Net Worth 2016-07

Total Net Worth in Jul: $447,868 (+$10,652) – Satisfied, it was a great month!!

Ok….I have been terrible, its been right at a year since I posted my numbers, so yes, this post really is for July of ’16.  Over the next few days, I will get caught back up.  As you will see my wife and I took on a series of big projects over the last 12 months, and we are just now getting our heads above water.

July’16 was another great month. We paid off our 401K loan (again….yeah, not the most Dave Ramsey like, since we keep using these loans to finance properties), so we got credit for  the increase in our 401 account.

We broke thru the $440K level for the first time and have been fortunate enough to be on a 6 month string of those milestones.

Assets: +$170,395K – Big Change!!!

OK…last month we sold a property, this month we bought a property, in this case we bought it with the intent of flipping it.  Our first attempt at a flip, stay tuned for more details

Net Cash Accounts: (-$34,993) – Another Big Change…

Our cash went down substantially, but it was for a good reason, we used the cash for a down payment on our first flip.

Net Cash Rental Accounts: +$4,146 – Satisfied…

We put money back into our rental accounts knowing that there will be substantial expenses over the next few months as we work on a major rehab.

Retirement accounts: +$22,917- Satisfied!!

An odd month, we added quite a bit to our retirement accounts this month, but a fair amount of that was because our payback of the 401K loan finally hit our retirement accounts.  Overall I will take it.

Liabilities: -$537,516 (-$151,812)  – satisfied.

Our liabilities went back up quite a bit this month because we took out a loan to attempt our first flip.

Net Worth 2016-06

Total Net Worth in Jun: $437,216 (+$13,053) – Satisfied, it was a great month!!

June was a great month.We sold our duplex, and my conservative numbers had the value a little understated. So there was a small windfall from that.

We broke thru the $430K level for the first time and have been fortunate enough to be on a 5 month string of those milestones.

Assets: (-$341,078) – Big Change!!!

We sold our duplex for $380,000.  I had the value (with sales costs factored in) at $340K.  So not a bad estimate by the time you pay a realtor and other closing costs.

I updated the value of our vehicles.  Ironically the ‘SUV’ value went up according to KBB, so I left it the same as before.  The value of the car was reduced by $1,078.

Net Cash Accounts: +$95,388 –Very Satisfied!!!

Depositing the proceeds from our duplex played a big part in this area going up.  With another $500 added across the rest of our checking and savings accounts.

Next month it will be a different story as we close (knock on wood) on a new property.

Net Cash Rental Accounts: +$21,705 – Satisfied

We split our proceeds from the duplex sale across several accounts.  We put some money into our emergency fund savings account /fund to pay the income taxes we will incur from the sale.  In addition we paid off our 401K loan and then added some liquidity to our rental accounts.

Frankly we didn’t have enough money in our rental property accounts, and it was a good time to increase that cushion.

Plus assuming that our next purchase goes thru, we will be spending some money to fix it up.

Retirement accounts: +$1,157 – Neither satisfied or unsatisfied

It wasn’t a terrible month, but it could have been better.  Our main IRA account was down a little, all the rest of our accounts were up a little.

We should be up in July, our 401K loan was paid in full during June, but the check didn’t clear back into the investment account in time to make this month’s report.

In addition we have raised our contributions to our 401K’s. Hopefully by next year we can begin to get our 401K accounts maxed out.  We have a little ways to go, but these increases should be a good first step.

Liabilities: -$385,703 (+$235,882)  – Incredibly satisfied.

We knocked off $235K of debt.  $220K of the $235K came from paying off the mortgage on our duplex.

In addition our liabilities were reduced as we paid off our 401K loan. At the time we took it out, I said it bothered me, but that I thought the property we bought would be a good investment, and that we were determined to pay the loan off quickly.  And we have, in less than a year.

I expect our liabilities to go back up a bit in July as we hopefully close on a new investment property.

 

How did you do in Jun?

Tiki Torches and Tenants

As some of you may know, my wife and I have over the last few years bought a house, lived in it a year, and then moved out and bought the next one.  We now own three properties (see update below) , one duplex and two single family homes.  One of the homes we live in, and the other two are rentals.

