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.
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.