I’ve written in the past about my two rental properties but just now figured out just how much they made in 2016. Since I share my financial life publicly and discuss real estate from time to time I thought it would be interesting to share my cash flow with you, my readers.
To keep it simple I am also not including any deductions related to depreciation or other expenses that are amortized over longer terms. Remember that while 2016 was a great year, it’s the large expenses which can eat significantly into profits.
Before we get started…
If you’re thinking about getting into real estate investing it’s important to realize that I self manage my properties. There are differing opinions on self managing versus hiring a property manager as well as investing locally or across other areas in the US. My strategy is all about running a small, local (if the numbers work), efficient rental business that doesn’t take much of my time to begin with. This starts with buying the right property and goes all the down to the details like automating rent payments. I am a firm believer that no one can run my rentals as profitably as I can. I am also aware of the argument that self managing is like creating a job for yourself as opposed to a true passive investment. I thoroughly enjoy working with my carefully selected tenants and rolling up my sleeves every once and awhile. Miss QCI usually tags along as my sidekick even for the dirty jobs like resetting toilets and cleaning up a backing up sewer line. She even once delivered an eviction notice to my tenants while I watched since we thought they would react more positively to a female (it worked). Fun times!
Like rental income, work ebbs and flows. This year I had no tenant turnover so for the first half of the year my time invested has been extremely low. Take a look at this spreadsheet where I track my expenses, including mileage to my rentals.
Now to the numbers…
Duplex (3 bed, 2 bath, 1500 sq ft. per side)
Original purchase price: $151,000 with 20% down payment
Rent collected: $21,240
- Taxes: 3,902.95
- Insurance: $572
- Mileage: $386.5 (703 Miles @ $0.55/mile)
- Other misc. expenses: $1,684 (a good portion of this was the install of a new garage door opener and flooring, including install)
- Interest paid on mortgage: $4,180
2016 Cash Flow = $7843.50 (Rent Collected – Total PITI (Principal, Interest, Taxes, Insurance) payments ($11,326) – 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
- Taxes: $1,587
- Insurance: $356
- Mileage: $80 (146 Miles @ $0.55/mile)
- Other misc. expenses: $485 ($200 of this was to clear out the sewer line after a backup in the basement during off-hours (overtime))
- Interest paid on mortgage: $1571
2016 Cash Flow = $2764 (Rent Collected – Total PITI (Principal, Interest, Taxes, Insurance) payments ($11,326) – Mileage – Other misc. expenses)
For 2016 my total cash flow on the rentals was $10,607.50. Note that I am not including the principal pay down on either of the mortgages from my monthly mortgage payments. Combined, I put down a total of around $40,000 on these properties. If you calculate a return on this investment it is incredibly high, which demonstrates the power of leverage. If you have any questions I’d be happy to answer them in the comments!