Often when reading blogs you hear only about the good, tenants paying on time, minor maintenance and boom…collect the cash.  All passive income right?

This month we have a couple of good ones to share.

Part 1: Tiki Torches

A few weeks ago we get a call from our old next door neighbor.  He tells us he woke up to a  a crackling sound in the back yard.  Low and behold our tenants had a party in the backyard complete with tiki torches.

Afterwards the party moved up the street to a local watering hole leaving the tiki torches lit.  Well of course one of the torches fell over catching the wooden fence (wood floats don’t you know?…like a duck) on fire.  Luckily our neighbor was able to put the fire out, and then put it out a second time when the embers lit back up. Without him being there, we might have been talking one or two houses that caught on fire and potential injury or loss of life.

Damage was a planter and a couple of sections of fence.  Repairs to the fence ran $1,472 which will be passed on to our renters.

They aren’t dummies, combined this young couple makes something like $170K-$180K/year….well except they didn’t think about putting their tiki torches out before they went to the bars….so maybe we can call them dummies with regard to tiki torches.

Part 2: Tenants

About the same time as our tiki torch incident, I get a call from a realtor doing a tenant background check.  But self….weren’t all of our tenants under contract for a year or more….and the ones that we were being ask about were under contract until May of 2017….and they signed a lease extension in October….self, why would I be getting a call from a realtor?

When I was growing up, never once in my wildest dreams would I have terminated a lease early, at least not one that I could pay.  Its not that or tenants lost a job or anything, nope, something they liked better came up….squirrel….

Look, we decided not to keep our tenants in an adversarial rental situation, we settled on an extra months rent to terminate the lease. (probably should have held out for two)  At least to their credit, up until then they had been low maintenance tenants, paid on time and did fully serve our their first lease.  When they did end up moving out, the place was in good shape.

Don’t underestimate a renters ability to do odd things.  Even when you think you have them under a long term lease.

The Result

OK..  Because we had tenants who were moving out, we thought it might be a good time to assess the market conditions of our duplex.  Right now within a block of the duplex there were 10 or 12 houses that had been scrapped and replaced with high end condos.  The market in the area is red hot.

So we put our duplex on the market.  Low and behold, in the first week we had 3 offers, one in cash.  We chose the cash offer and got just a couple of thousand dollars under list.

We actually had a really nice appreciation on the property since we bought it in 2013 (about +100K on a $280K purchase price).  I doubt we can get that kind of run in the next few years and we thought it would be wise to sell and book some profits.

Update…last week we completed the sale of our duplex…and that will be reflected in our next monthly net worth update.

Oh…and the property game continues.  we have a new house under contract.

 

 

 

2016-05 Net Worth

Total Net Worth in May: $424,163 (+$5,685) – Satisfied

May was was a solid month.  We broke thru the $420K level for the first time.

Look for big news coming.

Assets: +835,798 – No Change

We made no changes to our assets this month.

As I have mentioned before, real estate valuations are very subjective, I plan on making a couple of updates a year, and the value listed is conservative and would hopefully approximate the net cash we would take home after a sale (excluding the mortgage payoff but less closing costs and realtor fees).

But I will (knock on wood), have some changes in June….

Next month I will update the value of our cars

Net Cash Accounts: (-$1,424) –Not satisfied

I paid for some dental work this month, so my FSA account went down by $1,200.  This is use it or lose it money anyhow, and we did set up the FSA this year knowing I needed to get this specific work done.

In addition, and this is a small house keeping thing………..I fully admit to being a nerd, I enjoy balancing our accounts in Quicken.  I am OCD when tracking our finances.  I enjoy it, I come home after work and to unwind I balance our accounts in Quicken.  I mean all of them, FSA, HSA’s, escrow accounts, mortgage balances etcyou name it……..I  update them daily.

Anyhow, so in Quicken, when we take cash out of our ATM, I make a transfer into an account called ‘wallet’, where theoretically we can make expense entries as we spend our cash.  It all sounds good….but bless her heart….my wife is terrible at making entries in on small items purchased with cash.  I am a little better but my cash entries , aren’t exactly GAAP compliant.  So over the course of 3 or 4 years, our net worth summary ended up with about $1,000 more in our ‘wallet’ than we really had in her purse/my wallet.

