Many landlords are reluctant landlords trying to survive and hold on until they can get out. Many have been burned by housing prices, losing money on their rentals or are jaded because of horrible tenants. I would be lying if I didn’t say that being a landlord had many ulcer-inducing moments. I have lost money, had lots of pain and agony and even had over a $4,000 repair bill on three houses in less than 36 hours. Let’s just say I was very thankful for that emergency fund!
The biggest thing I have noticed over the years is that this is the one industry where the naysayers are VERY VERY loud. How many times have you read in the New York Times, the Washington Post, MSN, or any of the other mainstream outlets about the awful effects of being a landlord. In most industries you see the success stories and the failures are swept under the rug. In the Real Estate industry it is the exact opposite.
My Mission is to change this Philosophy here at Reluctant Landlord. I will celebrate the victories and all the achievements that makes me love this life. I will also tell you about the moments that drive me to drink coffee before 5pm and wine afterwards. I will share my mistakes and hopefully help you avoid those mistakes.
I started reluctantlandlord.net because I wanted to provide the resource for the average person to be successful in Real Estate. Whether you are truly a reluctant landlord who just wants to get rid of their house as soon as it’s economically feasible, a small time landlord who is a happy with 1-3 houses, or a empire builder like myself, I promise that on this site there will always be honesty and transparency.
Being a landlord has been scary, challenging, stressful and yet the most financially beneficial thing I have ever done for my family. It will be the reason why we will accomplish our dream of retiring early in 14 years. It will be the reason I can stay home with my future children and still earn an income from anywhere. It is going to be the financial funder for future entrepreneurial endeavors and the cash cow that lets us enjoy my husband’s Navy career (port calls, balls, weekend adventures).
As a numbers girl I believe the best way to show you the blessing, heart pulling, and ulcer-inducing moments is through the numbers. Starting this month, October 2015, I will be doing a monthly income statement with all numbers exposed. Although, I do warn you I am a financial analyst; not an accountant. I am guilty of rounding up and won’t be precise to the penny. You will still see it all. There will be months where the valley of despair is my financial state and also months that I feel like I just climbed and beat Everest.
Without further ado, let’s get into the October 2015 numbers. My first ever, “Bare It All” Monthly Rental Income Report!
October Rental Income Report:
Authors Note: For those that are new, here is a brief background on our strategy and goals. We buy houses for as little down as possible and are empire builders. We have bought using VA loans, investment loans; both foreclosures and short sales. We buy houses as personal property that we live in and also houses as pure investments. All of our houses have mortgages on them. We are lovers of good debt, while believers of always having a back up plan. Every house is purchased with the intention of being a rental one day.
Note: This house is special. The cash flow numbers are artificial due to the fact that our house was a short sale and significantly below the value the sellers paid. In California, the buyer has to continue paying the seller’s tax bill, until they recalculate it. The county will refund you at the end. Since our house was worth almost 1/2 of what the sellers paid when our original payment was calculated out it was based on our numbers not the seller’s.
So when taxes came due, our escrow account went into the negative because the county had not reassessed the home yet. Taxes were due at double what were originally predicted. When the mortgage readjusted the escrow it was readjusted from $260.95 to $769.17 a month to make up the difference. When the new tax bill comes there will be an overage of money and it will be sent back. So it will take a year for it to be fixed. Once it rights itself it will go back to a little over $200. Until then, there is nothing we can do, except show an artificial loss.
Notes: This is our personal house that we live in today, so it currently does not make any income and is not considered in the numbers. Once we are transferred and rent it out then it will be considered a rental and will be in the monthly reports.
House #7 – This house was artificially high this month. We had $2,800 in break lease fees. Our tenants have decided to vacate due to personal reasons. Thankfully our break lease laid out the rules in black and white for how this would be done. If we hadn’t have had the break lease we would have had to replace the tenants anyways without protections in place. Did I mention how important a break lease clause was in your lease? This is a prime example of why I include it in my lease.
Octobers Numbers in Summary
- Emergency Funds are Vital – See our $4,000 expense in less than 36 hours.
- Hold Your Tenant’s Feet to the Lease – Our tenants didn’t want to pay the break lease but after numerous conversations they did.
- Break Lease Clauses are Important – The break lease issue came up right before our trip to Fiji. Without the break lease clause we would have been scrambling with no protection.
- Tight Firm Leases are Important – Our 16 page lease saved us. We had a few issues come up this month and we were able to show where it was stated on the executed lease.
- Always Double Check Your Lease for Errors – When we were having issues with our lease it was brought to our attention that one of the blanks was not filled out. Luckily it didn’t affect us too much but it was a reminder to always double check.
- Moved Multiple Times – We have completed 4 moves (TX – Corpus to TX – Kingsville to VA – Virginia Beach to CA- Hanford), 3 long distance moves in almost 6 years of marriage.
- We self-manage all of our properties. – This includes the cross country homes and when I travel. I love to travel. Last year I visited Bahrain, Singapore and Abu Dabhi. That was only my international trips. I also traveled domestically. I was still self-managing the entire time. I started a break lease from the airports in Abu Dahbi on my smart phones.
- Limited Income – I have worked less than 3 years on a Masters Degree level salary over our 6 years of marriage. While my income has played a part in our houses, being frugal, creative, and thinking out of the box has also been important. Doing things such as downsizing and living in a hovel during my husband’s deployment or having roommates have made a huge difference.
- We put as little down in the houses as possible – Our goal is that the tenant rent and our sweat equity through self management will pay down our houses.
The only way you will be successful in Real Estate is if you pursue a strategy that works for YOU no matter the public opinion.
- Afford Anything – Check out her income report. She is also very successful while having a totally different approach. She uses property managers, and carries fewer mortgages than myself.
- Cash Flow Diaries – Check out his income report. He is a turnkey investor. Totally opposite of my self management principle.
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Starting Next Month I will do a Q & A video answer to posters’ questions from the previous month’s comments. So leave you questions, comments and feedback. I look forward to answering them.