Many readers have emailed me asking how I find my real estate deals. Often, readers share their struggles of how they cannot find good deals. Sometimes readers even say there are no deals. This is a limiting belief. Deals are always out there if you are willing to look. With that said, I also share in my readers’ frustration as finding a good deal is not always easy – If it was easy, everyone would do it. Though, nothing worth having ever came easy.

This post will cover the following:

• Understanding real estate cycles
• How long real estate cycles last
• Phases of real estate cycles
• My experience with real estate cycles

Part II, Selecting a Real Estate Strategy, covers:

• Real Estate Strategies
• Setting your real estate goals
• Making sure your strategy aligns with your goals
• Specializing in real estate investing

Part III, will cover Finding deals:

• My approach to finding deals
• Creating your criteria for deals
• How to look at deals differently than the competition
• Overcoming Analysis Paralysis

Understanding Real Estate Cycles

Being a successful real estate investor requires finding deals. You cannot be a real estate investor if you never buy a property. The real estate market ebbs and flows and will continue to do so. Depending on where we are in a real estate cycle, finding a good deal may be easy or very challenging.

Understanding real estate cycles is important if you want to play the real estate game. There are always good deals regardless of where we are in the real estate cycle. My mentor always reminded me that he bought his best deal at the height of the market. That’s right – he bought his best deal just before the market crashed in 2008.

Today, he laughs about this when he reminds me of this factoid. His success was a direct result of sticking to his fundamentals. My mentor invests for cash flow. He does not buy to speculate about appreciation – he buys for cash flow.

How long do real estate cycles last?

Research from the past 200 years suggests the average real estate cycle is 18 years. Some cycles may be longer while others may be shorter. However, on average, a real estate cycle lasts for 18 years. The table below summarizes the history of real estate cycles:

As you can see, most real estate cycles last about 18 years. There are two notable exceptions. First, the Post World War II expansion which was one of the greatest economic expansions in history. And second, the ‘bust’ in the 70s where the Federal Reserve doubled interest rates to tame inflation. Otherwise, 18 years is pretty much the standard.

Phases of real estate cycles

During a cycle, the real estate market will experience a boom and a bust. The ‘boom’ part of the real estate cycle consists of two concepts – recovery and expansion. The ‘boom’ times usually last for 15-16 years. This is where property values rise, confidence increases, and developers build which increases supply. The ‘bust’ times usually last 2-3 years. During bust times, property values are usually in free fall and it’s a buyers market.

My experience with real estate cycles

My love affair with real estate began in 2013 when I was searching for my first property. I checked out a few homes, found a place I liked and submitted an offer. My offer was accepted and I had the property under contract. After the home inspection, I decided to walk away. The inspector discovered a mold infestation in the attic. The roof and all the support beams were rotted out and needed to be replaced as well. I would’ve walked into a money pit.

The property I walked away from was inspected in November of 2013; I paused my search to enjoy the holidays with family.

After an enjoyable holiday season, I was revved up and ready to go. I bought my first property in early 2014. The home was located in a working-class neighborhood and had three bedrooms and two bathrooms. There was nothing fancy about the place and many would consider it a ‘starter home’.  I was house hacking to keep my cost of living low; this allowed me to save a ton of money.

The best deals occurred between 2009 and 2012. During this time frame, many short sales and foreclosures (bank owned properties) took place.

However, deals were still easy to find during 2013 and 2014. I was fortunate to enter the market at a good point in the real estate cycle. By this point, we were probably past ‘Phase I’ and in the early stages of “Phase II’. Property values were still below pre-recession highs. Banks were lending again and the rental market was strong.

After enjoying modest success at my first property, my doctor confirmed that I was infected with the real estate bug. Rental Property #1 was great and significantly reduced my housing expenses. I was paying ~$400/month to own a home in the Washington, D.C. area. The alternative was renting a 1 bedroom apartment for $1,500/month (likely more).

However, I lacked cash flow and was paying to own my property every month. I wanted to be paid. Cash flow, I discovered, is the most important factor in real estate investing.

