June – July 2014 Rental Cash Flow

Polar Wall SidingOnce again it is time to report on the rental income, rental cash flow, and other financial aspects of the rental property.  June was a great month again.  Maintenance expenses were light, and July is set up for a good month too.

24 of 25 rents were in by July 3rd, which is typical for my renters.  I really do not have too many weak links in terms of renters, but not all are as strong of a renter as I would like.  The one late rent is from a long time resident who used to have a bit of trouble paying rent, and was great for a few months, and is struggling again.  She always pays, and has been with me for as long as I have owned the building.  Her rent will come on Friday 7/11.

I have never charged her a late fee, and probably will not start.  She lives in my only apartment that has not been remodeled.  I did put in new appliances, carpet, a garage door opener, new front door, new furnace and a few other smaller improvements after I bought the building, but not much in terms of a total remodel.  She is one of the few renters I have that uses the pay washer, as there is not a washer in her apartment.

My apartment where my tenant died came through.  I spoke with the ex-husband, and he has a decent union scale job.  So, I collected my rent and kicked the can down the road for at least another month.  Actually, I do not anticipate any issues anymore, but time will tell.

Rental Maintenance

I changed out a water heater in one of my units.  The old one was a 6-year guarantee water heater, which was at least twelve years old.  The pressure relief valve opened up one day and spilled hot water on the floor.  Not much damage due to the floor drain, but it is a sign that something more serious could be wrong with it.  It was turned up a bit high, and a boiling sound could also be heard.  There could be a thermostat issue too.  Either way, the new water heater will prevent the issues in the future.  Total cost ~$340 for a 40-gallon gas hot water heater.  Installation was ‘free’ (by me), saving about $200.  The old water heater was put on the curb where a metal scrapper picked it up for free as well.

I finally got my roofing estimate for my one building with a flat roof.  It was ~$24,000 for a premium quality roof.  I have decided to look at the roof myself, and see if I could see anything.  I will do that in the coming weeks.  It is a pretty decent roof, but for some reason there is a leak.  Perhaps by going up on the roof I can do a simple fix and save quite a bit of money.  The roofing guy did say I could get the job done cheaper in the fall when work was a bit lighter.  So I may opt for that option too.

The siding was replaced at one of my West St Paul duplexes.  This building had white aluminum siding, and had storm damage.  The new siding will be Polar Wall siding, by Norandex.  The color will be changed from white to saddle.  I was able to get a price of .60 per sq. ft. for the siding, which normally runs ~$2 per sq. ft.  At a bit over 2,000 sq. ft., that is a tremendous savings.  The insulated siding should also save me quite a bit in heating and cooling expenses, as I pay the utilities in that building.  The majority will be paid by the insurance company.

Apartment Turnovers and Vacancy

I had two apartment turns for 7/1.  In both units I had renters move in the day after the former tenants left.  Zero vacancy expense for those turns.  There were minimal expenses for maintenance.  There was some touch up painting to do, some wall repair for picture hanging holes.

I did charge one tenant $150 to clean the carpet in a bedroom as they had a cat that pissed on the carpet.  I was able to do a pretty good job getting the smell out with lots of water and a carpet extractor.  I was going to replace the carpet at first, but due to the fast turnover and limited time, I decided to attempt to clean the carpet instead.  If I have any complaints from the new tenants, I will change the carpet.

I had one tenant give notice for 8/1, and have already found a renter.  I am waiting on the $1,000 holding fee, which I should have this week.  The apartment I manage is also going to have a turnover, and I have a renter scheduled for a 9/1 move in and have collected a deposit.   That one will have a month of vacancy, but it will likely need more work to turn.

My last Section 8 tenant was given notice to move, after seven years.  She was paid in full.  It’s time to go to a private market rent apartment, and get rid of all of the Section 8 drama.  It will be a major re-model, but i am ready.  I passed the section 8 inspection a week or so ago, but I am ready to move on from the extra junk, constantly changing contact numbers, broken windows, etc. that comes with lower quality tenants.

