well, at least for a few years. Hawaii might be out of my price range, but who knows… maybe I’ll get lucky 😉
Cheers!
FIF,
I am just curious if you know how much longer you would need to work in order to afford Hawaii?
Thanks,
Roger H
That’s awesome FI. Harnessing the power of leverage to produce, and greatly increase, really nice cash flow. Good work! Enjoy that trip of yours too. The high is nearly 80 here today, which drives my wife nuts. I however, love it.
-Bryan
Bryan,
Thanks! Are you also located in Hawaii or just vacationing?
In any event, I hope you enjoy the gorgeous weather! It’s been in the 30’s here… and I thought CA was supposed to be warm.
Take care!
What do you mean cashflow numbers are great? They are awesome! 🙂
Moneycone,
Thanks! Appreciate the support!
Cheers!
Love it man! Bit by bit it grows.
Let’s hope the bull market continues for years to come!
Sam,
Thanks! I wouldn’t mind if the bull market keeps surging a few more years. Definitely beats the doom and gloom panic of a few years back… although the best deals are only made possible in times of fear… still, nice to see people employed, going out, eating out, and just living life again.
All the best!
Let’s hope 2014 is just as good a year!
theFIREstarter,
Cheers to that! Bring on 2014!
These are excellent numbers. Considering (and correct me if I am wrong) those are generated with other people’s money right? You had some down-payment, but generally using leverage overall. I like it. The income is impressive.
Martin,
You got it! Each property is leveraged, although I do have either 20% or 25% in each deal.
Take care!
You are doing so well with rei . What type of insurance do you have on theses rental? Cash value or replacement cost? It is so low costs? Thanks , keep up the good work.
Wendy,
I have HOA on a few of these properties, so only need HO-6 insurance, which is very cheap…For the out of state stuff, I have basic landlord insurance which I believe is just cash value… I could be mistaken, but I think the replacement cost premium was a bit higher.
Take care!