Hopefully everyone’s rental cash flow and rent collections are going well.
All 25 of 25 rents were collected and deposited mostly on-time. I was able to place at least four renters so far this year, with one vacancy coming up for May 1. Rents have been bumped up just a bit for 2015 on the turnovers, so my monthly gross income, before expenses, should be up quite a bit over last year. I was able to raise rents just a bit in 2014 too. And I have bumped up the rent on one renter for April 2015.
Rental Cash Flow
All 25 rents were collected and deposited by 3/6, and all but two were in the bank by 3/3. (Update: actually, I missed the bank on Friday evening for the last one, so it’s a Saturday or Monday AM deposit for the final one.)
I had one late rent, from my one tenant, the one that is always late. I did get the money order on Friday, before the banks closed. I continually let her slide on the late fees, as she has an apartment that I have not yet remodeled, and has been there since I purchased the building. My mortgage payment is not much higher than her rent, and her rent helped quite a bit when I was initially remodeling that building. At some point, a major remodel will be completed, and rent will be higher from that apartment.
My monthly text reminder went out on the 28th of the month, which was also the last day of February. So, there was not much notice as a reminder to the tenants.
I did have one rent that came in the mail on the 5th, and it was due to the tenant’s bill pay setup and the short month, it arrived on the 5th. As soon as the reminder text went out, they responded and said that the rent was set up to start on the 27th, and might be a few days late. I would never have charged a late fee in this case, and it did arrive before the last fee would have kicked in.
New Tenants
In 2015 so far, I will have had to get five new tenants. Four are already either moved in, or locked in with a $1,000 deposit. I use my standard method to get tenants. Price right, market effectively, and screen hard.
I have moved one tenant in already, with three tenants that I have already screened and taken a $1,000 deposit. I have one unit left to fill for a tenant that wants to move early, but is obligated to stay (and pay) until 6/30.
So, currently I have tenants moving in 3/15, 3/24 and 5/1. Selling the extra week or two to a new tenant is a great way to make extra rent. They get to ‘own’ two places for a few days, which allows a slower move and plenty of time to clean the ‘old’ place. Moving trucks are a lot cheaper in the middle of the month too.
The first part of the month is pro-rated, and all rents remain due on the first of each month after move in.
Increased Rents
Apartment 1 Difference +$0
Apartment 2 Difference +$50
Apartment 3 Difference -$50 (less pets)
Apartment 4 Difference +$50
Apartment 5 Difference +$50 (pet rent)
Apartment 6 Difference +$25 (existing rent increase)
Total + $125 per month
Apartment Turn
My latest apartment turn was for my tenants that purchased a home through me. They left the place in decent shape, but here is always a bit of work to do in a rental. Here are some things I did. It seems like there is always a few items to fix. If I see something that needs fixing, I fix it. I would rather do it when the unit is vacant, than when a tenant moves in.
- Give it a solid cleaning. Make sure everything is spotless.
- Change locks
- Replace drain stop pull rod in bathroom sink
- Replace toilet fill valve and flapper
- Fix Jacuzzi tub that was no longer pumping water. It was a stuck motor.
- Remount fire extinguisher
- Fix door sweep
- Change tub drain and stopper and re-putty
Deposits Refunded
My renter that moved out received his full deposit back. Plus another $500 for using me as his Realtor to purchase a home. While it is a temporary setback, other than the $500, was not my money in the first place. Once I get new renters in place, I get new deposits to replenish the deposit fund.
Many landlords get into trouble by spending the deposits and not being able to sustain their properties without it. I do not keep my deposits in a separate account, but I definitely have enough capital to pay back all the deposits (and then some…) if needed.
I should get a commission check this coming week to make up for the lost renter.
New Texting App
My old app that I used to send texts to my tenants as rent reminders became useless about three months ago. The old app, GoSMSPro, quit the scheduling option. I did not even know it for a month or so. An application update came through, and it was gone. No notice, no warning.
I looked long and hard for a texting app that would be all of the following
- Allow scheduled texts
- Allow the ability to send a text to a Gmail group of people, I do not want to have to key in 35 renters individually
- All me to pick the phone number to text, when the tenant had more than one phone number
- And be Free
Actually, I would likely pay for the app, but free is better. Even better would be the ability to manage a group from my desk top, without having to set up a new Gmail group.
I settled on an application called HandcentSMS. It appears to do everything I want, and is free.
So now my monthly rent reminders go out on the 28th of each month, at 1:00 PM. I send one to myself too, just so I know it goes out.
Major Expenses Paid
I paid ahead on many expenses in December for tax purposes, so February was heavy on cash outflows. My main purchases in December 2014 were charged, and the Credit cards that came in January and were due in late January/February. All bills were paid in full, so February was great in terms of rent collections, but helped fund some of last year’s expenses. My prepaid insurance bills were checks, not charges, so those impacted December’s cash flow.
