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My 2017 Rental Income

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Not my house

I bought my first rental property back in 2012 at the age of 23. Since then I’ve had a lot of time to think about how real estate fits into my overall investment strategy in my quest for financial independence. If you’ve read this blog before you know that I am a big advocate of owning a few properties and self managing them. From my perspective it’s the perfect balance of extra income and amount of time invested.

I now own 3 properties (4 units), having purchased my latest property in 2017. Every year I like to take a look at the top line numbers to see just how much cash flow I am earning on each property.

You can view my 2016 rental income post here.

To keep it simple I am not including any deductions related to depreciation or other expenses that are amortized over longer terms. For these posts I will report the full expenses in the year that they occur with the end result being my cash flow for the year. 2017 was an even better year than 2016 which is hard to believe. The simplicity of my single family homes, no tenant turnover and the fact that my duplex was built in 1999 are all contributors to this.

Duplex (3 bed, 2 bath, 1500 sq ft. per side)

Original purchase price: $151,000 with 20% down payment

Rent collected: $21,240

Expenses (Parenthesis are +/- last year for the category):

  • Taxes: 4,012.68 (+$109.73)
  • Insurance: $572 (+$0)
  • Mileage: $84.48(-$302.02) 153.6 Miles @ $0.55/mile
  • Other misc. expenses: $39.54 (-$1,644)
  • Interest paid on mortgage: $4,083 (-$96)

2017 Cash Flow = $9817 (+$1974 from 2016) (Rent Collected – Total PITI (Principal, Interest, Taxes, Insurance) payments – Mileage – Other misc. expenses)

Single Family Home (2 bed, 1 bath ~1000 sq ft.)

Original purchase price: $52,500 with 20% down payment (15 year loan)

Rent Collected: $9,000

Expenses (Parenthesis are +/- last year for the category):

  • Taxes: $1,632 (+$45)
  • Insurance: $355
  • Mileage: $19 (-$61) 34.3 Miles @ $0.55/mile
  • Other misc. expenses: $74 (-$411) Some plumbing expenses, fee for paying property taxes via credit to leverage credit card rewards
  • Interest paid on mortgage: $1483 (-$88)

2017 Cash Flow = $3192 (+$428 from 2016) (Rent Collected – Total PITI (Principal, Interest, Taxes, Insurance) payments – Mileage – Other misc. expenses)

Nicer Single Family Home (2 bed, 1 bath ~1200 sq ft.)

This house was purchased in October 2017 which doesn’t make a cash flow calculation a valuable metric, but I’ve included the numbers below for those interested.

Original purchase price: $80,000 with $35,000 down payment (10 year loan, which has since been paid off)

Rent Collected: $1,634

Expenses:

  • Taxes: $2,000 Full year shown, pro-rated amount around $410
  • Insurance: $516
  • Mileage: $112 (-$61) 203.6 Miles @ $0.55/mile
  • Other misc. expenses: $353 Some easy touches to get the place rent ready.
  • Interest paid on mortgage: $336

2017 Cash Flow = -$279 (Rent Collected – Total PITI (Principal, Interest, Pro-rated Taxes, Insurance) payments – Mileage – Other misc. expenses)

Excluding my latest nicer single family rental, cash flow in 2017 was $13,009. Given the fact that these properties are financed I am extremely happy with this number. It also doesn’t take into account the principal payoff. I expect that 2018 cash flow will likely surpass this number as expenses through the first half of the year have been low. Our new rental will also contribute significantly since we paid it off in May 2018.

Review of Delta Breez Slim Bathroom Exhaust Fan

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One of the projects that has been on my list to fix at our house for years has been our downstairs bathroom fan. The bathroom isn’t frequently used, but when someone showers it sounded like a 747 taking off. It probably won’t surprise you that it also wasn’t effective at pulling moisture out.

The old fan was 8 inches by 8.25 inches which is still a standard size. The problem is that the hose was located directly above where the fan housing sits which means there isn’t a lot of room in the ceiling for a new fan. Most bathroom fan housings are around 5 inches deep, but these models wouldn’t work. It seems as though these thinner bathroom fans were common in the 80’s when our house was built. Based on how the fan was installed and how much of a pain it was to remove I am assuming it was original. After 37 years of use I think it’s time for a new one.