My OCD self needed to get it fixed, its bothered me for months.  And I can’t easily subtract it from our net worth totals, because the expenditures really happened, we just didn’t capture them, and the Quicken numbers are tied into how we budget, how we view our spending etc.

We entered a $500 expenditure this month, and will take another $500 next month (so we can ‘budget the expense’ across 2 months) to get the ‘wallet’ account down to the few dollars we actually carry in cash.  Its not a perfect solution as it makes it look like our cash accounts dropped faster than they did.  But oh well, it will end up making our numbers look better at the end of the day.

By the way, I said last month we would likely be flat on our cash, and I was right if you exclude the FSA.

Net Cash Rental Accounts: -$3,358 – Not satisfied

Ok….I will write more about it in a separate blog post.

1) we had a tenant accidentally burn up a fence.  So we have paid to get that fence fixed, but as of right now we haven’t yet billed our tenant, about $1,500 to repair the burnt section, and the burnt out wooden planter and to re stain the fence.  We should get reimbursed in June.

2) We have a tenant moving out, so we spent some money to fix up the house, we bought a power washer to clean up the brick exterior and power wash the sidewalks.

3) We got a couple of rent payments sent to us that hit after the end of the month.

Next month should be better.  I would point out, if you have real estate, you absolutely need some capital reserves to get you thru the ups and downs.  Ie paying a handyman to repair a fence while you are still waiting on your tenant to pay you back.

Retirement accounts: +$7,346 – A solid month,  satisfied

We made an extra payment of $2K to our 401K loan, and we made our normal 401K contributions.

Hopefully we can look to increase our contributions in July.

Liabilities: -$621,586 (+$3,122)  – Satisfied

A solid month in May , we paid an extra $2K on our 401K loan and had our normal $1,000 pay down on our mortgages.

 

How did you do in May?

Rental Income 2016-04

Gross Revenue : +$5,629

Duplex Unit#1: $1,375.

Duplex Unit#2: $2,640…a funny thing happened on the way to the forum.

Well, we thought our downstairs tenants had re-upped their lease thru the spring of 2017.  Found out they thought otherwise when a real estate agent called me for a tenant verification. The lease said they were under contract until May of 2017, it is clear today’s youth thinks differently than my generation about the importance of someones word and a signed contract.  Never once would I have even thought about ending a contract that I could pay early just on a whim (in this case these guys wanted to live with their buddy on a lake).

You can hold a tenants feet to the fire, I mean we could have enforced the contract, but do you really want to go a year with an adversarial relationship with your tenant?  Not really.  So we settled on letting them out early if they paid a fee of a months rent to cancel the contract.  So instead of the normal $1,320, we ended up getting twice that this month, but will have nothing coming in next month.  More detail on this later.

House: $1,614 – This reflects a half months rent, (tenant moved in mid month in March.  They paid first March in full and the April is then a partial month.), plus a $250 non refundable pet deposit.  Next month we will be back to regular payments of $2,200/month

Expenses : -$4,152

Duplex: -$2,177

This breaks down to $2,167 for our mortgage, and $10 for Office Supplies and Gas (mowing).  The water and trash bill didn’t hit in April.  (we will likely have two water bills next month)

House: -$1,976

Our House payment was $1,976 split between a first and second mortgage.

 

Monthly Free Cash Flow : $1,477

Duplex: $1,838 – Satisfied…well sort of, out tenant moves out in May, and we will look to do something else.  (stay tuned)

House: -$362 – expected but not yet satisfied…next month we will have a full month rent, and hopefully we can get some traction.

 

(disclaimer: I am pulling the data out of our Quicken system. I may on occasion make category revisions, therefore the month by month updates may not tie exactly to the year to date or year end totals.)

Rental Income 2016-03

Gross Revenue : +$4,895

Duplex Unit#1: $1,375.

Duplex Unit#2: $1,320

House: $2,200 – Finally!!!….Our tenants moved in mid month.  They paid first month up front, so next months rent will only be a half month.  But still, we are getting money in the door.

Expenses : -$4,831

Duplex: -$2,374

This breaks down to $2,167 in mortgages, and $207 for water and trash.  We had 2 water payments hit this month, $101, and $106.  (Just the luck of the draw in terms of how the calendar hit.)