In 2015, I began looking for another property to buy. The first and most important factor in my search criteria was cash flow. While my first property lowered my living expenses I wanted to get paid while house hacking. This would also allow me to live for free. Actually, I would get paid to live.

The real estate market was booming in 2015. Prices were increasing and in some instances skyrocketing. My search began by looking at duplexes, triplexes, and quadplexes. Locally, developers were having a field day converting these types of buildings into for-sale condos.

Properties were receiving a dozen or more offers and selling above asking price. In fact, many buyers were submitting all cash offers. My offers’ were contingent on FHA loan financing (low down payment) and would take about a month to close. As a result, my offers were not appealing and many sellers overlooked them.

Fortunately, I found an old, rundown rowhome in an up-and-coming neighborhood. The property was listed at an obscenely high price – mind you this was when I found the listing. The listing agent had already cut the asking price three times. My agent and I put our heads together and submitted a lowball offer.

To my surprise, I received a call from my real estate agent the following day. He informed me my lowball offer was accepted. I was shocked, fearful, and then excited. You see, the purchase price was on the high end of my comfort zone. The property needed a full renovation and I had limited funds. Between a 203K FHA Loan, and maxing out three no-interest credit cards I was able to pull off the renovation.

I moved into the new property, elected to live in the smallest room, and rented the remaining rooms. I was living for free. Better yet, I was actually getting paid about $1,500/month after all expenses and the mortgage to live in my own house. This allowed me to quickly pay back my credit card debt.

In 2016, my desire to own cash flowing real estate didn’t fade. The DC real estate market was hotter than ever. The city was still booming and property values continued to trend upward. Based on my experience, I would say we were nearing the peak of ‘Phase II’ in 2016.

I submitted several offers that year and lost several bidding wars. Heck, I even had the highest offer on one property. However, the seller selected a lower, all-cash offer. I was shut out in 2016 and unable to buy a property.

I opened up a HELOC (home equity line of credit) at the end of 2016 and had been saving aggressively for over a year. With a mountain of cash behind me, I was ready to make a deal. I still desired more cash flowing real estate. 2017 would be my year; I was determined to find a (good) deal.

Property values continued to rise. At this point, the more well-established neighborhoods no longer provided quality investment opportunities; the returns disappeared. Some of the ‘up-and-coming’ neighborhoods were becoming too expensive as well; returns in these neighborhoods were declining.

This led me to look in new areas. I wanted to be in the next hot market. I decided to explore on the fringe. I sought places that everyone would want to be in one, three or five years.

After educating myself on the upcoming development trends, I identified a few neighborhoods with potential. This served as a great strategy as I closed on rental property #3 in the first quarter of the year. The duplex was modestly improved and rented out a few months later.

Towards the end of the year, I got a notification on my phone which turned out to be a pleasant surprise. The notification informed me a property I saw earlier in the year was back on the market. This triplex was under contract for a long time but the buyer was unable to close. The seller was fed up and relisted the property.

This is where I stepped in and bought rental property #4. The property has been like a redheaded stepchild (no offense to my ginger friends). The renovation went well and the property was ready to go in less than 60 days. However, the property sat vacant for over 9 months as the city made me jump through unnecessary red tape.

You see, DC has shotty recordkeeping and had no documentation of the building. They claimed the property did not conform to the zoning ordinances. Long story short – they were wrong and I was right. The property is now humming along but it took most of 2018 to stabilize the property.

I was intentionally out of the market in 2018. I had bought two properties in less than six months the previous year. My cash reserves were depleted, I was focused on getting rental property #4 up and running, and I needed to repay my HELOC. The real estate market still moved forward in 2018 as prices climbed to record highs. There was less inventory to go around. Increased interest rates also sidelined some would-be buyers.

