This past month was my most trying month as a landlord. When it rains it pours and it was like a hurricane in October 2017 for my rental property portfolio. Too soon for a hurricane joke?
I had the privilege of dealing with raccoons, never ending plumbing problems, and my first vacancy in years. If that was not enough, I also was blessed with an HVAC furnace needing to be replaced.
Yet, despite all the headaches and ‘nightmares’ – I STILL love being a landlord. This month was not great for my cash flow. In fact, I took my first ever loss. This month’s landlord report demonstrates the importance of keeping a cash reserve, building a real estate team, and that most problems are easily solved with a phone call.
However, there was one bright spot this month. I have a new property under contract and am scheduled to close on rental property #4 in November. Yeah, thats a thing now.
My real estate empire will soon consist of four properties (7 units total). I look forward to sharing a multi-post series on rental property #4.
The upcoming series will share everything from start to finish. Some highlights include analyzing the deal, getting the property under contract, renovations and leasing the units.
Digressing back to the horrible month of October….
The Landlord Report- October 2017
Hello there – welcome to another “Landlord Report”. This monthly report will share my experiences as a landlord. The report will show EVERYTHING related to my rental properties and life as a landlord….
I will discuss the rents that I collected, mortgage payments, and other ‘landlord items’. Other topics may include repairs, finding new tenants and any other items that might randomly pop up. The report will also share how much money I made and the amount of time (hours) I spent. I want to show the world being a landlord is a wonderful thing.
Throughout this process I aim to be as transparent as possible. Being a landlord and owning rental property is a wonderful way to earn (mostly) passive income and allow you to buy back your time faster. Please feel free to contact me with any questions – happy to provide insight.
The table below outlines all my income and expenses for the past month month:
As you can see, October was a
bad horrible month for my rental property portfolio. While it pains me to share this information, I am also glad that I finally have a chance to share some of the less appealing sides of being a landlord with all of you. Being a landlord is not all sunshine and cash flow.
Below you will find a detail account about what happened at each property this month.
Rental Property #1
Rental Property #1 Summary
Rental property #1 by far caused the most headaches this month. The property enjoyed a visit from a raccoon, experienced plumbing problems and a vacancy.
Rental property #1 was invaded by yet another raccoon. The bastard did a number on the attic as well; he destroyed two HVAC ducts and had fun tossing all the insulation around. This cost a pretty penny. If you are a visual learner, you will enjoy the pictures below.
If that was not enough, he decided to visit the rest of the house. Yes, he found a way to get into the main house from the attic. The furry fella then helped himself to the food on the kitchen counter. After a nice midnight (actually 2:30am) snack, he retreated for a nap in the bathtub.
Thankfully, the tenant was able to shut the bathroom door. By placing a simple call into animal control, the furry
critter demon was removed from the house at no charge.
Unfortunately, the raccoon left a trail of destruction at my expense.
Before going further into details about the damage caused by the raccoon, I would like to take a moment to use rental property #1 as a talking point.
This property is half of a duplex, which means I share a roof and walls with the owner next door. Personally, I recommend avoiding situations where you may be sharing a roof with another owner. I also recommend avoiding any property with a Home Owners Association (HOA) or an elevator.
The family that owns the property next door are nice people. In fact, the patriarch was the original owner of their home and he passed away earlier this year.
However, the property is not well maintained. Their yard is always over grown, they neglect to make necessary repairs, and the backyard is untamed.
I kid you not, their backyard looks like a jungle full of vines and weeds. Trees are taking over their property which also provide easy access to the roof for raccoons.
Over the past year, I’ve had to persuade the neighbors to buy a chimney cap to help keep raccoons out. They were very reluctant to do so; mind you this was only ~$100 expense.
Well, the neighbors lack of maintaining their home continued to be my problem. Below is a picture of a hole on their side of the roof.
Raccoons were able to use this hole and a gap between the gutters to access both attics. Unfortunately, their neglect became my problem Thankfully, the roof is patched and all access points have been sealed.
Oh, I finally got the neighbors to cut down some of their trees as well. This will make it harder for any critters to get on our roof or into the attics.
The contractor recommended the installation of a one way door. While there should not be any way to access the attic anymore, the door will allow for visitors to kindly leave. I am not into the “Hotel California” attic where my visitors can checkout any time but can never leave.
