How I Calculate My Rental Property Cash Flow ($6K Per Year) • Part-Time Money®

2018 Cash Flow Analysis

Twenty-eighteen was another challenging year for our rental property: 100% occupied (thankfully), new contract negotiations, and major water damage that ruined the wood floors!

If you’re new to my recaps, this is property is our old personal residence – a Frisco, TX townhome we purchased in 2007 and converted to a rental property in 2012.

We bought it for $205,000 and put 20% down. We now owe $137,000 on it and the value is listed as $324,000.

We manage this property ourselves: listing it, vetting tenants, managing repairs, rent collection, and raising rent. You can now add ‘dealing with a major insurance claim’ to that list.. It’s been a very positive experience overall, especially if you consider we’re somewhat accidental landlords.

In summary, this year was our second-best yet! Thankfully we kept our tenant through contract negotiation (we signed another two-year lease in June) and we were able to slightly raise the rate (woot!). Why? Because we had a major flood issue, we had to make an insurance claim, and had to comp a month’s rent because of the delays in repairs.

Other than the major repair, we had our annual A/C checkup and a roof leak that needed addressing. It was brand new when we purchased it in 2007 and we made no repairs last year so we were due for a few it seemed. And hey, at least we got brand new floors! We chose wood tile this time – super durable.

Let’s look at the specific numbers:

2018 Cash Flow Analysis

2018 Rent Collected

• 2,175.00 January Rent
• 2,175.00 February Rent
• 2,175.00 March Rent
• 0.00 April Rent (Month of Major Repair)
• 2,185.00 May Rent
• 2,175.00 June Rent
• 2,200.00 July Rent
• 2,200.00 August Rent
• 2,200.00 September Rent
• 2,200.00 October Rent
• 2,200.00 November Rent
• 2,200.00 December Rent

Total Rents Collected $24,085.00 by check

Rents were solid this year other than the one month we had to comp. No vacancy (yay!) and we did take advantage of the new lease agreement to raise the rent slightly – just $25. Thank goodness we did, HOA dues are set to go up by $35 this year.

2018 Expenses Paid

• $10,108.44 Mortgage Payments for 12 Months
• 7,333.75 Property Taxes for 2018 (up ~$150 from 2017)
• 2,100.00 HOA Dues for 12 Months (It’s a townhouse, so this pays for lawn care, outside insurance, and the pool)
• 1,001.22 Insurance (Condo policy through Farmers paid annually with credit card – rates went up because of a better policy and thanks to the claim)
• 149.00 Repairs (Air Conditioning Check-Up)
• 350.00 Leak Detection Service (we had a couple of small leaks that needed investigating – repairs were free since they were due to HOA negligence)
• 10,805.00 New Floors (and clean up from flood damage)
• (12,080.76) Insurance Proceeds (from flood damage)

Total Expenses Paid $19,766.65

Expenses got out of hand a bit. Thank goodness the insurance proceeds exceeded the cost of the floor repairs. The difference allowed us to absorb the increases in taxes, insurance, and that silly leak detection fee.

Total Cash Flow $4,318.35

Boom! Not too bad. I honestly thought we going to be much closer to breaking even this year. I think this shows that we’re poised for a strong 2019 with the property. I wouldn’t be surprised to see another $5K+ year.

Our cash flow through the years:

• 2018: 4,318.35
• 2017: 5,929.24
• 2016: 1,933.72
• 2015: 3,158.47
• 2014: 2,104.44
• 2013: 4,256.41
• 2012: (53.93)

What’s next?

This next year I’m expecting to be a quiet one for the rental property. Our tenant is great and we expect that to continue.

We’re planning on paying off our personal mortgage in 2019. Once that happens that will leave us with the decision to possibly pay off the rental property mortgage. Mrs. PT will want to, I know it. We’ll see. But how cool would it be to turn this property into a $15k a year income source!

Do we plan on getting into more rental properties? No, not at this time. I’ve been putting a little money into PeerStreet (you can see my review here); otherwise, I’m spending my time, energy, and on my businesses.