As we enter 2019, many people are concerned about a recession. Likewise, many are concerned about real estate prices and think we are due for a pullback. Candidly, we are a bit ‘long in the tooth’ as the United States’ economy has experienced one of the longest economic expansions in history. We are probably near the peak or in ‘Phase III’. However, the real estate market may not slip into ‘Phase IV’ for a few years.

I am still actively looking for new real estate deals and have submitted multiple offers this year. However, many deals do not provide appealing returns. Given that we are probably late in the current real estate cycle, it’s more important now than ever to stick to fundamentals. Do not forget that cash flow is king. Don’t do a thin deal or leave yourself little room for error.

The economic data suggests the economy is on stable footing. Don’t let the fear-mongering media convince you otherwise; their job is to drive ratings and attract eyeballs. Based on the 18-year cycle theory, we shouldn’t expect a real estate correction/pullback until 2024.

If you are struggling to find, its probably because of where we are in the cycle. Keep in mind that every market is different and that there is always a deal out there. A few years ago I might’ve looked at 8-10 places before finding a quality deal. Today, I scan dozens of deals before finding a quality investment opportunity.

Stay tuned for part II… where I will cover how I find my deals

Flashback to when you were a senior in high school or college. Do you remember the second half of the year or final semester? Did you get that itching feeling where you were ready to be done?

I believe many referred to this as senioritis.  Common symptoms include but are not limited to lower grades, not completing assignments, cutting class, laziness, lack of motivation, and finding it difficult to get out of bed in the morning.

I definitely caught this bug in high school and college.

I vividly remember all of these symptoms. Skipping class was a regular event in high school. I skipped so much class that I was reported for truancy; this almost resulted in legal action by the school/county. I knew skipping class was wrong but my friends and I still checked out of school.

High School Senioritis

We had senioritis and we had it bad. It got worse as the weather got warmer. We would play hooky from class any chance we got. Our go-to adventure was a day trip to the rope swing in the afternoon. This was a cool outdoor spot that we converted into the ultimate ‘bro spot.’ This place was equipped with fishing equipment, a fire pit, benches we made out of logs, and a rope swing that would carry us out into the middle of the creek.

We often found ourselves at the bro swing during the middle of the day or after school. Casually swinging into the water, lazily lounging around in a hammock, and occasionally sipping on a beer was common practice. No thoughts of school and not a care in the world. Life was great and we lived in the moment.

At this point in life, I was doing the minimum to get by. To say that I was checked out was an understatement. I was mentally done with high school and ready for the next chapter of life. College, parties, girls, and freedom. Pretty much anything but that essay for my high school English class that I had not started.

Unfortunately, my senioritis got the best of me. I had to take a course over the summer to officially graduate.

College Senioritis

I also remember the exciting feeling of the unknown associated with the next steps in life. During high school, it was moving out of my parents’ house, moving away and attending college. Making new friends and saying goodbye to old friends. Not having to follow any rules. Better yet, setting my own rules.

Stay up til 4:00 am when I have an 8:00 am a lecture? You bet.

Feel like sleeping in until an ungodly hour? Check.

Learning that every action in life has consequences? Sometimes the consequences are good and other times they are bad. Learned that too.

College is often a great place to learn both academic and life lessons. Personally, I made many mistakes and experienced many growing pains as a college student. I made some expensive mistakes like failing out of college… Twice.

I also learned many life lessons and gained academic knowledge while in college. After a few years of trial and error, I finally got the hang of this ‘school thing’. I transferred to a new school and got my shit together. This was reflected in my improved GPA and graduating near the top of my class.

But… senioritis seemed to make a comeback my last semester of college.

During my senior year of college, that exciting feeling returned. This was accompanied by listening to “Graduate” by Third Eye Blind on repeat and full blast.  The next step in life was ‘becoming an adult’ or ‘adulting’ as the kids call it these days.

My concentration waned that final semester. I kept most of my grades up but definitely slacked off towards the end. The seniors (my self included) were definitely having more fun than we probably should have; I have no regrets about my decisions.

Leaving the academic world and creating the life of my dreams awaited for me. The economy wasn’t in the shitter anymore, but things still weren’t great. I had applied to almost 100 jobs with no luck.