Property Taxes
I received my 2015 property tax statements this week. The taxes are down slightly overall, so in 2015, I should pay about $1,700 less than I did in 2014. The valuations stayed the same for the 4-plexes in 2015, and I received notices that the valuations would be headed up for 2016 by about 3%. So, that will likely eat up any tax savings for the year. But it all adds up and I will take the savings for this year. In 2014, I paid $31,403.26 in property taxes, not including my personal residence.
Was your cash flow as expected? Did any major household expenses attempt to derail your financial independence objective? Are your property taxes up or down this year?
Good day, You are so effecient. I can say this much, it’s much better getting rent for March, I do have two that pay in 2 payments, I agreed to this years ago, since paid 2 x a month. so it’s ok. Anyhow one person whom I hold 2 notes is late and I’ve had a heart to heart with him about investing not being for everyone, I will never sell a home to an investor who has no reserve, I can tell you that much. I literally wait until the rent is collected by the investor so he can pay me. I made clear to him it’s not how it works, The banks don’t care if I am dead or ill or have life issues , THEY want their money, I am no different. Anyhow lifes lessons.
I have 2 tenants, one in whom I’ve given 90 day notice to move after 6 years, section 8. There was a freeze on rent, so these 2 homes have not had rent raised since 2009 and 2010, that’s insane to leave rent the same for 6 years. The reason I’m asking someone to move is not for what most would think. I have a beach property,it’s lovely, it’s built in 2000, it’s 17 homes from the waves ! it’s my beach property, but it’s a small HOA and the front unit couple have been a headache, and I’ve learned since I make like 200 a month profit yet sit on 200k equity in that rental, I shall just sell. I don’t need a headache from another home owner. When one person causes me grief than the other 10, then I have to say it’s time to remove myself from situation. Whats more an issue is they are bored, so it’s fix the roof that’s not broken , they said clean gutters, trim a brach that hangs over their balcony, just little thing they can do, I think they irritate me on purpose. They hate that that they are the only owners and other 2 units are rentals. But some things do backfire also. I am president of the HOA and I have been wondering why they haven’t complained In a month and I have gotten calls from lenders, they are trying to refinance, and if anyone knows this industry, when 50 percent of the building is occupied by renters it’s almost impossible to refinance. SO when I sell they most likely can. I bought this place to retire, how many people get to own a home that is near and even at the beach !?!?!! they kind of stole my dreams, I will buy another though if I set my mind to it.
So bills are paid, my house is now paid in full as of February and I do feel the excess income, never can tell you have more money when it’s in savings earning nothing, but that 2k mortgage gone sure has made income and cash flow increase. I also have offers in on a golf course property that’s got an old mobile home on it but it’s rented, it’s on the green and cart path, the lands worth the 50k alone ! so I hope they take my offer and then I have a project up the road. After all my guys a golf fanatic so to have a place near the green with a great view is cost effective 🙂 I hope you are all heating up in the East, we had 80 degrees yesterday and it was beach time and coastal drive in tank tops, the weather differs so much I wonder if real estate will keep climbing so far we are up 2013, 2014 and 2015 has very little inventory, will be interesting to see prices. Looks like the great depression all over again the poor are getting poorer and rich are getting richer with stocks and real estate rising in a world where jobs are low paying, I will shut up, GOOD DAY
Nice efficient Business! Thanks for educating us. In have one question:
I had a tenant that pays low rent (it cam with the purchase of a long lease!). His lease will be up soon. I also want to do a extensive remodel and raise the rent. I would like to get a new renter (the old one has been somewhat a pain). Can I tell him that his lease will not be renewed because I need to property back for doing the remodel? Or do I need to raise the rent first w/o any remodel and let him decide or see what happens next?
Thank you for the comment Austin!
In MN, I can terminate the lease, or raise the rent at it’s end for no reason. Other states may have different criteria, especially in rent controlled districts. I would not give any reason in writing, if you can avoid it. Any reason you give might be an invalid one. When I terminate a lease, I just send a notice that the lease is terminated.
How much do you typically raise rents year to year? Do you try to do that every year? A certain percentage?
It really depends. If I have a vacant unit, I attempt to adjust to market. If I get 2-3 qualified tenants through the property and they do not ‘bite’, I know I am too high.
On existing tenants, I tend to leave them alone. In my rent raise, I was renting similar apartments for $125 more, so I raised it another $25. I do not need to squeak out every last dime from every tenant.
wow, awesome job screening tenant aggressively and place them so quickly. I’ve learnt something today, you actually text your tenant using an apps to remind them to pay rent? That is so awesome. I’m still very shy when it comes to that.
$31K in property taxes, wow! way to be a model citizen! Good thing is our country loves you back and you get to deduct taxes off your earning!
Thank you!
I send a reminder text, similar to the way a mortgage or credit card company will send an invoice. It’s a reminder, and I think it helps.
If I add the property and income taxes together, the number is a whole lot more….