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Updates on rentals

April 7th, 2016 at 01:06 pm

Hi all

All rents in. I am SO THRILLED with this new company. They enforce late fees. rents come in sooner. I am hoping for less vacancy and faster filling of units (I will decide if that improved by year end but I think it will)

Tax results today. My accountant says betweeen $5-10k and was going to work on them again.. Appointment is at 10am.. So fingers crossed for the 10k figure. I took out $14k from my $15k emergency fund for rentals to pay for the siding, roofs, driveways, seeding work. Good investment I think. not done yet. the rain/snow has delayed things. That is ok with me as it gives me more time to pay. My tax refund will go towards that and then predicting 2-3 months to rebuild my fund up

Suburban rust fix should be done TODAY. excited to see it. again I was referred to a long time client of my accountant so I am sure it will be done right or fixed if not. no one wants to make their accountant look bad.

I looked at my #s again and not sure what I wrote before but I fixed an error in my spreadsheet and hre is what it is

IF the homes/units were paid off I would have made the following

2014 $20k
2015 $34k

Last year I actually got LESS RENT than 2014 I think due to vacancy poor management . just nightmares. The only reason my net was more was because of less repair costs

2014 was my big fix up-repair-improve year

and this year I am targetting $60k This year before the subtraction of the $22k improvements (which will show this month) I was at $18k net for Jan-Feb-March. this subtraction will take it down to negative and then I have April thru end of year to make that back up and reach $60k. I get rents deposited on the 15th of each month

I really want to get it up to $70-80k a year..

Next year will try for higher.. key factors are vacancy , repairs, time to fill vacant units

Thrilled with new managment company. bringing me to new heights and making me see and think my 5 year goal can be a reality

Literally I am starting to wonder. hey should I do a career change, take some classes.. feels like the world is opening up.. investigating hobbies.. all of that

Hope to hear on that Section 8 rent increase this week or early next. This is on that home I was going to sell then got some advice from here and others and decided just to keep it. it is fixed up, rented, new manager says it will not be hard to rent. so why not keep it.. and if I can get a rent increase of $100 or more with the current tenant .. even better!

I know I am not at June 2018 yet (5 year goal end date) and there are still upcoming challenges but it feels like I am OVER THE HUMP and no longer climbing the mountain but managing my way downward.

Posted in 6 homes-rentals, 3 units-rentals, Musings | 9 Comments »

9 Responses to “Updates on rentals”

  1. pjmama Says:
    April 7th, 2016 at 02:52 pm 1460040751
    1460040751

    Glad to hear things are going well and looking up!

  2. LivingAlmostLarge Says:
    April 7th, 2016 at 03:36 pm 1460043378
    1460043378

    Crazy amazing work. Would you call what you are doing passive income? Would you say it requires no effort but just cash and nerve? I ask because Texas Husker keeps talking about how easy it is to not invest in the stock market but instead buy businesses or real estate and then retire.

    You've obviously done this also previously as well your thoughts? Is there a certain level of income or savings you should have before you jump in?

  3. Rachael777 Says:
    April 7th, 2016 at 04:39 pm 1460047159
    1460047159

    When I look back I think I was pretty crazy. (and had I not pulled through the tough times the sentiment would have been more of 'I told you so'). I jumped in and bought 6 homes that needed both management work and repair/update work with a $6k rental emergency fund, $25k down, pending primary home foreclosure/sheriff sales and less than a year on a job and then I bought 2-3 units after that.. I bought them both on a such a short amortization that they required ME to put in money (not take money out) . scary but I got through it. My investments were not passive at first as I had to do a lot of repair work, managing the manager etc, WATCHING PENNIES..They are getting more passive as they go along and really I like controlling improvements so that management is good.. once I get through the major improvements I want to do and gain trust in the management company it will be even more passive.

    I think real estate can be easier (not easy) if you have more cash up front, can get a loan, settle for less cash flow, longer amortization and get better condition properties. I wanted to get them paid off and to get IN to the market and start so went with low cash deals and what was available on a seller financed contract

  4. Rachael777 Says:
    April 7th, 2016 at 04:41 pm 1460047313
    1460047313

    I can say that the reason I went the real estate route was I thought it would be easier and faster than trying to save up essentially the millions of dollars I would have needed to throw off (what I hope to be) $8k monthly income for life by 6/2018.I saw no way for me to save my way to retirement like that at age 44

  5. LivingAlmostLarge Says:
    April 7th, 2016 at 05:52 pm 1460051523
    1460051523

    But you have a job paying $100k to supplement the pay off as you mentioned and to carry the cashflow problems. What if you don't have the income to carry properties? Buy less? Cheaper?

  6. Rachael777 Says:
    April 7th, 2016 at 09:02 pm 1460062965
    1460062965

    You can purchase properties that cash flow from day 1 too. In fact mine would have cash flowed (even w the issues) from day 1 if they were on a 10-15 year or certainly a 20-30 year term. Difference is I wanted to have them paid off (and get the big $ per months vs much less starting immediately) and feel I owned the homes. that is risk avoidance too. no debt. When you go in with lower down, longer amortization to get a few hundred or more dependent on the property you have the risk of that remaining debt.. especially if markets are flat or unstable. I know a guy who came to me last week for thoughts. He owned 5 homes but all bought with low down, 30 year amortization and amkes approx $400 a month from them (with no issues) but realistically (he is 53) is he going to feel he can retire on that.. he now feels he should have shortened the amortizations or bought less and paid them off as he is now facing possible layoffs where he works.. So everything is a trade off. More risk, more rewards. Some of your tradeoff factors are; cash down, length of amortization, condition of house, area of house, rent, net cash flow. I now say for x amount of $$ I want to buy a certain amount of cash flow and that is how I buy. If you have an extra $100k or something laying around my mindset is to consider cash flow real estate investing as one of your options.. Not sure where you live but some areas are more conducive to that which means you may need to invest OUTSIDE of your area to make a profit.. but management companies are around so money made out of area is worth the same as money made locally... I say look at investing where the $ is to be made.

  7. FrugalTexan75 Says:
    April 9th, 2016 at 02:38 am 1460169517
    1460169517

    Glad your new property management company is working out!

  8. livingalmostlarge Says:
    April 9th, 2016 at 09:28 pm 1460237295
    1460237295

    interesting. how high a return do you think is needed to invest in a property? Break even or make money?

  9. Rachael777 Says:
    April 17th, 2016 at 09:29 pm 1460928544
    1460928544

    You need to familiarize yourself with the term 'cap rate'. My 6 homes were at 14.9% cap rate, 3 units 10.5% cap rate, house I just bought 12.9% cap rate, 2 units 14.2%cap rate. Generally higher cap rates means higher risk or maybe cost to repair/fix up/fix management issues. 10 is a solid cap rate but at 20% down you may not have enough to pay the mortgage at current rates. Also beware of letting someone else calculate cap rate. I calculate it with monthly offsets for vacancies, repairs etc.. some people do not include those very real costs in the calculation

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