2017 Cash Flow Analysis

It’s time once again to do our annual rental property cash flow analysis. To see previous years, visit the link at the bottom of the post.

Twenty-seventeen was the absolute best year ever for our rental property: 100% occupied, no major repairs, not a peep from our tenant, and the biggest cash flow amount ever!

If you’re new to my recaps, this is property is our old personal residence – a Frisco, TX townhome we purchased in 2007 and converted to a rental property in 2012. We bought it for $205,000 and put 20% down. We now owe $140,000 on it and the value is listed as $330,000.

We manage this property our self: listing it, vetting tenant, managing repairs, rent collection, and more. It’s been a very positive experience overall, especially if you consider we’re essentially accidental landlords.

In summary, this year was made great because we raised the rent in 2016 and have seen a full year with the same tenant at that higher rate of $2,175.00.

Additionally, we saw virtually no repairs or maintenance on the property. It was brand new when we purchased it in 2007 and we seemingly made more than a year’s worth of repairs in 2016 so we were due for an easy year.

Let’s look at the specific numbers:

2017 Cash Flow Analysis

2017 Rent Collected

• 2,175.00 January Rent
• 2,175.00 February Rent
• 2,175.00 March Rent
• 2,175.00 April Rent
• 2,175.00 May Rent
• 2,175.00 June Rent
• 2,175.00 July Rent
• 2,175.00 August Rent
• 2,175.00 September Rent
• 2,175.00 October Rent
• 2,175.00 November Rent
• 2,175.00 December Rent

Total Rents Collected $26,100.00 by check

2017 Expenses Paid

• $10,108.44 Mortgage Payments for 12 Months
• 7,186.03 Property Taxes for 2017 (up ~$600 from 2016)
• 2,100.00 HOA Dues for 12 Months (It’s a townhouse, so this pays for lawn care, outside insurance, and the pool)
• 657.29 Insurance (Condo policy through Allstate paid annually with credit card)
• 119.00 Repairs (Air Conditioning Check-Up)

Total Expenses Paid $20,170.76

Total Cash Flow $5,929.24

Officially our best year ever!

Our cash flow through the years:

• 2017: 5,929.24
• 2016: 1,933.72
• 2015: 3,158.47
• 2014: 2,104.44
• 2013: 4,256.41
• 2012: (53.93)

Notice the pattern? It seems every other year I make better cash flow. This correlates with years in which the tenant has the property 100% occupied and rent is consistent.

Also, by the second year, the tenant and I have worked out all of the kinks (i.e. repairs, maintenance issues) and the property seemingly costs less to keep up.

What’s next?

I’ve given up on the idea of doing the cash out refinance to improve the yield from the investment in this property – something I hinted at last year. I just don’t have an interest in taking on more debt and finding a new property. I’d rather just focus on my businesses.

The agreement with the tenant runs out next May. I will need to negotiate a new lease at that time. My hunch is that they will want to remain in the property and I might be able to raise the rent to $2,200.

What gets me excited about this property is the idea of getting rid of the mortgage and being able to bank ~$15K in cash flow each year. That would be an awesome supplement to our business income and/or retirement investment income in the next phases of life.

2016 Cash Flow Analysis

It’s time once again to do our annual rental property cash flow analysis.

2016 was a pretty good year for our rental property.

It didn’t start out that way, though. Things were shaky in the first quarter. Home values and subsequently, property taxes, were rising, cutting into our monthly cash flow.

Then we found out we were losing our tenant, whom we loved. It wasn’t looking good.

In a bid to save the year and improve our cash flow going forward I took a chance and raised rent by $300 when I put the property back on the market.

It worked! Our first tenant application was an excellent one (great credit score and job status) and they were eager to sign a two-year lease at the increased level.

