July was marked by headaches and getting hit with a backlog of invoices from my contractor. Plenty of time was spent getting tenants moved into rental property #4 as well. Oh, and you gotta love when an HVAC system dies in the middle of a heatwave during the 4th of July.
This month might have been the worst month financially for me as a landlord. However, the numbers are skewed since my contractor was slow with his billing.
The Landlord Report- July 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 also share how much money 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, July was a horrendous month for my rental property portfolio. Rental Property #2 was a shining star in an otherwise gloomy month. This month captures a few months worth of repairs. As I have shared over the past two reports, my contractor was slow with his billing. As a result, this report shows some expenses for May, June, and July.
Realistically, the actual expenses from this month weren’t as bad as it seems. However, I still had to pay for all of these expenses this month. Will dive into greater detail below.
Being a landlord is not all sunshine and cash flow. But! I still love being a landlord. This month hurt.
Below you will find a detailed account of what happened at each property this month.
Rental Property #1
Rental Property #1 Summary
The washing machine at rental property #1 was acting up again. I call my go-to appliance repair guy with hopes of him fixing the machine. As usual, he picked up my phone call but I didn’t get the good news that I am used to. He was leaving the following morning to visit his family in Europe for two weeks. He was happy to fix the machine when he got back, however, I have tenants and they need access to a washer.
I was now faced with a challenging decision. Do I search for a new repair guy for this job? Possibly, but it may take a day or two to find someone. Do I bite the bullet and replace the machine? Possibly, but that is expensive. Though, the machine is at least 10 years old and has required maintenance three times in the past year.
For better or worse, I bought a new washing machine. The washer was nearing the end of its life and I did not want to keep repairing the machine every few months. This option should save me time for this ‘repair’ and in the future. The new machine should last 7-10 years and not require maintenance for at least 5 years.
A quick trip to Home Depot and about $600 later, I thought this problem was resolved. The machine was scheduled to be delivered a couple days later while I was in Colorado climbing up some 14ers. Unfortunately, the delivery company Home Depot uses is ran by a bunch of knuckleheads.
The knuckleheads who work for the delivery company are supposed to call 30 minutes prior to arriving at the property. Instead, these clowns called me after being at the property for 15 minutes. I request that they please wait for 5-10 minutes as one of my employees was down the street.
My guy quickly jetted off to the property to handle the delivery, but his efforts were wasted. The delivery guys were already gone. My blood pressure shot through the roof at the lack of professionalism by this delivery company.
To top it off, their customer service was beyond rude and unhelpful. The machine would not be delivered for another 4 days. Meanwhile, my tenants were without a washer for about a week. I told the tenants I would pay for dry cleaning or laundromat expenses. However, they kindly declined.
4 days later, the knuckleheads at the delivery company arrived with the new washing machine. They installed the machine and hauled away the old machine. A huge sigh of relief… This saga was finally behind me and I could move on to bigger and better things…
Except, I got a phone call later that evening from one of the tenants. He told me the new washer was flooding the house. Anger and rage consumed me.
To be clear, I was not mad at the tenant. This was merely a frustration of how long a simple task like replacing a washing machine should be. Rather, my anger was geared towards the delivery company.
You see, the knuckleheads did not install the machine properly. The drain line was not connected to the drain pipe. The lazy delivery guys simply put the drain line behind the drywall.
So, when the washer went to drain the water from the machine, all the water drained behind the drywall. The water had nowhere to go. So, the water pooled up and came out from under the baseboards. This resulted in the utility room flooding. This was a mess I cleaned up. I also properly connected the drain line.
I would like to give a big round of applause and thank you to the vendor Home Depot uses for deliveries.
This process should not have taken much time. The delivery service overcomplicated what should have been a simple process.
New Washing Machine:
Total cost: $601.14
Total time: 6 hours 30 minutes
On the bright side, the tenants paid their rent in full and on time. I collected the $2,325 at the end of a bike ride that ended two blocks from rental property #1. This took an extra 15 minutes of my time.
Rental Property #1 Summary
In summary, rental property #1 – lost $244.38* and I spent about 6 hours and 45 minutes managing the property.
My mortgage debt dropped by $716.60 from my monthly mortgage payments. When considering the principal reduction, I came out ahead by $472.22.
*Remember – this is an accidental rental that I plan to live in during FIRE.
Rental Property #2
Rental property #2 enjoyed a quiet 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 was great to have this month – especially given all the expenses at my other properties.
Rental Property #2 Summary
In summary, rental property #2 – earned $1,414.89**. I spent about 20 minutes managing rental property #2 this month.
My mortgage debt decreased $740.63. When factoring paying down my debt, rental property #2 made me $2,155.52. Not bad for about a couple of minutes 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
July was actually a quiet month Rental property #3. However, I finally received the bill for the pipe that was replaced a back in May.