This looks much better.
Mountains of fresh insolation.
This round of the ‘Raccoon Saga’ set me back $2,510 – not cheap and plenty of headaches. Thankfully, the time burden was minimal and consisted of a handful of phone calls.
If the ‘Raccoon Saga’ wasn’t enough fun for a month, I still have TWO other headaches to share with you.
The kitchen sink was dripping and the repair was above my plumbing skill set. I used an app called ‘TaskRabbit” to source a handyman for the job. The repair was simple relatively speaking but I am not the best of plumbers.
The repairman agreed to show up the next day and the tenant let him in. The task took the repair man less than a half hour and set me back $83.85. Not bad for five minutes of clicking around on a phone.
Oh, and that vacancy I mentioned earlier…. Yeah, I had my first vacancy for the first time in over two years (possibly longer). I blame the vacancy on seasonality as October is a weird time to move. The vacancy set me back $825 for the month.
I found a great tenant to move in mid-November and his lease will run through the end of June. The shorter term lease was my idea since I want to get the room back on the summer leasing schedule. I will also give the tenant an option to renew for a full year.
The house remains rented on a room by room basis and always has been. This is not ideal, however, this occasionally happens when you move out of a house hack. I look forward to the day of having a traditional lease on the property.
In summary, rental property #1 – lost $3,037.09 and I spent about 2 hours managing the property.
My mortgage debt dropped by $699.26 from my monthly mortgage payment. When considering principal reduction, I lost $2,337.83.
Rental Property #2
Rental property #2 caused fewer headaches than rental property #1 this month.
The kitchen faucet had a minor plumbing issue. The cartridge that regulates the flow of water broke.
This was a simple repair that I did myself. The round trip to Home Depot took a half hour and the replacement part cost $28.98. The actual repair also took about a half hour.
In all, the repair costs less than $30 and about an hour of my time. A plumber would likely have costs $75-$100 just for labor.
My business license for rental property #2 expires in November. So, I spent about five minutes online and $198 to renew the license. I will not have to worry about this for another two years.
The tenants paid their rent of $4,000 in full and on time. Rent collection required me walking downstairs to get my morning cup of coffee.
Rental Property #2 Summary
In summary, rental property #2 – earned $1,364.45**. I spent about an hour and half managing rental property #2 this month.
My mortgage debt decreased $718.78. When factoring paying down my debt, rental property #2 made me $2,083.23.
Not bad for less than two hours worth of work. This is what a normal month typically looks like as a landlord. The dollar per hour cannot be beat.
**I also live in the house and get paid to live here. Pretty sweet right? House Hacking is awesome.
Rental Property #3
The fun times continued with rental property #3 this month. The furnace for one of the units decided to die in October.
When I bought the property, I knew both units’ HVAC systems were old and only a matter of time before a replacement would be necessary. As such, I made sure to cash readily available to pay for the replacements.
When my tenant called me, I was not surprised to hear her heat was not working. Thankfully, this phone call was in October and not in the middle of a January blizzard.
This problem is expensive but easily solved. I called my go to HVAC guy and he was able to install a new furnace the next day. The parts and labor costs about $2,500….. ouch.
On a normal month, I would not sweat a one time expense of $2,500 as much. However, given the craziness of October, this expense combined with the other expenses in my rental portfolio hurt.
The property also experienced leaky garbage disposal and backed up kitchen sink while I was at FinCon. A quick phone call to my handyman fixed both of these problems.
In summary, rental property #3 – lost $1,021.07 and I spent about twenty minutes of my time managing this property.
Rental Property #3’s mortgage debt also decreased $403.66. When factoring paying down my debt, I lost $617.41
In summary, I spent about 4 hours of my time maintaining my portfolio of rental properties.
Rental property #1 was a complete nightmare this month.
Rental property #2 was very manageable.
Rental property #3 took little time to manage but replacing a furnace is not cheap.
Overall, this was a brutal month my rental portfolio. You need to be willing to take a few bumps and bruises as a landlord. I still believe being a landlord is great but its not all sunshine and cash flow.
In October, my rental properties provided me with a negative cash flow of $2,693.71.
My mortgage debt decreased $1,821.70 last month which further increased my net worth.
Factoring in repayment of debt and cash flow, my rental properties lost me $872.01.