Let’s look at the numbers:

2016 Rent Collected

• 1,875.00 January Rent
• 1,875.00 February Rent
• 1,875.00 March Rent
• 1,875.00 April Rent
• 1,125.00 May Rent (Tenant Moving Out)
• 507.50 May Rent (New Tenant)
• 2,175.00 June Rent
• 2,175.00 July Rent
• 2,175.00 August Rent
• 2,175.00 September Rent
• 2,175.00 October Rent
• 2,175.00 November Rent
• 2,175.00 December Rent

Total Rents Collected $24,357.50

Expenses Paid

• $10,108.44 Mortgage Payments for 12 Months
• 6,561.79 Property Taxes (These went up by $500 in 2016!)
• 2,100.00 HOA Dues for 12 Months (It’s a townhouse, so this pays for lawn care, outside insurance, and the pool)
• 2,319.00 Repairs (Air Conditioning, Garage Door, Plumbing, and Outdoor Lights)
• 663.24 Maintenance (Turnover costs including deep cleaning, re-keying, and supplies)
• 646.31 Insurance (Condo policy through Allstate)
• 25.00 Move-In Gift

Total Expenses Paid $22,423.78

Total Cash Flow $1,933.72

If it hadn’t been for those semi-major repairs to the garage door, shower, and air conditioning, the property would have performed really well.

Not our best year ever. But getting the new, quality tenant at a much higher rent should mean good things for this next year.

Our cash flow through the years:

• 2016: 1,933.72
• 2015: 3,158.47
• 2014: 2,104.44
• 2013: 4,256.41
• 2012: (53.93)

The increased home value (purchased for $205,000, now worth $323,000) has put us in an interesting situation. Even with the increased rent and cash flow, the amount of equity we have in the property now makes the investment look really poor on paper. $1,900 in annual cash flow for $180,000 in equity ($323,000 value per Zillow – $143,000 outstanding mortgage debt) means we’re earning ~1% for our efforts.

I recently talked with Eric from www.IdealREI.com he had an interesting suggestion: do a cash out refinance and use the funds for another financial goal. We could take the cash and buy another rental property, pay down the debt on our personal residence, or simply put it into the stock market. All would likely results in an annual return greater than 1%, don’t you think?

What do you think we should do?

2015 Cash Flow Analysis

Did we make money this year? Is the investment still worth it? What needs to change in 2016? These questions and more will be answered in our annual review.

A little background…we purchased the property, a townhouse, back in 2007. It was our first home. We lived in for almost five years before deciding it was time for a bigger place with a yard. We moved across town to another neighborhood.

Instead of selling the house, we decided to try to keep it as a rental property. It’s been a complete DIY process for us. We prepared the house for rental, we listed it ourselves, we vetted tenants, we signed agreements, and we collect rent.

We’ve been through a couple of tenants over the last four years. Both have been a pleasure to work with.

As for 2015, it was a quiet year on the rental front. Our tenants agreed to another year (resigned in April). We dealt with minimal repairs and maintenance. We did, however, face significant increases in our property taxes. Home values are rising in this area. Overall that’s a positive. But it will require us to ask our tenants for more rent in 2016. That will be interesting. Alright, on to the numbers.

2015 Cash Flow Analysis

2015 Rent Collected

1,875.00 January Rent
1,875.00 February Rent
1,875.00 March Rent
1,875.00 April Rent
1,875.00 May Rent
1,875.00 June Rent
1,875.00 July Rent
1,875.00 August Rent
1,875.00 September Rent
1,875.00 October Rent
1,875.00 November Rent
1,875.00 December Rent

Total Rents Collected $22,500.00

Expenses Paid

$10,108.44 Mortgage Payments for 12 Months
6,157.48 Property Taxes (These went up by $1,500 in 2015!)
2,100.00 HOA Dues for 12 Months (It’s a townhouse, so this pays for lawn care, outside insurance, and the pool)
622.61 Insurance (Condo policy through Allstate)
353.00 Air Conditioning Repair

Total Expenses Paid $19,341.53

Total Cash Flow $3,158.47

In total, it was a great year. Revenue was solid. Expenses were reasonable and not unexpected. I do have some work to do when it comes to revisiting our insurance policy (it went up by +$100). And I’ll need to consider a rent increase due to the significant rise in property taxes.