Thankfully, I found a job shortly after graduating with the assistance of the school’s President; he was kind enough to refer me as ‘his best student’ to a local employer. Since then, I’ve been in hustle mode.

Also see: Negative Net Worth to Over $500,000 in 4 Years

Introducing Senioritis FI

Warning: Symptoms of Senioritis FI may include a decline in work ethic, increased apathy in the workplace, increased daydreaming of financial independence, planning more vacations, drafting an exit plan, less motivation, and that unmistakable feeling of being ready to be done.

Today, I feel like I’m in the final semester on my path to financial independence (FI). I’m mentally checked out and ready to be done with Corporate America. Every day, notwithstanding the crazy market conditions, I am blazing closer and closer to financial independence. FINANCIAL FREEDOM.

I have that itchy feeling of Senioritis FI. My desire to work hard or even work at all is dissipating. Getting out of bed some mornings is a struggle. It’s challenging to keep my work ethic up some days. Heck, I might’ve even played hooky from work a few times.

I am not financially independent yet, but I am close-ish. There is definitely a light at the end of the tunnel. Most months, my rental properties provide enough passive income to support my spending habits and lifestyle. But, my emergency fund is light (thanks rental property #4), most of my investments are in retirement accounts, and I still need to build up a buffer.

Yet, part of me longs for a gap year like Noah and Becky took last year. Check out their year-long adventure here. Or maybe do something cool like Chad Carson’s 17-month adventure with his family in Equador which you can see here.

Or wouldn’t it be awesome to move abroad like Jim; he retired at the end of last year and heading to Panama with his family. Maybe cruise around the states in an Airstream like Steve and Courtney. Better yet, I could be reunited with my love (the mountains), go hiking and play with dinosaurs like Carl.

My work is no longer fulfilling. I am tired of battling with burnout and am ready for a change. I am ready for some downtime and to focus my life energy on meaningful and fulfilling activities.

Though I have not achieved financial freedom, I am confident that I could survive a long time without much financial pain. I am leaning towards taking a gap year (or longer) to decompress and enjoy life. Traveling the globe and knocking out bucket lists items while I am still in my twenties sounds very appealing.

But what if I cannot get another job with similar pay? That’s ok. Do I enjoy my six-figure income? Sure. But I was able to get by on less than half of what I make now. I don’t need to make $100k+ a year to survive. I was able to save money on an entry-level salary. Also, I have my real estate income to fall back on now – which I didn’t have 6 years ago.

What if you can’t get another job? Well, that’s a risk I am willing to take. I am willing to bet on myself, my drive, and skill set. I think someone would be willing to employ me again if I needed it. Would it be the same type of work or pay? Maybe not, but I could get by waiting tables or flipping burgers. This is kind of like BaristaFI.

At a minimum, some may say I am Lean FIRE and able to cover all the essential expenses. I am definitely not Fat FIRE like some. Candidly, I don’t know if I ever need to be Fat FIRE as I have never spent that much in a year.

Maybe I will give into my Senioritis FI and pull a fuck it FI (FIFI) like my friend Miss Mazuma.

Or do I suck things up for another year? And add plenty of cushion in my financial freedom plan and retire at the ripe age of 30? Or perhaps I find a way to overcome burnout, learn to deal with Corporate America, and keep working for a while.

Like college, and high school before that, I don’t know what I am doing next. The thought of the unknown both terrifies me and excites me. One thing I know for sure is I’ll be ok because of the work I’ve already done. Decompressing and enjoying life is high on the priority list.  I look to knock out some bucket list items and catch up on some much-needed travel. Full-time entrepreneurship also excites me; the thought of syndicating apartment buildings would get met out of bed in the morning. I also have some non-profit/philanthropic endeavors that have been sitting on the backburner for years. Stay tuned.

 

As many of my readers may know, I love dividend stocks and believe dividends provide a great source of passive income. Quarterly, I provide updates regarding my dividend income, dividend goals and if I buy dividend stocks.