Plans are to replace the shower surround, vanity and topper, tile the bathroom floor, and do any painting and fixes necessary.  The laminate floor will also be replaced.  It has been there for 15+ years, and is still functioning.  Carpet would never hold up that long.  I have written about carpet vs. laminate in the past.

Mortgage Update

I finally received my “Satisfaction of Mortgage” for my own home.  It was paid off in March, but it took until now to get the recorded document back.  I refinanced a bit over three years ago, for ~$77K, assuming that five years would be a decent pay off timeframe.  The loan was a zero cost refinance, for five years, on my remaining balance.  Everything was the same, but .75% cheaper.  No appraisal fees, no recording fees, etc.   The catch was a $500 prepayment penalty if I paid it off in less than three years.

I managed to pay it off on the month of the three year anniversary.  I was dying to pay it off sooner, but I was not about to pay any prepayment penalty, that’s why I refinanced, to save money.

The original mortgage paid off my two duplexes, so it would have been paid off much sooner if not for those properties.  I now have four properties paid off, and four mortgages.  I am only about three quarters of a million dollars in debt….  The bright side is that if I had to, I could pay off all the other mortgages.

Retirement Update

My retirement date for my real job has been updated to 7/1/2016.  It takes 3-4 months to max out my 401K.  From there, I need 1,000 hours (6/30) to equate to another year of pension, which is only two months away after maxing out the 401K.  Adding another day, to 7/1, gives me another month of benefits by working only one day.  7/1 is a Friday, so it will be a short day and I can then start the long weekend which will last for the rest of my life.  Of course, there is about a 25% chance I may decide to bail a year earlier, you never know.

The retirement account goal has also been updated, to the nearest ~$5K or so, to reflect gains in the market and other additions.  I found an account with 100 shares of PFG stock in it that I didn’t know I had.  I have initiated a transfer to my main account so that I do not have to worry about setting up new beneficiaries.  Other people do not have to know about a new account if something happens to me.  It will likely be a mess anyway, no sense in making it worse than it is.

 What was your month like?

9 Replies to “June – July 2014 Rental Cash Flow”

  1. I have a quick question for you. You said you had a renter moving out in August and have already found a renter. I have that situation with my only rental. Did you show it with the current tenant’s permission? My problem is the lease is up at the end of August, after school and college has started and college students or families are my target tenants. I’m wondering if it would be appropriate to go ahead and start advertising it for rent for Sept. 1, with the tenants permission to show it? Thank you for your help.

    1. Thank you for the comment!

      You absolutely want to start showing a unit as soon as you get notice that the existing tenants are leaving. If you know that you need to do some work, and cannot have it ready right away, be sure to build in some time to allow that. You do not want to make a promise to deliver a rental and not be able to deliver. It puts your new renter in a hard spot. And it may leave you on the hook for a hotel bill and a storage unit.

      Good renters look for a new place 6-8 weeks out; some even longer. After a few showings, you will know what the response is to the place. If the current tenant is a hoarder and there is lots of clutter, you will have difficulty in re-renting. You may have to wait.

      I should write a post on this and provide more detail.

  2. I have the concern you mentioned, our current garden unit renter is a great renter who pays early every time, she let us know she will be moving out in October, my concern is she is a bit sloppy/messy with the unit, especially the 2nd bedroom she uses as an art studio. Any recommendations on what we can do to suggest she clean it up in the month(s) ahead for showings?

  3. Wow looks like retirement is coming up soon for you! That’s great! It’s great that you have the skills to replace the water heater, potentially fix the roof, etc. I’m starting to buy into the whole idea that the more you can know – even if you don’t know a lot or aren’t “great” at it – the better your chance of success. Knowing a little about a lot can actually go a lot further than being an expert in one thing. Anyway hope you have a great weekend!

  4. Hi Eric

    Have you already fixed a date for retirement with your employer or is that just your current planning? Mine is still a ways off but I had a friend who just retired on Friday which got me thinking about it again. What is the usual notice period that people give for retirement in the private sector? Any idea?

    Glad you rent came through from he ex-husband of the lady who passed away.

  5. Very nice post. Love the way you squash down time. It’s never good to tolerate an empty unit if you can do better.
    Thanks for showing us what goal setting and long term planning looks like. Love it.

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