If you look at what we originally “invested” in this property ($41,796) at the time we converted it to a rental, our annual return was 7.6%. Not bad.

Another way to look at this property though is to compare the return to the overall current cash value. Zillow says the unit is worth $290,250. We owe $146,225 on the property.

So if we sold it, we would free up $144,025 in cash (this ignores taxes on the sale and depreciation recapture). If you compare our annual cash flow to this value, you get a significantly smaller return of 2.2%.

Said another way, because we aren’t selling this property, we are settling for a small return on our money. Of course, there are other factors to consider, like the effect on taxes (which is very positive) and the diversification of our investments.

I don’t think we’ll be selling anytime soon. But I think it’s good to know where we stand, and I’m thankful we have options.

What do you think of the year we had? What would you do about the rental increase? How would you handle it? And what do you think of my secondary cash flow analysis?

2014 Cash Flow Analysis

Another year has passed and it’s time once again to report on the progress of our rental property.

I had a few negative things happen this year that could have ruined the year.

First, my tenant broke his lease. This was somewhat expected. He’d been telling me that a job change was coming. The transition was uneventful and I only had five days of vacancy. And…I was able to raise the rent by $100 a month!

Second, I screwed up a DIY repair. The shower valve went bad last winter and I attempted unsuccessfully to repair it on my own during the vacancy period this May. I ended up doing more damage and had to call in a plumber. Not only was the fix time-consuming and expensive ($496 total), it required drywall and tile work, which the plumber wouldn’t do. On the positive side, I can now do drywall and tile work.

Finally, the hot water heater went bad over July 4th weekend. As fate would have it, I was out of town at the time and couldn’t do a proper evaluation. So I bit the bullet and replaced the seven-year-old heater, sight unseen. I spent over $1,300 on the new heater. On the positive side, I won’t need to replace a water heater for several years.

So even though I had some issues, in the end, I was able to make the most of things and have another very positive year.

I expect the year-ending cash flow report to again be very strong. Let’s dig into the numbers.

2014 Rent Collected

1,775.00 January Rent
1,731.00 February Rent (less tenant repair)
1,775.00 March Rent
1,775.00 April Rent
515.32 May 1-9 Rent
1,028.23 May 15-31 Rent
1,875.00 June Rent
1,875.00 July Rent
1,625.00 August Rent (less 2 nights hotel for hot water issue)
1,875.00 September Rent
1,875.00 October Rent
1,875.00 November Rent
1,875.00 December Rent

Total Rents Collected $21,474.55

We collect rent using Chase Quickpay, which makes it super easy and free. Our new tenant was a Chase account holder. I can’t stress enough how easy this makes the process. In my next lease agreement I may make this mandatory.

Expenses Paid

$10,104.44 Mortgage Payments for 12 Months (Details of the loan)
4,736.87 Property Taxes (These went up by $500 in 2014!)
2,100.00 HOA Dues for 12 Months (It’s a townhome, so this pays for lawn care, outside insurance, and the pool)
491.56 Insurance (Condo policy through Allstate)
100.00 Repaint Front Door (per HOA regulations)
496.00 Repair Shower (DIY gone bad)
1,177.24 New Hot Water Heater
164.00 Plumbing Repair

Total Expenses Paid $19,370.11

Total Cash Flow $2,104.44

Not as nice as I hoped. The repairs really cut into the profits. But still very positive, and that’s $2,100 I have in my pocket. In unrecognized gains, the property is really climbing up there in value. And I can’t wait to see what kind of loss I get to count against this year’s personal income.

Up next for this property: the lease runs out in June. I’m hoping the current tenant will stay on another year. We’ll see.

You can read the entirety of my rental property experience by sifting through the real estate category.

What are your thoughts on our year three cash flow report? Leave your comment or question below.

Cash Flow Analysis 2013

Another year has passed and it’s time once again to report on the progress of our rental property.

Generally speaking, it’s been a very positive year. No issues with the tenant other than the threat of a job loss, which would have forced him to move. Luckily, that didn’t happen and I’m thankful I have a tenant that over-communicates in this area.