If you notice, our escrow readjusted (happens annually) and raised our monthly payment from $1,886 to $2,167 or +281.

House: -$2,457

Our House payment was $1,976 split between a first and second mortgage. If you notice, our escrow readjusted (happens annually) and raised our monthly payment from $1,512 to $1,976 or +464.

A note, I know this seems like a huge increase and it was, but about $300/m of the increase is due to the payback of an escrow shortage.  When we bought this house, it had been totally redone.  The property taxes went way up and left a shortage in the escrow account.  Instead of paying for the escrow shortage up front, we decided to let the monthly payment go up for a year.

The reality is this $300/m or $3,600/yr was really property tax from 2015 when my wife and I lived there and I  would expect a $300/m decrease in 2017.

During the month we spent, $120 to clean up the yard and get it ready for the new tenants, $160 to fix a gate and $15 more on cleaning supplies.

On a side note, those magic erase sponges are fantastic.  We were able to use them to clean up some white trim around our windows and doors.  Because they worked so well, we didn’t have to repaint the trim saving a ton of time (and money).

We also spent $186 on electric, water and trash during the month.  These expenses go away in the future as the tenant will be paying for them going forward.

 

Monthly Profit : $64

Duplex: $321  – Satisfied…but holy cow that increase in property taxes hurts.

House: -$257 – not satisfied…yet

Overall we are getting there, next month will be tight because we only get a half month rent out of our house.  I would expect things to really kick in during May.

Since I began these updates the cash flow has been mediocre to poor.  A lot of things have happened, we had a lot of expenses that were incurred as we moved out of the house and got it ready to rent.  To be fair we would have had the exact same expenses had we been getting it ready to sell.

I sort of discount the $300/M that we are paying back to the escrow account, it really is not a rental expense per say, rather the increased escrow is a property tax expense we incurred while we lived there that is now being paid by our tenants.

Most bloggers don’t mention this, by the time you clean up the property, make small repairs, paint, have property taxes readjusted etc, that it seems to take a year or so before a property starts to make money.

It gets better, rents typically go up a little each year, the property taxes have had their initial jump, any major repairs have been completed etc.  You have changed the locks, fixed the paint colors etc.

Also don’t forget, the way the properties are leveraged (the types of loans on the property) play a huge part in the cash flow.  For instance we have PMI on the duplex (approx $60/Month), and have a second mortgage on the house.  ($220/Month).  Those expenses will go away as we pay down the loans.

But its not just cash flow….

We put down total cash of about $63K to buy the duplex (2013), $57.8K+$4K in repairs (foundation, fence, minor plumbing etc)  …$4,500 of the $63K was stupid tax.

On the house we invested $19.8K (2014) of cash to close.

Conservatively we have about $110K in unrealized price appreciation between the two properties (after closing costs) if we chose to sell. About $60K from the duplex, and $50K from the house.  So 132% ROI since 2013.

Our rentals are in trendy areas of Dallas (Lower Greenville and the Bishop Arts district).  These are booming neighborhoods with a ton of development .  I think they will continue to appreciate.  The duplex is a likely target for developers, there are probably 10 or 15 high end (350-550K/unit) condo/town home developments within a 6-8 block radius of our place.  To the right developer, the property might be worth an additional $30-50K or so above what we are calling the conservative number.

Plus just by paying the payments, we have a monthly reduction of $700/month on the principal owed between the two properties.  And all of that is being paid by the tenants.

If you are thinking about getting into the rental game.  Have additional savings above and beyond the down payment and closing costs that you can use for unanticipated expenses.

So overall I am very pleased with what we have done so far with our properties, we have bought houses that we could live in initially.  Then move on and rent out behind us.

 

(disclaimer: I am pulling the data out of our Quicken system. I may on occasion make category revisions, therefore the month by month updates may not tie exactly to the year to date or year end totals.)

Net Worth 2016-03

Total Net Worth in March: $405,389 ($91,563) – Incredibly satisfied

March was the best month we have ever had.  The stock market did well, our tenants moved in.

During the month we broke the $400K barrier for the first time, 21 months since we broke the $300K barrier and 4 months since we broke the $310K barrier.  I know we kinda ‘cheated; to get here since I picked this month to update the value of our properties, but even without the increase in asset values, we had a really good month.