Using ‘The Dividend Report‘ section of my blog, I share the progress of my goals. I also share dividend growth stock ideas and thoughts. Additionally, I will share the rationale behind any future purchases or sales. Dividends are truly a wonderful thing.

The Dividend Report

For over two years, I have been working towards the same goal. I want my average dividend income to provide $1,500/month. As I solidify my path to financial independence, I want dividends to be 25-33% of my monthly retirement income. This goal may be revised upwards over time. I track my dividend income with Personal Capital and store the data on a Google Sheet.

In case you were wondering, real estate provide the rest of my retirement income.

Q4-2018 Dividend Income

I’m pumped to share this dividend report with you. Quarter 4 of 2018 (Q4) marks the end to another year. This means a lot of things.

I now have 6 years of dividend data! I cannot believe I’ve been tracking my progress for so long. It’s fun to watch the progress I’ve made over time.

My portfolio also generates the most income in Q4. A few of the funds I own pay larger dividends at the end of the year in addition to their regular payment.

This was a great year for my dividend income as many of my stocks’ increased their dividends as well.

The graph below shows my dividend income history since 2013:

The table below shows my dividend history since 2013:

2017 Dividend Income vs 2018 Dividend Income

This year my total dividend income was $4,990.77. Last year, in 2017, I made $3,651.28 from dividends. That means I made $1,339.49 more this year from dividends. This is a 36.7% increase; I am pleased with my growth. The best part? I sat on my butt and didn’t need to lift a finger to earn an extra $5k.

There are three main reasons for the increase. First, I maxed out my 401k for the third year in a row. Regularly contributing to a 401k is one of the 6 steps to a 6-figure net worth.

Second, I continued buying index funds every week in a brokerage account and opportunistically bought dividend growth stocks.

Third, 18 of my 19 stocks increased their dividend payout. This means each share I own now pays me more for owning the same great company. How awesome is that? We will dive into this in greater detail.

The table below summarizes the increase in individual dividends for the past few years:

As you can see in the table of above, many of the stocks increased their dividends by a large percentage. In fact, most increases were well above inflation (AT&T, Allergan, BP, and Verizon being the laggards). This means even after inflation I am earning more every year. Dividend growth stocks provide many benefits.

Oh, and the astricts next to GLOG is meant to indicate the stock provided a special one-time dividend of $0.40 per share in addition to its regular dividend payments.

My average monthly dividend income is now $415.90 ($4,990.77 / 12 months = $415.90), which is 27.73% of my goal of $1,500/month.Previously I was at 20.28% of my goal. I hope to build off this success and get even closer to my goal in 2019. Last year, I shared my stretch goal with you – this was to hit my goal of $1,500/month by the end of 2019. Candidly, this will be near impossible. However, I will continue to offensively build wealth and invest regularly.

This quarter vs. last quarter

My Q4-2018 dividend income was $2,458.38. Last quarter (Q3-2018), my income was $1,051.55. This is a $1,406.83 or 133.79% increase from the previous quarter. The large increase is misleading for a few reasons. A handful of my funds do not pay a dividend in Q3. As a result, the same funds pay (multiple) dividends in Q4. Some of the funds also provide a larger dividend in Q4.

Q4-2018 vs Q4-2017

Last year’s Q4 dividend income was $2,092.46. This quarter I earned $2,458.38. This is $365.92 or 17.49% more compared to the same time period last year. Imagine if your job paid you 17% more this year.

New Purchases

I made three individual stock purchases in Q4-18. As many of you were probably aware, the market experienced extreme volatility at the end of 2018. I found this as a nice Christmas gift to long-term minded investors.

AT&T – As I mentioned in the last Dividend Report, I was interested in AT&T. Well, the market continues to bash the telecom giant. Shares continued to tumble in the 4th quarter. As a result of the declining stock price, shares of AT&T yield almost 7.0%. This dividend caught my eye.

