It seems like I get pretty busy doing things, and the rental cash flow reports get put to the way side. As last month, all rents were collected on time. This is not too difficult, as great tenants pay rent. There are also ways to get rent on time, and remind tenants about when rent is due.
Rental Cash Flow – Rent Collections
All 25 rents, except one, were deposited by 4/3. That is 24 of 25 rents, in the bank, by the third of the month. About a third of the rents are in the bank buy the first, another third by the second, and the last third on the third day. Most are in hand the previous day.
Some of the delay, if you want to look at it that way, is due to my deposit schedule. I collect rents and deposit the next day.
My one ‘late’ rent, was paid by the fourth of the month. No late fees! Some landlords like late fees, I hate them. Why would I want to collect an extra ~$75, and risk an eviction? I can just price right, get solid tenants, and get my price. No hassles, no extra work, no wondering if I am going to have to evict and lose big.
Rental Cash Flow – Expenses
Property taxes are due by May 15th, so I have mine queued up for delivery on May 8th. One day late means a 10% penalty. Since I pay my own taxes on five buildings that do not have a mortgage, it’s about $9,500 in taxes – twice a year. If the taxes all arrived late, it would be a $950 penalty. Yikes! Property taxes are one of the largest expenses I have.
This year, my property taxes are actually down just a bit. Perhaps they are about $2,000 less than last year. For 2016, our building valuations go up, so that will be an added expense, assuming that the tax rate stays the same.
Main Sewer Line Cleaning
I had to have Roto-Rooter come out and clear a main drain line. That was $249, and a folow-up camera inspection was $75. I have a belly in the sewer line, which can be cured with a new line for ~$10K. Alternative solutions are to clean the drain a couple of times a year, or even flush water down the drains from the laundry sink periodically. If the tenants keep all things out of the toilets, like tampons, baby wipes, condoms, etc., that will also help. So I will be putting up a notice on everyone’s door this week.
I have a few turnovers coming in the next few weeks and months. There will likely be a few more before the year is out.
Tenant Turnover #1
One will be a one-day turn on 4/30. The existing tenants are very clean, so it should be easy. The new tenants will be paying an extra $80 per month, so add up another $960 in annual rent income. These roommate tenants moved to two different apartments closer to work or life. There will be no loss of rent, or vacancy expense, on the turnover.
Tenant Turnover #2
I have another turnover in mid-May. This has been re-rented. The existing tenants have purchased a home and will vacate by ~5/4. The new tenants move in on 5/16. That gives me a bit of time to get the apartment ready. The existing tenants will pay half a month’s rent for May as a penalty to break their lease. I will be renting that place for $50 more than the previous tenants. There will be no loss of rent, or vacancy expense, on the turnover.
Tenant Turnover #3
My tenant that has a lease until 7/31 notified me that they have purchased a home, although not through me. They were former homeowners and used their previous agent to purchase the home. They close on ~5/15, and want to be able to get out of their lease by the end of May. They did say they would honor the lease. So I have another place to fill.
I started advertising and showing right away and may already have a tenant for 6/1. I raised the rent by $75 and did not seem to have any market objections. There was a lot of interest. So, assuming all goes well, that’s another $900 annually.
Tenant Turnover #4 – Unexpected death
I had another turnover that happened unexpectedly. The remaining tenant that was in the apartment where my tenant died has died too. The wife died at 51, the ex-husband who was living there died at 62. Both far too young, but it shows what excessive smoking and drinking will do to a body. The relatives said they were surprised he lived this long with all his drinking.
I picked up rent on 4/1, and noticed the tenant did not look as good as he usually does. The son texted me about a week later saying his dad went to the hospital with kidney and liver issues. A follow-up text a week after that, and he was still in the hospital. That is always a bad sign. A week after that, I got a call from the kids uncle saying the tenant would not make it through the night. And I received a call this past weekend confirming he had passed.
They will be cleaning out the apartment, as it is packed full of stuff. Definitely a hoarder and I always dreaded the day he would eventually move out. There will be some work, but I did a pretty extensive remodel on the property a few years ago. I was planning on raising rent, or selling the building, and now I am glad he did not have those things to worry about at the end. he was a pretty good guy, so I left things alone.
Other than additional cleaning, I will likely replace the kitchen floor with the same floor I just put down in my previous turnover. There may be some painting to do, and some wall fixes. It is a 1920’s building, so work is always more ‘fun’ that it should be.
I will likely not get paid for May, which is owed s I did not get a 30-day notice. I may also have some vacancy on this property.
The Lock from Hell!
I like to do my own repairs, and fixing a lock is not that difficult. This lock was acting up. The tenant’s keys were sticking in the lock, and my master key was very difficult to work. Sometimes, I would give up on the master, and go to my truck for the specific key to the building. I hate things that do not work.
I researched in line for a possible fix. There is a way to tighten the pin cylinder to fix the issue. I removed the door knob from the security door, and put a temporary one in its place. At home, on the kitchen table, I can do a proper job. I could use my work bench too, but isn’t that an alternate use for the kitchen table?
After removing what seemed like 1,000 parts, I adjusted the lock cylinder. It was still a no go. I needed to bring it to a lock smith. I drove there, and had to drop it off. They called the next day, and the lock needed to be re-keyed and cost $20. Easy peasy.
I attempted to put the door knob and handle back together, on the kitchen table, and it seemed like I had it. It’s always easier to fix things that have a few parts right away,. Not after a couple of days.
For some reason, if I turned the handle a bit, the handle spring would slip, and the door handle was floppy. It’s hard to explain, but looking back, I think if I had installed the handle with the door latch it may have worked. So after 3-4 hours, back to the locksmith I went.
After a couple more days, the lock was ready to be picked up. The locksmith put it back together, no charge, and installed it on a piece of wood, similar to a door. I brought the entire assembly to my building and installed it. No problem. Unfortunately, the tenants keys did not all work. Some worked, most did not. I had to make all new keys for the tenants. The new key was just a slight bit off, and if I re-cut the old key they worked. Just a small sliver of cutting was needed.
I outlined many of the expenses that came up in March in a previous post. I am hoping I can get by with limited expenses for a few months. Air conditioner problems are next, along with the standard fixes.
This is a busy time for turnovers, but it appears my revenue continues to go up. That is the beauty of rental income, it is somewhat inflation protected. As i get closer to my leaving my full-time job, this is a bonus.
What is your cash flow like? Are you ready to be a landlord? Do you have other means of passive income that has a built in COLA?