The grass was not cut this month. There were heavy rains for a week straight at the end of the month. This threw off the normal schedule lawn service for rental property #3. I guess you can call this saving $40.00?
Progress was also made on installing the second gas meter. The new meter rack was installed; this rack and hold two meters. I still only have one meter at the property, however, this process should be wrapped up in the near future.
Total cost: $773.32
Total time: 1 hours 15 minutes
Utilities for the property
Gas Bill: $44.97
Water Bill: $248.47
Electric for unit 2: $76.20
In summary, rental property #3 – earned $672.96 and I spent about 1 hour and 15 minutes of my time managing this property.
Rental Property #3’s mortgage debt also decreased $415.81. When factoring in paying down my debt I made $1,088.77.
Rental Property #4
Wow, so managing rental property #4 this month was like experiencing an earthquake followed by a series of aftershocks. There was one item after another this month. This is not the norm for being a landlord, but occasionally you will have hectic months. I anticipate things will die down as we enter fall.
First, there were several repairs and maintenance items this month. The property is generally in good condition but there is always a learning curve when you have a new property. You will learn a lot about a new property during your first year of renters.
Starting with last month’s tub fiasco, I finally received the bill from my contractor. Parts and labor for replacing the tub were not cheap. However, this was an emergency repair and something I won’t need to deal with for over a decade. My contractor took care of this problem less than 24-hours after I called him.
New bathroom tub:
Total cost: $1,521.17
Total time: 0 minutes (time was recorded last month)
The 4th of July is supposed to be a time of celebration and relaxation. Well, my tenant called me the evening before the holiday the let me know his AC was not working. I stopped by to check things out.
The tenant turned the AC down to 58 degrees which froze the system. As a result, we turned the system off to let it thaw out. I was not able to get my HVAC guy out to the property until July 5th. Let’s be honest, no one is working on the 4th of July.
Well, I met my HVAC guy first thing in the morning. We went on the roof to look at the condenser; he told me it was dead. A new system would cost less than replacing the condenser. The existing system was ancient, parts are scarce and expensive.
I knew the existing system was old and nearing the end of its life when I bought the place. So, I willingly, though painfully, opted to install a brand new system (furnace, condenser etc). This was an expense I was saving for but was hoping for a few months of rent before replacing the system.
This upfront investment will save me future headaches. With routine care and maintenance, the new system should last for a decade or longer. I am happy with my purchase and like taking care of my properties. Even better, my HVAC guy had the system installed the same day. However, the expense could not have come at a worse time.
New HVAC system for unit 1:
Total cost: $3,400.00
Total time: 2 hours 30 minutes
Having people live at the property puts stress on the building. This is not a bad thing. In fact, this is a good thing for a new property. You can run all sorts of tests during a home inspection, but there is nothing like having someone actually live at the property.
As I mentioned last month, I rented one of the units to a college student for the summer; he was in the city for an internship and moved out at the end of this month. I also had tenants move into units #2 and #3 part way through July. So, the building was 100% occupied for part of the month.
Being fully occupied is great from an economic standpoint and for testing the property. Turns out the main sewer line was partially blocked. We stressed the plumbing during the home inspection, but nothing beats having people actually live at the property.
This backup caused minimal water to backflow into unit #1’s bathroom. So, I gave my plumber a call and was able to snake the line. Apparently, some sort of wipe or paper towel was blocking the main line. This was causing the backup. In the future, if I buy more properties, I may add snaking the main line to my standard operating procedures before renters move in.
Main Line Cleaning:
Total cost: $350.00
Total time: 2 hours
I also bought box fans and a dehumidifier to help with the minimal flooding that occurred.
Box fan and dehumidifier
Total cost: $221.44
Total time: 1 hour
I also had a much of small costs and finishing touches before tenants moved in. This includes items like making copies of keys, buying air filters, last minute touch-ups and cleaning supplies.
Total cost: $247.96
Total time: 4 hours 30 minutes
Water Bill: $66.16
Electric for units while vacant and common area: $77.00 (I will only pay for the common area once all the units are leased)
In summary, rental property #4 – lost $5,650.52 and I spent about 10 hours of my time managing this property.
Rental Property #4’s mortgage debt also decreased $437.13. When factoring in paying down my debt I lost $5,213.39.
In summary, I spent about 18 hours of my time maintaining my rental property portfolio.
In July, my rental properties lost $3,807.55. I lost $211.50/hour being a landlord. This month required much more time than usual. The unusual amount of repairs combined with moving in new tenants to rental property #4 are the main reason for the increased time commitment. Most months will require way less time as being a landlord is usually pretty passive.
My mortgage debt decreased $2,310.17 in July which made my loss more bearable.
Factoring in repayment of debt and cash flow, my rental properties lost $1,496.88. So, I lost $83.16/hour. Despite the painful month, being a landlord and owning a rental property portfolio is a great way to build wealth. What is your excuse for not owning a rental property?