Our Rental Property – The First Year

Just a quick update here on how our rental property is doing. The last time we checked in, we were basically running a $10,000 loss! This was our first seven months owning the property, and I blamed the loss on the start-up maintenance to get the house in tip-top shape, the heating bills for the winter months, and well, the lack of tenants, since the house was vacant when we bought it and it took time to find people.

I predicted that the next five months would be profitable since we had tenants, and didn’t expect too much in the way of maintenance. And mostly, that’s been the case! Our rent payments have been rolling in electronically through Cozy. And we haven’t had any major repairs. Basically, all I’ve been doing is going over to mow the lawn.

One bad thing: We were just informed by our first tenants that they will be leaving after their year lease is up! Argh! That’s just how life goes for a landlord I guess. So soon we will have to filter through the punks and rejects to find some more worthy tenants.

Here’s how the first twelve months went.

Rental Income

Months Occupied Rent Collected
Apartment 1 7 + 3/4 months $8,356.94
Apartment 2 10 + 1/2 months $9,959.68
Total Income $18,316.62

Rental Expenses

Mortgage Payments $9,099.00
Home Equity Loan Payments $1,363.73
Property Taxes $3,606.61
Insurance $2,351.00
Maintenance $6,043.65
Electric $616.67
Gas $985.62
Water & Sewer $250.47
Miscellaneous $35.00
Total Expenses $24,351.75
Less Loan Principal 4,242.64
Expenses Less Principal $20,109.10

Total After 12 Months

Total Income $18,316.62
Total Expenses ($20,109.10)
Profit $(1,792.49)

Well what a difference five months makes! After just five months of normalcy, we brought that 10k loss down almost to our breakeven point! That didn’t take long at all.

Over the past five months, aside from our fixed costs of a mortgage, home equity loan payment, and utility bills, the only big expense we had was a new washing machine for one apartment. You’ll remember, we had to buy a washer and dryer pair for one apartment to get it rented.

Well, the other apartment’s very old washer (on left, at least 30 years) started giving the tenants problems, so we replaced it rather than try to fix it. The new washer cost $582, so if it lasts 30 years… hell, if it just lasts ten years, it will be worth it. That would be just $58.20 per year against $11,400 of annual rent payments for that apartment.

Hey, also a nice estimation by me regarding the gas expense. I estimated it would cost $100 a month, averaged throughout the year, and it came out just under that. Even though I had the heat turned up to a stifling 71 degrees just to keep everyone happy.

With a sunny outlook towards the future, let’s take a look at what would happen…

If the next year is like the last five months

Assuming we get new, good tenants and everything stays stable like the last five months, this is what our annual income statement would look like next year:

Total Rent $24,410
Mortgage Expense ($9,099)
Home Equity Loan ($1,364)
Utility Bills ($1,900)
Maintenance ($1,200)
Property Taxes ($3,650)
Insurance ($2,400)
Total Cash Flow $4,797
Plus Loan Principal $4,300
Total Profit $9,097

I guess we’ll just have to wait and see and check in again next year at this time. If the property continues to generate a nice cash flow, it might be the early retirement helper everyone dreams of. Fingers crossed!

What’s your favorite form of passive income?

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