I spent a lot of time sifting through the company’s earnings reports. I extensively analyzed their balance sheet, statement of cash flows, and debt schedules. The many are worried about the company’s ability to repay/pay down their debt. AT&T’s dividend payout ratio is approximately 58%. This means the company has almost 40% of the free cash flow to pay down debt or invest back into the company. Management has stated their intentions of deleveraging the company. The company also stated during their last earnings report that they expect a modest increase in free cash flow.

I am willing to ride out the storm with AT&T. I believe their recent acquisition of Time Warner (now referred to as Warner Media) will provide organic growth. The telecom giant has morphed into more than just a phone company. I believe they will play a pivotal role in the ‘Streaming Wars’ with Netflix, Disney, Amazon, and others. Likewise, AT&T also has strong potential for international growth (mostly Central America).

I bought 200 shares of AT&T during Q4.

MSFT – Microsoft. This is probably a name that everyone knows. Tech companies were among the hardest hit names during the recent market decline. Mircosoft is one of the best technology companies out there. They are also a leader in the cloud space. The company has excellent management, a great balance sheet, and well position for the future.

I purchased 10 shares in the mid-90s during the recent pullback. The stock quickly rebounded but would like to add more on any pullback.

AMZN – Amazon. If you don’t know this company you probably live under a rock. Amazon is a company that needs no introduction. The company is everywhere, growing like a weed, and disrupting several industries. The company does not pay a dividend and may not pay a dividend for a long time. This, as you may know, is a deal killer for me. The stock was trading over $2,000 a share in 2018. During the fourth quarter pullback, the stock briefly dipped below $1,400/share. I believe in the long term viability of the company, their ability to increase revenues, and earnings. I do not like owning stocks that do not pay a dividend. However…

I purchased 1 share of Amazon. Let the good times roll.

 

Well, 2018 is in the books. Last week I shared with you the Landlord Report for December of 2018. This week, its time to reflect and look back at all of 2018. I truly believe having a side hustle is a must if you want to offensively build wealth. Expenses can only be cut so much but you can always EARN more.

Speaking of earning more, my rental property portfolio helped me earn more in 2018. Some may view this as part-time work. In some regards, they are right. The table below outlines my rental property portfolio’s performance for 2018.

My rental property portfolio earned $26,662.49. This means I put over $2,000/month in my pocket on average after all repairs, expenses, utilities, taxes, insurance, and my monthly mortgage payments. Not bad for what many consider ‘part-time work’.

My tenants kindly paid down my mortgages every month. In fact, they helped me build $25,711.42 in equity during 2018; this assumes the value of my properties did not increase or decrease. Candidly, most of my property values probably increased. Though, since I am not a seller, I do not care too much about what people think my property is worth.

However, over time, as my tenants continue to pay down my mortgages, I will build substantial equity in my properties. This will allow me to either refinance or use a home equity line of credit to pull cash out of my properties. The best part? This will be tax-free money.

Diving into the numbers

Now, the numbers for 2018 are solid but also potentially misleading. The numbers for rental properties 1, 2 and 3 reflect a full year. All three of these properties have been stabilized for a while and provide predictable income.

The numbers for rental property #4 only reflect 7 months of operations. During that time, the property experienced elevated expenses like one of the HVAC systems needing to be replaced. Rental property #4 also experienced higher vacancies than normal as the property was in lease-up. The property also struggled with a non-payment of rent issue from one of the tenants (the eviction saga that’s near its end).

Looking forward to 2019

Looking forward to this year, I anticipate rental property #1, 2 and 3 to have similar years. However, rental property #1 and 2 will probably have higher expenses; 2018 was a blessing with few repairs.

Also, I expect rental property #4 to stabilize this year. Rents should remain steady and the property should provide positive cash flow. Between all of my properties, I will likely earn over $40k from cash flow while my tenants pay down about $28k of my mortgages.

Behind the scenes

There is also a lot of ‘behind the scenes’ work I do not share in my monthly reports which can be found in real estate corner section of my site.