Had some fun removing the old fan…

After several frustrating trips to the store I finally found the Delta Breez Slim models. Specifically, I bought this Delta Breez SLM70 Slim 70 CFM Exhaust Fan from Amazon. It set me back only $38 which I thought was very reasonable. Bathroom fans are measured by the amount of air flow measured in CFM (Cubic Feet per Minute) and sound. My preference is to always buy the highest CFM model with no regard to the level of sound. Now 70 CFM is around the middle of the range, but this is the only model that would fit in my existing hole. I didn’t want to go through the hassle of cutting a wider hole.

Note that they offer similar models in both 80 and 100 CFM options, but they have different housing dimensions and support a 4 inch duct, but come with a 4 inch to 3 inch adapter. Not surprisingly, if you go with a higher CFM model, but use a 3 inch duct you lose some of air flow the fan might otherwise be able to pull with the 4 inch duct. Also worth noting is that the 70 CFM model is rated at a sound level of 2.0 sones whereas the 80 and 100 CFM models are rated at 0.6 and 1 sones respectively.

The housing dimensions for the 70 CFM model are 7.5 x 7.2 x 3.9 inches which meant there would be a small amount of space around the new fan (my hole was 8 x 8.25 inches). My project started with taping up the existing holes in the hose. Apparently some squirrels thought the hose was a good place to hide small acorns. I quickly realized there was no proper vent on the outside of the house meaning squirrels were free to enter the hose and nibble? on my hose. One project sometimes leads to the next…

Once the hose was repaired, I turned off the power and began hooking up the electric. This was pretty easy, especially if you have experience installing a light fixture. There was a small metal piece that needs to be removed to access the electric. Once hooked up you simply reattach the metal piece, thus hiding the wires and wire nuts inside. The next step was to attach the hose which I then sealed with the same aluminum (foil) tape. Having the extra space made it very easy to work with the fan housing. Next, I used three nails to attach the housing to the joists. I was lucky that the location of the air duct, electric and the side that it attaches to the joist were all the same as my old fan. Note that you first install the housing and then screw the actual fan in later.

The below picture was taken with the housing still intact, but there are three screws to remove the fan which are then used to reinstall it once the housing is in place. The fan has a plug which attaches near the electric box.

The fan grille was not quite big enough for my hole so I had to make some adjustments so it covered up the gap. I then tested the fan and it successfully held up a piece of paper. Note that this model also has a green indicator light when the fan is turned on, but it isn’t necessary since you can definitely hear it when it is turned on.

Overall I am happy with the Delta Breez SLM70 Slim bathroom fan. I think for the money you can’t go wrong. Bathroom fans vary quite a lot in price and this seems like a good quality fan for under $40. The install was surprisingly easy and the included directions were helpful. The fan isn’t as quiet as the larger fan models or those marketed as quieter, but doesn’t bother me or my family. While it is hard to gauge volume from a video you can get a sense of what you might expect in the quick video I made below. If you’re not going to buy this specific model due to your needs you may still want to consider Delta fans. They were carried at my local hardware store but Amazon also stocks several of the models. I will continue to update this review with how the fan is performing over time.

Why I Love Moen Faucets and You Should Too

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I love nothing more than a company that stands behind their products. This is one of the main factors I consider when buying any product. Quality customer service is something that Miss QCI bring into our own rental business and something we take pride in with our jobs. It’s one of the reasons I tout how awesome the cell phone provider Ting is on this very blog and try to highlight other great companies here.

Another thing I enjoy is getting into the nitty gritty details of real estate and managing my properties. There are a lot of great resources about real estate investing, but what about the day to day stuff like talking about toilet flappers? Take also for instance faucets. Every property you own is going to have many and it is one of those maintenance items in my experience that comes up quite frequently.

So what brand of faucets should you buy?

Moen.

If you choose, you could stop reading this blog post right now and head on over to Amazon.com or your local hardware store and feel confident with any Moen purchase. I have no affiliation with the company but just had, yet again, a positive experience with the company and they are deserving of some free promotion.