Assets: +$78,242 –Incredibly satisfied

After holding off for some time, I decided that it was more appropriate to occasionally update the value of our real estate holdings.

I came to this conclusion for a few reasons.  There was getting to be a significant discrepancy between the values of our real estate and the values listed on the Net Worth updates.

More importantly, we are making decisions to buy/spend/rehab/invest etc on real estate, the results both good and bad are best reflected by keeping the values at least somewhat close to market.  For instance we might decide to sell a property if the value has gone way up.  Maybe we rehab a house based on our value vs the after repair value.  Maybe we accept low cash flow if we are getting 10% year over year appreciation vs selling if the market is flat.

I think real estate valuations are very subjective, and I don’t want to get into monthly updates since places like Zillow etc are so volatile. I plan on making a couple of updates a year, and I am trying to make it so the value listed would roughly approximate the amount we would take home after a sale.

The Duplex’s value went up from $308K to $340K in our latest Net Worth Estimate, similar structures in the area have actually sold in the $350K-$390K range.  Zillow currently has an estimate of $385K so I don’t think that $340 is overly aggressive.

I have increased the value on the rental house from $230K to $280K.  This house is in a booming neighborhood in Dallas.  Our real estate agent estimated that its current value would be about $300K.  So the $280K number I believe to be fairly conservative.

I  left the price of our current house the same as we just bought it in Nov of this year and a few months ago, I already increased the value a little based on some rehab work we did to the house.

I used KBB to update the value of our autos and reduced the car value by $616, and the SUV by $555.

Net Cash Accounts: (-$4,208) –Not satisfied

Our cash balances were down quite a bit.  My wife’s kids came to town, and we spent some money shopping, eating out etc.  So our credit card balances (which are paid in full every month) went up.

In addition we paid everything we could on our personal loan so the overall balances in this area were negative.

Net Cash Rental Accounts: +$965  – Satisfied

We were up this month on our rentals.  Finally have someone living in our old house offset by some final expenses we took on to get the house ready to rent.

Retirement accounts: +$9,708  – Incredibly satisfied

A great month in our investment accounts. My 401K account had its best month ever.  My IRA did well as Apple is starting to come to life. The wife’s 401K did well as she is entirely in a Vanguard S&P fund.

Honestly in this area we just need to continue investing, and to continue increasing our contributions over time.

Liabilities: +$6,857  – Incredibly satisfied

A great month, we paid off the personal loan (+5,761) we took out to buy/rehab the house we bought in Nov.  I absolutely hated taken out this loan, it went against just about everything my wife and I are trying to do.  Being able to get it paid off is a great relief, it lowers our fixed costs by $310/month.

Next month we will turn our focus to the 401 loan, we owe $19.2K, I would like to see us have it paid off by Aug.

The remaining improvement (approx +1,100) was just due to regular amortization on our other loans.

How did you do in March?

Rental Income 2016-02

Below are our monthly updates.  (disclaimer: I am pulling the data out of our Quicken system. I may on occasion make category revisions, therefore the month by month updates may not tie exactly to the year to date or year end totals.)

Gross Revenue : +$2,695

Duplex Unit#1: $1,375

Duplex Unit#2: $1,320

House: $0 – This property gets a tenant mid March

Expenses : -$3,766

Duplex: -$1,919

This breaks down to $1,885 in mortgages, and $33 in painting supplies.

House: -$1,848

Our House payment was $1,452 split between a first and second mortgage.

During the month we continued to get the house ready for rental, we spent $120 on paint and painting supplies.  We spent $41 on cleaning supplies.  And spent $173 on smoke detectors and other electrical supplies.

Utilities during the month were $62.

Monthly Profit : -$1,072

Duplex: $776  – Satisfied

House: -$1,848 – not satisfied…..continued duh

The property is almost there, it definitely took a lot longer to turn than it should have.  One of the difficulties in buying and then moving every year or so is that it is draining to simultaneously move/unpack in your new house while spending effort to get your last house ready to rent.  Especially as in this case we bought in November right before Thanksgiving and Christmas.  In addition we did some remodeling to our new house and then did some painting and other work on our old house.