I spend a lot of time meeting with brokers and other real estate investors. Driving neighborhoods and analyzing deals takes up countless hours of time. I also spend time with mastermind groups and networking with other real estate professionals. I attend networking events and conferences. I am developing a network of investors who may want to invest in future deals. Likewise, I am meeting with attorneys and accountants to help round out my real estate team.

These hours are not necessary for running and maintaining my current rental portfolio. However, these hours are crucial to my success. You see, I am constantly looking for growth as an individual and as a real estate investor; I am looking to grow in every aspect of my life.

Time and Money in real estate investing

I view real estate as means to an end. My rental property portfolio is not only as an investment but also a business – a business that I want to grow.

In many ways, real estate investing is a lot like a startup. Most startups require a lot of time, money, and energy to obtain growth. You have to build something from scratch. Tech employees are rewarded on the backend with stock options that materialize through an acquisition or when the company goes public.

Real estate investing requires intensive time, energy, and money up front similar to a tech startup. First, you need to educate yourself on real estate and then learn the market(s) you want to invest in. You will need to look at dozens or even a hundred deals sometimes before you find a worthwhile property. You also need to build a real estate team that will allow you to actually take down the deal. Then you may need to renovate or reposition the property for it to be successful.

Likewise, you probably won’t make a ton of cash up front. You will have closing costs, possibly renovation costs, repairs, and any other expenses associated with the property. Over time, your earning will increase but your time commitment will likely decrease. The end result should be a property that provides (mostly) passive income and strong cash flow.

Summary

In summary, 2018 was a solid year. I am very grateful for a good year of building equity and collecting cash flow. 2019 is set up to be an even better year as all four properties should be stabilized.

I am committed to continued growth in all aspects of my life, including real estate. At some point in the future, I would like to break into the commercial real estate space. I would like to buy an apartment with investors and continue going my portfolio. Putting deals together is fun for me; I find it exhilarating. This may be something I do occasionally once I leave my day job. Or, perhaps the right deal will allow me to leave my day job.

My rental property portfolio enjoyed the holiday season. This month was light when it came to repairs & maintenance requests. Progress was also made in the on-going eviction Saga at rental property #4. In general, 2018 ended well for my rental property portfolio.

The Landlord Report – December of 2018

Hello there – welcome to another “Landlord Report”. This monthly report shares 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’. I may include repairs, how I avoid vacancies, how I screen new tenants or any other items that pop up. This report will share how I made or lost. I will also share what kind of time commitment was required for being a landlord. I want to show the world being a landlord is a wonderful thing.

Throughout this process, I will 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.

I hope you follow along with this monthly series. The Landlord Report can serve as a guide to owning rental property. 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:

As you can see, December was a profitable month. This month was not quite as lucrative as last month (November 2018) but still one of my best months when considering the cash flow. I made over $3,800 after my expenses and mortgages were paid. My rental property portfolio produced income while still incurring expenses (more on that in a bit) and struggling through an eviction where a tenant is not paying rent (more on that too).

I cannot wait for the eviction saga to be over; rental property #4 is about to turn the corner. Rental property #1 and rental property #2 enjoyed a perfect month. Rental property #3 and Rental property #4 had a few minor expenses and items worth discussing. Being a landlord is not all sunshine and cash flow. But! I still love being a landlord. Below you will find a detailed account of what happened at each property this month.

Rental Property #1

The Starter Home

Things were absolutely boring and easy with rental property #1. I never heard a peep out of the tenants and there were no repair or maintenance items this month. The tenants paid their rent in full and on time. I collected the $2,325 on my way home from work. This costs me about 15 minutes of my time.

Rental Property #1 Summary

In summary, rental property #1 – earned $356.76* earned and I spent about 15 minutes managing the property.  My mortgage debt dropped by $727.98 from my monthly mortgage payments. When considering the principal reduction, I came out ahead by $1,084.74.

*Remember – this is an accidental rental that I plan to live in during FIRE.

