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?