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
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.
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.)