Rental Property #2

The Fixer-Upper

Rental property #2 had a perfect month. The tenants paid their rent of $4,050 in full and on time. Rent collection required me walking downstairs to get my morning cup of coffee. Does life get any easier than that?

Rental Property #2 Summary

In summary, rental property #2 – earned $1,414.89**. I spent about 1-hour managing rental property #2 this month. My mortgage debt decreased $753.06. When factoring paying down my debt, rental property #2 made me $2,167.95. Not bad for about a couple of hours of work. Oh, and I got a free place to live.

**I also live in the house and get paid to live here. Pretty sweet right? House Hacking is awesome.

Rental Property #3

My Duplex

Things at rental property #3 were relatively quiet this month. There were no repairs for the property. Utilities were the only expense. I imagine the gas bill will spike for the next three months now that its winter. Looking forward to when I have new tenants so that I no longer have to pay for gas. 

Utilities for the property:

Gas Bill: $182.29

Water Bill: $210.34

Electric for unit 2: $60.23

In summary, rental property #3 – made $1,363.06 and I spent about 30 minutes of my time managing this property. Rental Property #3’s mortgage debt also decreased $423.22. When factoring in paying down my debt I made $1,786.28.

Rental Property #4

The eviction saga continued in December. As expected, the tenant in unit #3 did not pay his rent by the 5th day of the month. This was a violation of our agreement from mediation and caused me to file for a Writ of Restitution the following morning. Our court date was set 10 days later. 

Flash forward to our court date – I accidentally went to the wrong courtroom. Doh! However, thankfully this did not hinder my ability to take legal action or keep things moving forward.

After finding the correct courtroom, I discovered the tenant did not show for our court date. The judge listened to me stumble through all the legal jargon, took pity on me, and granted the Writ of Restitution. This means that I officially have the courts blessing to evict the tenant. This also means that the U.S. Marshalls will be assisting in the matter.

I was required to return to the courthouse two days later to file two forms. This was a quick trip that took about 15 minutes. However, I would need to return the next day because the court records were updated in the system yet. Returning the following day, the system still was not up to date. 

After sitting around for about three hours, the clerk called my name. I approached the gentleman to find all my paperwork was in order, I was granted the Writ of Restitution, and that I should expect a call from the U.S. Marshalls in early January. 

At last, the eviction battle was over. The end is near and the punk who willingly does not pay his bills will be removed from my property. I small victory but a modest financial loss. I look forward to providing an update (hopefully) in January about the tenant being removed from the property. The eviction saga is not quite over yet – but we are getting there.

Despite the pain and headaches caused by tenant #3, rental property #4 is still throwing off a bit of cash flow. The property produced cash flow even after a repair and the standard utilities. The plumbing stack for the building backed up and required a 50-foot snake. It appears that one of the tenants put some sort of cloth, napkin or paper towel down the drain. 

Otherwise, there is nothing to report except for this month’s utilities.

Minor plumbing repair:

Total cost: $350.00

Total time: 1 hour

Utilities:

Water Bill: $173.60

Common area electricity: $43.59 

In summary, rental property #4 – made $670.02 and I spent about 15 hours of my time managing this property. The property will be more profitable once it’s fully leased. Rental Property #4’s mortgage debt also decreased $444.70. When factoring in paying down my debt I made $1,114.72.

Portfolio Summary

In summary, I spent about 16 hours and 45 minutes of my time maintaining my rental property portfolio. Most of the time commitment was from the ongoing legal battle with the tenant at rental property #4.

In December, my rental properties made $3,804.73. I made $227.15/hour being a landlord. Being a landlord is provides one of the best dollars per hour sources of income. I expect things get even better once I resolve the non-payment of rent issue.

My mortgage debt decreased $2,348.96 in November. Gotta love having tenants pay off over $2k of my debt every month. Factoring in repayment of debt and cash flow, my rental properties made $6,153.69. So, I made$367.38/hour. 

Being a landlord and owning a rental property portfolio is a great way to build wealth. What is your excuse for not owning rental property?