Let me back up a little bit…

My dad is no stranger to the rental business. He has been doing it for years and got started just like I did, by buying a duplex and living in half. Ever since I began purchasing homes he drilled into my head that you just need to buy Moen. When I closed on the lake foreclosure I live in, it quickly was apparent that the kitchen faucet needed to be replaced immediately. The water wasn’t allowed to be turned on during inspection so I was going in blind so to speak when it came to plumbing. The $180 was a painful unexpected expense as I just began to understand the scope of work for the rest of the house. However the need was an immediate and I felt confident a new Moen wouldn’t fail me as I purchased it not on sale (gasp!).

Fast forward to today, I’ve had to contact Moen support a couple of times and they haven’t let me down. This company, for being a relatively “boring” business actually has the kind of service you should expect from ALL companies in 2018 and beyond. The most recent issue was with a kitchen faucet that had a loose handle. Not only was it loose, but you had to lift from the back of the faucet for it to function properly – not good! Digging into the issue further revealed a cracked piece of plastic pictured below. (Side note: in order to take apart some of the Moen faucets you first have to locate a hole which inside has a screw which takes a hex key or allen wrench to unscrew. These holes are often found behind a Moen logo which comes off. Sneaky!)

These are the two pictures I sent to Moen through their contact us page. No need for any fancy plumber lingo or even the model number if you’re not able to locate it, just some clear pictures of the issue at hand.

Just a few business days after my email I received a shipping notification for a handle hardware kit, dome kit and handle adapter kit. In some instances an issue like this would result in having to replace the entire faucet. The process was painless and I’m a happy camper…errr, landlord.

I have never dug into the actual warranty policy since Moen has always taken care of me, but scanning the Five Year Limited Warranty, Ten Year Multi-Family faucet Limited Warranty (Go Landlords!!!) and Lifetime Limited Warranty, you quickly get a sense that Moen stands behind their products.

Now I’ll be honest, because I was brought up in a Moen household there are not many other faucets and fixtures that I have experience with. However, I think there is a strong case to be made for sticking with Moen products simply based on the headaches you will avoid down the road.

Reflections on Purchasing My Last Rental Property – Part #1

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I struggled to come up with a title for this series of blog posts. It seemed as I wrote through the story of buying my latest rental I would go off in mini tangents about a certain topic. I tried to stay focused, but there are so many things to understand when it comes to real estate investing and more importantly, where I’m coming from as an investor. I hope you enjoy these posts on how I went about purchasing my latest rental property and the approach I have taken towards real estate investing (not necessarily the one you should take). If you enjoyed this post and found it beneficial (or have questions) please let me know in the comments!

It was the summer of 2017 when I first announced my plans to purchase my next rental property. From July 25th to when I slipped on my crocs and rode my bike to the title company to drop off my earnest money, a lot has happened.

I tried to tweet my progress throughout the entire process to remind myself later of the ups and downs. Now I’ll try to delve deeper into the process, looking back on the purchase of my latest property. This happened to be the most difficult one to purchase when it comes to time invested. Even though I’ve purchased two other rental properties already, I continued to reflect on exactly what I wanted in my next property.  (Want to follow me on Twitter?)

Deciding to buy a third rental…

It all started with a slightly annoying day at work. I had originally planned to not purchase my next rental until spring 2018 since I would likely be able to pay cash. But if you’re not happy with the way things are, you tend to make plans to fix them and this was just an acceleration of the plan.  I don’t like to complain about my job since I have it pretty good (work from home, full insurance premiums paid etc.), but I have a strong desire to capture back my time, to work on things that I enjoy, and to most importantly – work part time. My goal for 2018 is to have more scheduled off days than working days on any given week. For me personally, the best way to accomplish this goal is through real estate. It is something that has been in my family from quite some time, but don’t confuse that with thinking that I knew or know what I’m doing.

I had to learn just like everyone else when I purchased my first rental back in 2012 at the age of 24. Probably the most important piece was having the support from family and Miss QCI. It was just the kickstart I needed to buy my first, second and now third rental property. Miss QCI has truly become my sidekick landlady doing everything from helping me install a toilet to handing out eviction notices (one that needed the women’s touch).

