The Landlord Report – October 2017

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.

 

landlord

 

The table below outlines all my income and expenses for the past month month:

The Landlord Report

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

The Starter Home

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.

The raccoon tore apart two of the HVAC ducts and made a mess of the insulation

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.

A hole in the roof that is technically on the neighbor’s side.

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.

Installed a one way door to let any future visitors out.

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

The Fixer-Upper

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

Portfolio Summary

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.

 

14 thoughts on “The Landlord Report – October 2017”

  1. For all that headache, I’m impressed your balance sheet is less than $1k in the red! I’m sorry, but I had to laugh with the raccoon predicament. It sounds like one of those completely frustrating yet hilarious (in hindsight maybe?) situation. I hope November bodes a bit better for the properties… thank you for sharing the ups and downs of being a property owner!

    1. In hindsight it’s hilarious! The raccoon drama *knock on wood* is finally over. Though, I still dislike those furry demons.

      Always happy to share what it’s like to be a landlord. I am not some guru trying to sell anyone on instant riches. Just trying to show what it’s ACTUALLY like to be a landlord.

      Thanks for reading

  2. Those damn leaky garbage disposals! At least you didn’t get called in to fix that one haha 😉

    That’s super frustrating that it was your neighbors’ refusal to take care of their property that caused a raccoon issue for you. Glad the intruder was caught fairly quickly and hopefully that’s the last pest you have to deal with for a long time!

  3. I’ve been reading your blog for a few months and am a firm believer of creating supplemental wealth through property management. I’m also a home owner in the Falls Church, VA area and have an investment property in my hometown of Ames, IA; both homes have been treating me very well. The other day I listened to a podcast from ChooseFI and they talked about home ownership being the worst investment one can have. The things they talked about didn’t seem to make sense and I’m still trying to wrap my mind around their theory. They also talk about the math supporting their claim however, I have a degree in mathematics and all my calculations show (multiple) home ownership(s) as being a great way to supplement ones investment portfolio. Have you or any of your readers heard this from ChooseFI? I’m looking for reassurance that I’m not missing something. In addition, I have a few questions:

    1. What spreadsheet do you use to keep track of all your home finances?
    2. How do you go about finding the right repair tech for all your home needs?
    3. Have you considered creating a local meet-up for like-minded individuals to share ideas w/ regard to FIRE and house hacking?

    1. Stefan thank you for reading. Like you, I am a big fan of owning real estate. I am also a big fan of the ChooseFI podcast. Did you also listen to the roundup episode after the episode, “The Cult of Home Ownership & Crushing Gioarbitrage”? The round up provides a great explanation on home ownership vs investment real estate. I agree with ChooseFI that home ownership sucks as an investment. However, investment properties that provide strong cash flow are great. Check it out – happy to discuss in greater detail.

      1. I have a spreadsheet that I created. No frills but it gets the job done.
      2. Mostly word of mouth. Referrals are great in this industry. If you do not have any referral sources – you can always check out angie’s list or yelp etc.
      3. We actually have an unofficial DC area FIRE/Personal Finance blogger group that meets up every month or two. Shoot me an email if you are interested in attending.

  4. Great report! And yikes, RE isn’t for us but I’m so jelly you like it! Any advice for handling the stress?

    We’re realizing that slowly that we are not landlord material. Everything has been hunky dory but I still hate managing the property. That’s usually not a good sign huh? We’ll likely sell next year so we can write, travel, sleep in etc.

    1. Yoga and meditation are great for stress. Not everyone is meant to be a landlord. Have you considered hiring a property manager?

  5. Sorry, but I laughed about the raccoon napping in the bathtub. Glad you got rid of him though and I hope you’ll have no more issues. We are only a couple months in to the landlord thing so no issues as of yet, but we do need to replace the furnace and a/c soon. Thanks for sharing your report!

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