The good news is that March, knock on wood, is shaping up to be a lot better and we should hopefully see the earnings/cash flow of these rentals take shape.

Rental Income 2016-01

As I may have mentioned in other posts on my blog, we own a couple of rental properties.

We bought a Duplex in the summer of 2013 and lived in one of the two units for a year.

In the summer of 2014, we bought our second property, lived in it a little over a year and in the fall 2015 bought a third house that we just moved into.  Our second house was rented as of March.

Below are our monthly updates.  (disclaimer: I am pulling the data out of our Quicken system. I may on occasion make category revisions, therefore the month by month updates may not tie exactly to the year to date or year end totals.)

Gross Revenue : +$2,695

Duplex Unit#1: $1,375

Duplex Unit#2: $1,320

House: $0 – This property gets a tenant mid March

Expenses : +$6,619

Duplex: -$2,019

This breaks down to $1,885 in mortgages, and $134 in expenses.

$6.64 in mailing expenses, $21.48 for a new fence latch, $1.02 for a light switch and $104.42 for water/trash.

House: -$4,599

One of the lessons I have learned as a landlord is that it is really expensive to turn a property.  Between the vacancy, the cleanup , repairs etc.  The costs always skyrocket.

Our House mortgage was $1,452 split between a first and second mortgage.

In Jan we spent $300 on a make ready cleaning, that included a generous tip since our housekeeper cleared her schedule to get to our place.

We had some electrical work done $1,125, bought some of the lighting supplies, cans, covers, pendents & bulbs $263.  A new mailbox $70.  A new dryer vent $39.  A couple of new appliances including a dish washer $910 including installation. Towel racks $243, respirators $27 (we did some cleaning and painting).  Utilities $170.

We have a premium property in an up and coming neighborhood, so we spent a fair amount to get the house ready to rent.

Monthly Profit : -$3,924

Duplex: $676  – Satisfied

Rent was paid on time, minor repairs and this profit reflects cash out of profit.  Ie it ignores the pay down of principal, depreciation, tax benefits etc.

House: -$4,599 – not satisfied…..duh

Certainly not a positive month for the house.  But we are looking at some up front expenses, and I think this house will cash flow very nicely in the future.

 

 

 

.

Net Worth 2016-02

Total Net Worth in February: $313,826 ($8,943)

February was a solid month.  The stock market particularly KMI rebounded, and we didnt have a ton of major expenses.

Assets: +$0

We continue to take a conservative view of property price appreciation, and have made no changes to the listed values of our real estate holdings.

I haven’t typically updated the value of the properties.  But I think going forward I will update our assets a couple of times a year and will probably do a full update next month.

Net Cash Accounts: (-$1,168)

Our cash balances were down slightly.  We did a lot better on spending and our credit card balances (which we pay off in full every month) were down $1,000.  Our checking account was down $2,500 as we made an extra payment to our personal loan.

Net Cash Rental Accounts: ($476)

We were slightly positive on our rental accounts even though we continued to spend money getting our house ready to rent.  Great news, we have new tenants that have signed a lease and will be moving into our house in March.

Hopefully with both rentals fully leased, we can see some improvement in this area over the next few months.

Retirement accounts: ($4,300)

The month was solid, KMI, knock on wood seems be turning the corner and rebounded from $15/share back to $18.52.   I still like the company for the long run, it has fantastic assets but its been tough to hang in there over the last year or so.

During the month, we moved about 1/4 of the cash in our 401K account into our other funds.  The market seemed oversold and each time we get a 10% pullback I try to move money from cash into equities.  In addition I turned off new contributions to the Vanguard Healthcare fund.  The Healthcare fund has been a huge winner over the last few years, but I believe this fund is at risk from being targeted in this political cycle.  Pharmaceutical companies  could be challenged for a while.  I don’t plan on selling anything in the fund, but its time to put contributions in other places. (Value, S&P, Small Cap)

Liabilities: ($5,335)

This was a much better month.  We were able to pay down our personal loan by $4,239 in Feb.  Hopefully we can have it paid off in March or at the latest in April.

The remaining improvement (approx +1,100) was just due to regular amortization on our other loans.

How did you do in Feb?