July – August 2014 Rental Cash Flow

packs-163497_1280-PDThe month of July was great, all rents were received and the rental cash flow was 100%.  25 for 25, and no vacancies.  Only one was late, and that one was expected.  No late fee was charged to this one tenant, but all other tenants get hit with it even if they are one day late.  No major expenses were found.  I did have a bit of excitement with a murder near one of my rentals…

Rental Cash Flow

I had two vacancies that I filled for 7/1, and two more for 8/1.  Despite the turnovers, cash flow was great and I had no vacancies.  I also had a tenant give notice in late July that they had a job transfer, and would need to get out of their lease early.  They need to be in Ohio on 8/18, and wanted to know what the process to get out of their lease was.

No problem, I have a ‘Lease Termination Clause’ in my leases.  It states an early lease termination costs two month’s rent.  It is expensive for me; I have to turn a unit and market to new tenants.  Their other option is to keep paying rent until the end of the lease in January.  Since the new company was paying for the relocation, I explained to my tenants that the relocation expense includes the lease termination fee.  I believe that the company will reimburse them as the HR department asked for a lease and a receipt.

I started marketing the apartment right away.  Since I was at the end of a marketing campaign from my other two units, I had a backup renter ready.  So, I filled the unit for 9/1 at an additional $20 per month.  Easy peasy.  I collected the two month’s termination fee and will add that to the ‘bonus’ pile.

For August rent collections, the property I manage is vacant for the month of August.  A new renter is scheduled for 9/1 and a holding fee has been paid.  22 of 24 of my own rents are collected as of today, with the one tenant going to pay on 8/8.  It’s the same tenant that struggles every month.

My last Section 8 tenant was given notice to move by 7/31 in the middle of May.  As of 8/7, she was still there.  So I do not have rent income for that unit for August and probably not September.  Most of her stuff is out, and she was cleaning as I left today.  I will do a major remodel in that unit.  New kitchen cabinets, new refrigerator, new tile bathroom floor, new laminate floors all around.  I will also replace some doors and other miscellaneous items.

Life is tough for a Section 8 renter.  Not many landlords accept Section 8 tenants, as they are a high risk tenant, almost by definition.

My tenant that had a death paid up.  They did inquire about late fees, but were paid by the late fee date.

Contractors Do Not Know Everything

My duplex that was re-sided by the general contractor failed the final inspection for lack of putting on a house wrap or “Weather Resistant Barrier (WRB)”.  The Contractor was very professional about it, and said they would remove the siding, put on a house wrap, and re-side the building.  It will probably cost ~$4K for him to go back and do it right.  The sub-contractor who actually did the work was a bit miffed, but such is life.  I am not sure how the work that gets done will be paid for, but it’s not my expense.

I pointed out the house wrap issue before the contract was even signed.  The contractor said it was not needed.  I am not sure why, but whenever I have someone hired to do a job, I seem to know more than they do.  They are supposed to be the expert, not me.  Had they not dome the right thing, I would have gladly taken the contractor to Court and would have won handily.  After all, failing a final inspection would almost guarantee it.  Collecting would be another matter.

A Murder Close By

A Mendota Heights police officer was shot and killed about 100’ from one of my rental buildings. It was a one-off event by a known criminal that was driving through.  The guy happened to be pulled over in front of my building, and he shot the cop three times and the cop died.  A one-time event is nothing to be worried about, but another murder in the same area could impact rents even if it was coincidental too.

The interesting thing is that virtually every newscast pictured my building in the background.  I should have had some paid advertising on it.

Major Improvements

I built a closet under a set of stairs in one of my buildings this month.  That is the second one that I did this year.  At some point, I may have to write a post about “how to build a closet under a stairway”.  I have one more closet to do; but it may be next spring before I tackle that.  It is certainly nice to have a lockable storage area in each building.  At some point, I will have a few cleaning supplies and a vacuum cleaner in each one.

I also had one duplex sided in July, which I just discussed…

Rental Cash Flow Increase

I am in the process of getting ready to pay off a mortgage on one of my rentals.  When it is paid off, I will have an additional $1,145 in cash flow every month, or $13,740 annually.  If I bought another building, I may not even get that much cash flow.  So, I am going to lock up a sizable amount of cash at 5.5% by paying off the mortgage.  It will also further my early retirement plans along nicely.

How was your rental or investment income for July/August?   Any good renter horror stories?

 

 

 

10 Replies to “July – August 2014 Rental Cash Flow”

  1. Eric, I am curious about the Section 8 comment. How many Section 8 tenants did you have and what made you decide to stop being a landlord for that program?

    1. Thank you for the comment.

      When I first started landlording, all I had was section 8 tenants. Two duplexes with three residential tenants and one commercial tenant.
      The program is fine, the Section 8 tenants are high risk. Common behaviors are extra tenants, not paying their portion, higher maintenance costs, inability to show a unit when the tenant is moving out, late move outs, etc.

      One of my tenants turned into a murderer, I had two tenants in a duplex that filed retraining orders on each other. At the court hearing they both went to jail for the night.

  2. NIce job! I am not a landlord by nature, but I ended up being one because I couldn’t sell my place without taking a 25% loss. So it’s by necessity… and it’s really not in my blood to be a landlord. I quite dislike it 🙂 I couldn’t imagine having 25 properties/rental units.

  3. I thought contractors knew everything (JK!) I have been reading through some of your renter stories and they are awesome. I hope that you will have more, although I am sure you prefer the tenants without the drama.

    1. Thank you for the comment!

      I should have a post coming soon. My last Section 8 renter just vacated, so I am assessing the damages… That renter was full of drama too. I am not a contractor, just handy with tools.

  4. I live next to a house that has been rented for years. The absentee owners hired a local tile contractor (an expert) to redo the back-to-back bathroom shower stalls (one a full tub, the other a stall). After several months I noticed the grass next to the outside wall was sure green in an otherwise xeriscaped yard. And sure enough it wasn’t long before a redo of the tile was done. The grass continues to be nice and green ….

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