Given that there were 12 solid months of on-time payments and no major repairs or unexpected expenses, I expect the year-ending cash flow report to be very strong. Let’s dig into the numbers.

Rent Collected

$1,775.00 January Rent
1,775.00 February Rent
1,775.00 March Rent
1,775.00 April Rent
1,775.00 May Rent
1,775.00 June Rent
1,775.00 July Rent
1,726.31 August Rent (less tenant repair)
1,775.00 September Rent
1,775.00 October Rent
1,775.00 November Rent
1,775.00 December Rent

Total Rents Collected $21,251.31

We collect rent using Chase Quickpay, which makes it super easy and free.

Expenses Paid

$10,104.44 Mortgage Payments for 12 Months (Details of the loan)
4,298.90 Property Taxes (I told you they were high in Texas)
2,100.00 HOA Dues for 12 Months (It’s a townhome, so this pays for lawn care, outside insurance, and the pool)
491.56 Insurance (Condo policy through Allstate)

Total Expenses Paid $16,994.90

Total Cash Flow $4,256.41

Nice! This easily beat my expectations and it’s more than made up for the slow start in 2012. Given our initial investment of $41,796, this cash flow produced an annual return rate of roughly 10.2%.

Being a landlord definitely comes with its risks, but this is certainly one of those times when I’m going to celebrate and feel good about our investment.

I have this tenant till August 2014, and would love to keep him on, so the next thing I’ll cover is signing a follow-up rental agreement.

You can read the entirety of my rental property experience by sifting through the real estate category.

What are your thoughts on our year three cash flow report? Leave your comment or question below.

Cash Flow Analysis 2012

All has been pretty quiet on the rental front. Our tenant is paying on time and reporting no issues. Be sure to scan the real estate category of this blog to see our history with this rental property.

Today I thought I’d share the cash flow analysis of our first six months (ending December 31, 2012). We moved out of the townhouse (aka purchased it for rental on July 1, 2012). We rented it out on August 15, 2012 and have maintained the same tenant.

Rent Collected

$500.00 Holding Deposit
387.50 August Rent (prorated, less holding deposit)
1,775.00 September Rent
1,775.00 October Rent
1,775.00 November Rent
1,745.00 December Rent (minus tenant repairs)

Total Rents Collected $7,957.50

We also collected a $1775.00 security deposit, which I’m not including in my calculation. Those paying attention all along will notice that my rent is $25 higher than I previously estimated. So that’s a win.

Expenses Paid

$5,054.22 Mortgage Payments for 6 Months
1,602.71 Property Taxes (pro-rated for 6 months)
1,069.00 HOA Dues for 6 Months (includes $19 in late fees)
210.50 Repairs Before Move-In
75.00 Repairs After Move-In Inspection Form Completed

Total Expenses Paid $8,011.43

I didn’t make an insurance payment in the last half of 2012 so that didn’t pop its ugly head up on this report. But it will for the 2013 report, of course.

The late fees on the HOA dues are of course a pain in the rear. My fault totally there. For some reason when I switched the payment coming from Capital One 360 to Chase (where our real estate checking account is), the HOA company didn’t like the payments. I’ve since corrected the issue, but due to some negligence, I’m out the $19. Oh well, could have been worse I guess.

Total Cash Flow -$53.93

I’d say we made it through the first six month period quite nicely given that we didn’t have a tenant for one and a half months. I’ve got my current tenant on a two-year lease so we should have a solid 12 months of rent to collect in 2013, with roughly the same expenses (plus, the insurance I mentioned above). The report for 2013 should be cash flow positive in the $2,000-$4,000 range.

As a bonus, the tax loss on this property is going to be pretty substantial for 2012 with first-year depreciation and all of these expenses to include. It should end up helping us quite a bit in reducing our taxable income. I look forward to sharing that report with you soon.

What are your thoughts on the cash flow report? Does this make you more or less interested in buying a rental property? Do you think I have a good investment on my hands? Or do you see it as a wash, and better than having sold the place for a loss?