It seemed owning two rentals (3 units) was the perfect balance between the amount of time they required and the payoff (see my 2016 rental income). But if we bought one more and paid cash or paid it off as soon as possible we would have some much needed cash flow as we look to change our working situation in 2018.

Where Should You Invest in Real Estate?

There are many people who recommend not investing in your local market. After all, it truly isn’t a passive investment if you’re managing the property yourself. Plus, what are the chances that the place YOU live is the best place IN THE COUNTRY for real estate investments.  I understand where these people who preach this are coming from and I think anyone going into real estate investing should as well. Whether people may not agree with me, the below sums up my thoughts on this topic:

  • The numbers work in my area. (you shouldn’t invest locally if they don’t)
  • I like managing my rentals and enjoy the work that comes along with them (even the disgusting jobs – sewer backups and removing toilets keep me humble)
  • No one can run my rentals as efficiently and profitably as I can. I am an efficiency freak, I am constantly looking to optimize my entire life and this spills into rental management.
  • I like control and lack trust. I know you can find rockstar property managers, but I am already a rockstar property manager.
  • My goal with real estate investing is have a small portfolio that still covers a significant portion of my living expenses. I have no desire to go bigger or be a real estate mogul. If you’re looking to scale to a large real estate portfolio, you should probably go a different route. It’s all about balance for me and this is hard for some people to understand. More is not better for me personally. With lots of things in life, I have my ‘enough’ point.

Now that you understand some of the background and my perspective…In my next post I’ll talk about the initial steps I took towards purchasing a property including initial discussions with my realtor and financing!

The DIY Bike Maintenance Experiment

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I enjoy doing as many projects as I can myself which is why I continue to self manage our rentals. I actually enjoy this work. Time is usually the limiting factor but this year I decided to start working on a new skill: bicycle maintenance.

We have 6 bikes in the QCI household (but only one car) and if you add our immediate family there are many more bikes that may need some fixing. In the below post I’ll share and review the bike maintenance tools I’ve purchased so far and some tips on where to buy. I will continue to update this post as I buy new tools and my experience with them.

Oumers Chain Whip Review

One of my first purchases was this Oumers Chain whip with Cassette / Rotor Lockring Removal Tool Pack from Amazon. On one of our bikes the cassette seemed sticky which likely meant the freehub needed to get cleaned up and greased. I also considered the Park Tool version of the same product, but it is both more expensive and didn’t come with the lock ring tool. Note that generally Park Tool makes the highest quality tools. Given the anticipated unfrequent use I figured that the Oumers chain whip would do just fine and it has. I have successfully used it a few times and am happy with the purchase.

 

Park Tool Cone Wrench Set Review

While I was able to get the freehub apart using the Oumers chain whip and some other wrenches I was unable to tighten one of the bolts when I put it back together. This required a cone wrench. You can buy higher quality cone wrenches individually but for the price of two individual cone wrenches from Park Tool (around $18), you can buy this Park Tool set. It covers every size most people should need including: 13mm and 14mm, 15mm and 16mm, 17mm and 18mm, and 13mm and 15mm. These certainly don’t feel as hefty as their more expensive counterparts, but they worked perfect for my needs. I imagine they will last for many years to come.

The Club Utility (Bike) Lock Review

One of the most frustrating things to buy is a bike lock. Look at almost any lock and you’ll find some negative reviews about the lock being compromised. How much you spend on a lock will ultimately be determined by where you live. My goal was to by a bike lock which would deter thieves and one that would likely be more secure than what others use. I landed on this lock which is branded as a utility lock. It’s called “The Club” and it looks as intimidating as its name. At time of writing it’s just $14 which in my opinion is a great deal. We bought the smaller version and have found its ability to expand quite handy, especially when locking up our ebike, which has a wide kickstand forcing it to be placed further away from bike racks. The only downside is how heavy it is. You’ll definitely notice the weight of this if you place it in your backpack, but in my opinion this is a small price to pay for having a sturdier lock.

More to be added soon!