Let’s open the books … again.
Every month I reveal my income, expenses and bottom-line results from my real estate investments.
This month’s update is long overdue (it’s a 2-for-1!) because I’ve been trying (unsuccessfully) to write a deep-dive lesson to accompany this article.
But writing these lessons takes time, and right now I’m focused on building the upcoming rental property investing course. So this month, there’s no accompanying lesson.
This update is just-the-facts. It’s a dose of financial voyeurism to spice up your workday. Here we go!
(New reader? Got questions? Read this first.)
In April 2016, the rental properties brought in $9,158.53 after management fees, when applicable. Here’s the breakdown:
April 2016 Income: $10,188.53
House #5 was the wild card — until now. This month we have a better property manager who (gasp!!) collected rent and late fees in a timely manner! Shocking! I’ve learned my lesson: Don’t drag your feet on firing a mediocre property manager.
Alright, so April’s gross income is north of $9k. What about expenses?
Mortgage, Part II: $1,749.99
Home Depot: $25.89
Lawn Mowing: $27
April 2016 Expenses: $6,226.91
Yowza!! Those are higher expenses than usual, leading to a smaller bottom-line …
April 2016 Bottom Line: $3,931.62
Dun-dun-dunnnn! Little did I know that it’s about to get worse. Much worse. Muah-ha-ha-ha! Scroll down to witness the sordid May decline.
(Oh, and for those of you who are wondering:)
Nerdy Details That Only Nerds Care About: “Mortgage” is PITI on multiple properties; “Mortgage Part II” is three months of interest-only payments for House #3, covering March, April and May. “Insurance” represents a policy on House #3, which is non-escrowed. BTW, I respect that you’re reading a paragraph that calls you a “nerd” twice. Seriously. We’d be friends IRL.
As I emphasize in every report, money is meaningless without the context of time. There’s a HUGE difference between earning $X in 5 hours vs. 25 hours. That’s why I detail the time commitment below.
But before we get there —
Let’s peek at May’s income:
Unit 1: $2,750
Unit 2: $1,490
Unit 3: $1,295
House #2: $850.50
House #3: $1,273
House #4: $1,500
House #5: —
House #5 needed plumbing attention and our awesome property manager handled everything. She made all the arrangements and used May’s rent to pay the bill. Neither the income nor expense hit my bank account (hence the “–” above, since these reports only reflect cash hitting or escaping our bank account).
We didn’t spend a minute worrying about this. Heck yeah. An awesome property manager is the most underrated player in the game.
May 2016 Income: $9,158.50
Onto the spending …
Mortgage, Part II: $583.33
Water, Part II: $176.48
WTF, Part II: $3.25
Lawn Mowing: $24
Ewwww. That’s a runaway list of expenses, leading to this whooping total —
May 2016 Expenses: $7,974
… resulting in the smallest bottom line since the advent of the Afford Anything income report.
May 2016 Bottom Line: $1,184.50
I’m damn glad I can share this with you. I explain why below. But first, for those of you who love trivia —
Nerdy Details Only for Extra-Nerdy-Nerds: “Mortgage” is PITI for several properties; “Mortgage, Part II” is an interest-only payment for June. “Water #1” covers one month (notice we didn’t pay a water bill in April); “Water #2” covers a different month.
“WTF” represents a random 91 cents that disappeared in some vague debit authorization. “WTF #2” is a random charge from the electric company. Huh??
How about that gargantuan insurance bill? Yeech! Long story short, this should’ve been paid from escrow, but a few wires got crossed along the way. Sh** got complicated. We’ll be getting an approx. $1,900 refund within the next few months, but we sent this payment to keep the policy current while our agent untangles the mess.
Wow, I can’t believe you slogged through this chunky block of minutia. Does your office block Facebook? Well, whatever your reason, here’s 35 seconds of hilarity as a thank-you. Watch it with the volume on.
Most people who promote real estate investing only reveal their top-line results; the oversized novelty checks. I don’t play that game.
I despise sugarcoated spin. I want you to see these two consecutive months when we spent almost every dime; when the bottom-line hugged the $1k – $3k range. This is the real deal. I don’t just show peaks; I show valleys, as well.
Real estate investing is a high-stakes game. The rewards are life-changing, but the path isn’t adorned with puppies and unicorns.
These income reports are intended to dispel myths at both extremes:
- Whiners: “I don’t want to wake up at 2 am to plunge toilets!”
- Shysters: “Accelerate from $0 to $999999 in the next 4 minutes — with no money down!”
Both notions are crazy-talk, and I hope these income reports can squash this insanity.
How Passive is This?
How much time did we spend — combined — managing our investments?
- 10 minutes – Texting our former next-door neighbor.
- 30 minutes — Change auto-pay to reflect our new bank account.
- 2 hours — Create an escrow account with our new bank, which required one of us to visit a branch in-person.
- 30 minutes — Email insurance agent.
- 30 minutes – Email different insurance agent.
April 2016 Total: 3 hours, 40 minutes
Not too shabby. How about May 2016?
- 30 minutes — Will emails Unit #1 tenants about renewing their lease.
- 60 minutes — Will and I discuss the Unit #1 lease renewal. (The tenants want to renew into a two-year lease. We spent half an hour brainstorming how to price this request. The conversation took 30 minutes, but since I track both of our time, it’s 60 combined minutes between us.)
- 20 minutes — Will talks on the phone with a tenant requesting a double-cylinder deadbolt.
- 10 minutes — I order the deadbolt from Amazon. I use the same brand on every property, so I didn’t have to research anything. (The charge will appear on June’s report).
- 45 minutes — Renew our umbrella insurance, which requires emailing a bunch of documents and making a few quick calls.
- 30 minutes — Random text messages.
- 5 minutes — House #4 tenant calls to say he’s moving out at the end of his lease.
- 40 minutes — Will and I discuss renovation plans for House #4.
- 45 minutes — I call the contractor to discuss ideas and plans.
- 10 minutes — I call the House #4 tenant back to review everything with him.
May 2016 Total: 5 hours. (Well, it’s 4 hrs, 55 min. But hey, let’s round up.)
These investments require less than 1 hour per week. I spend more time reading Game of Thrones fan theories.
(Whoops. Am I not supposed to admit that? #NowWhosTheNerd?)
June’s income will be unremarkable. But in July, we’re leaping into no-holds-barred negative territory.
The House #4 tenant is moving out, and we’re embracing this opportunity to replace the home’s cabinets, countertops and flooring. We’ll rip out one wall and punch a hole in another. We’ll add a bar-height countertop to integrate the kitchen and dining. This is spatial re-invention at its best.
July’s cash flow will drop deep into the red, and I’m excited to reveal those numbers — plus photos showcasing the before-and-after results. Stay tuned!
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