The rental cash flow for the month was as expected and according to plan. All rents for December 2014 were in hand by Friday, 12/5/14. That is 24 for 24. All units were full, with the exception of my one vacancy that I have been working on for a few months.
I generally have ~10 to 15% of the rents in prior to the first, 50% in by the first, 75 to 90% of the rents in by the seconds of the month, and 100% by the fifth of the month.
I started a repair log that should help both readers and I understand the maintenance that is being performed. Just as when you have kids, you do not always think about the time spent doing the ‘kid’ things, I often do not think about the time spent maintaining the rentals.
I had some expenses that were not unexpected, but were unexpected that day. Things like changing water heaters and fixing furnaces.
Rental Cash Flow Definition
My incoming cash is always on the first week of the month. The expenses are throughout the month and year. I try to remember and log most items, but the recent rent collections are easier to remember than a month+ ago.
Expenses like taxes, insurance, utility bills, mortgages, vacancy, management, etc. are all paid or accounted for, and not necessarily reflected in these cash flow reports. Since I manage and mostly maintain my own properties, I do not spend as much on other labor. This helps as I can maintain my properties better than many landlords. I can also purchase the tools I need to do a proper job on the maintenance.
Water Heater Replacement
The water heater started leaking, and very old. It was a water heater that I wanted to replace when I purchased the building in 2009, but I decided to do other higher priority projects instead. It lasted another 5+ years, so it was worth it to wait. If I was going to be away for an extended period, I may have changed it sooner.
The water heater started to leak on the cement floor, which then mostly drained slightly away from the floor drain. It was a slow leak, but any water leak is a bad one. In this building, the individual water heaters are in the basement. After being notified by the tenant, I changed the water heater the next day. They are easy to change, and other than being a bit heavy, only take a couple of hours to change. I left the old heater on the curb and called a scrapper to pick it up.
I spent about $300 on the water heater, and saved about $300 on the water heater install. That’s cash money in my pocket, rather than someone else’s pocket. It’s actually money not spent, but it’s the same.
The furnace repair was a bit more work. The furnace was running a bit intermittent. When I stopped over the first time, I was able to clean the burners and wire connections and get the furnace working again. It worked for a day or two. I stopped back over and replaced a ground wire that was suspect, and saw that the new ground wire did not fix the furnace. So I ordered a pilot hood and a used computer control board. The control board was $49, about $200 cheaper than a new one. The pilot hood was $25. I changed the control board when it can in, and it fixed the furnace. I did not need the pilot hood assembly, so I now have a spare.
The furnace now appears to be working fine. It took three trips, but sometimes that is necessary to diagnose and repair an issue. A ‘real’ furnace guy would have had the part in his truck, and advised to change out the furnace or spend $500 to fix the old one.
Those two repairs, the water heater and furnace, saved me at least $600 – $700.
Tax Planning Expenses
I am now starting to spend money on future items that I know I will need done for 2015. Any expense in 2014 will be fewer taxes for 2014. I prepaid all my insurance that is due in January 2015, a few weeks early. I purchased some supplies that I know I will need for future projects. It’s not a lot or prepaid expenses, maybe $3000 – $4,000 or so. By spending on those expenses now, it will save me about a third of that money in taxes. I do not like to buy too many supplies ahead of time, as I may change my mind on how I am going to do the project, or the parts could get broken or temporarily lost.
The retirement countdown is still getting closer. I have some aggressive saving goals for 2015, and that should bring down the amount needed to retire. I should save what I saved this year, plus any principal and interest payments that I made last year, on mortgage that I paid off. I also had a one-time expense of $29K last year that I will not have for 2015. That should help bring me closer to my ‘magic’ retirement number.
So, in 2015, my 401K deductions start again, and I pay less income tax withholding for the first few months of the year. I am looking forward to the last full calendar year of working.
Previous Cash Flow