The Cash Flow Analysis for Our Rental Property at Year End 2014

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

To see 2013 and before, visit the link at the bottom of the post.

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 dry wall and tile work, which the plumber wouldn’t do. On the positive side, I can now do dry wall 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 Cash Flow Analysis

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 lawncare, 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 years 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.

So see last year’s cash flow report, click the next page below…

Pages: 1 2 3



Last Edited: December 31, 2014 @ 2:05 pm
About Philip Taylor

Philip Taylor, aka "PT", is a CPA, financial writer, FinCon CEO, and husband and father of three. He created PT Money back in 2007 to share his thoughts on money and to meet others passionate about managing their finances. All the content on this blog is original, and created or edited by PT. Read more about Philip Taylor, and be sure to connect with him on Twitter, Facebook, or view the Philip Taylor+ Google profile.

Comments

  1. HullFinancial says:

    Personally, I aim to have a little more cash flow in my properties, as the insurance will drag you down a little further and you’ll probably continue to have some maintenance costs. Still, if you can be pretty close to CF breakeven pre-tax, then you’ll wind up in the good when it’s all said and done, since you’re not having to bump into the standard deduction for mortgage interest given that it’s a rental. It’s a heck of a lot better than selling for a loss. If you can hold onto it (and keep it rented out) long enough, then you’ll either a) pay off the mortgage and have nice positive CF, or get back to at least breakeven on the capital gain of the sale.
     
    A potential topic to cover, if you haven’t already, would be the depreciation recapture rules on the sale of a rental property. A lot of people aren’t aware of it and certainly don’t understand it.

    • @HullFinancial What have you found is your vacancy rate across your properties? Obviously I was affected by the 1.5 months (effectively 3 months if you extrapolate) vacancy. I’m hoping to improve upon that in 2013 and see a nice positive cash flow.
       
      Now don’t go giving me work to do. I studied those rules once, but you know I’ve since forgotten them. Seriously, thanks for the push.

      • HullFinancial says:

        @Philip Taylor On the Virginia property, our vacancy is 14%. We refused to let pets and opened it up in the late fall, when few people were looking to rent – or, at least, few people without pets. In our Texas properties, the rate is a touch below 8%. We have a great property manager who keeps them filled, and a great working relationship with her where she birddogs properties for us and has renters lined up as soon as we can close on the property and get it into move-in condition.

  2. This is great Phil:-)  I will pass it onto my son who has a basement suite rented out…..
    I’m sure he will find it interesting

  3. BillyMurph says:

    @ptmoney Is that your first one? How have you enjoyed it so far? Does it make you more/less interested in doing more?

  4. I think investing in rental property is a wise decision.  And it looks like it won’t take long until it is profitable for you. My husband and I would love to rent out property in the future as well as we think it’s a good way to diversify our investments, instead of having everything in mutual funds, etc.  Glad things are working out for you so far.

  5. Does your mortgage include principal payments? or is it an interest only?
     
    If it is a fully amortized loan then you are probably asset positive

  6. moneystepper says:

    Pretty good looking figures there – 10.2% return is certainly impressive

  7. I am about to rent out my Denver condo for the first time. I hope I end up with the same positive cash flow at the end of 2014 that you did for 2013!

  8. DenverEric I hope so too, Eric. My first year wasn’t as good because I took a while to onboard the tenant. But I’m glad I took my time with that because it made year 2 (and beyond hopefully) really solid.

  9. JD in Boerne says:

    How does the rent you receive impact your taxable income? I understand that your expenses can be deducted, such as repairs and taxes on the property, but doesn’t the rent collected increase your income and essentially cost you money as you pay taxes on that income?

  10. JD in Boerne Your taxes are never more than what you earn. Assuming you have a 25% tax rate, if your net income on the rental property is $5,000 for the year, you would pay $1,250 in taxes and keep $3,750 in after-tax profit.

  11. JD in Boerne This is a great question and one I intend to answer in detail when I file my taxes this year. Rental property gives you the added benefit of being able to subtract depreciation from the income. So my $4k profit will be more like a $2k loss for tax purposes once I subtract $6k in annual depreciation expense. The loss will help reduce my overall tax burden. It’s a huge win.

    • Congrats in a profitable rental property. For the purpose of income taxes, can you categorize mortgage payments as an expense?

      • Thanks, James. You can categorize the interest, insurance, and property tax portions of the mortgage payment as expense. But not the principal. Schedule E is where it all goes.

  12. Philip — Those are good numbers!
    I have learned maybe the best investment is by getting a quality tenant, and it sounds like you did!
    — Phillip H.

  13. Man congrats! Just started year one of a real estate business myself and it is so cool to see you cash flowing! Don’t forget to factor in home office deductions, mileage on your car, half of on your meals, and depreciation and you return is much higher than 10%!!