I Earned $18,143 in Gross Passive Income
My February Rental Property Investments Report
"I'm Rich Because of Real Estate!!!"
...is what the headline might say if I were one of those late night infomercial guys. The reality is - what you bring in is not what you really earn. I've decided to put monthly updates about my passive income. I'm a little nervous putting up such personal information online for literally anyone to see. It's not a small thing to do, but I'm truly interested in sharing the in's and out's of investing and I want you to know that I really live by what I say...So, now you can take this information and decide if you want to go down the same path as I have, or continue on without real estate.
Gross Income is your total income before all expenses. Real estate has a remarkably stable monthly income, unless you have vacancies of course, but with any business expenses can fluctuate wildly from month to month. I pay some bills quarterly (taxes & water), yearly (accountant & Uncle Sam), or randomly depending on need (contractors & repairs). It's really important to look at the data over a quarterly or yearly basis in order to truly understand the income and expenses.
Here is a quick breakdown
Gross Income: $18,143
- Water/Sewer: 793.74
- Insurance: 308.94
- Property Taxes: 1674.79
- Interest Expense: 3082.6
- Professional/License Fees: 219.80
- Repairs/Maintenance: 225
- Grounds keeping: 126.74
- Utilities: 143.88
- Property Management Fees: 200.00
- Misc/Other: 184.93
Net Income: $11,182.58
I really did have a Great Month! Unfortunately, investing in rental property is not all rainbows and unicorns.
More Detail on My Rental Expenses
The reality is, this was a very low expense month. Each year and quarter there are so many charges that aren't included. Don't read too much into the $11k number as its actually a bit lower when considered over the entire year.
Water & Sewer expense is something I hate paying. It fluctuates wildly, I have no control over it, and tenants rarely tell you when the toilet has been running non-stop for 3 months. Compounding the problem further, I get billed quarterly for this expense which means a leak can rack up thousands and thousands in expenses before you even know it's leaking!
This water bill is only a portion of what I pay on my rentals. For some reason, the towns and cities don't send out all the bills at the same time, or even forget to send them completely. Because of this, they usually get paid across two months. We also have some leeway in paying them so we might stagger paying the bills in order to keep our cash flow higher each month.
This one get's recorded in a really weird fashion because of how I have my different LLCs set up. Some properties pay insurance yearly, others escrow it in the mortgage payment and the bank pays it yearly, and others pay monthly. This insurance amount listed here cannot simply be multiplied by 12 to get the entire year worth of insurance.
Just like water/sewer, my property taxes are a mess. The government never gets the bills out on time or to the right address and they get paid across multiple months because of this.
It is much better to look at quarterly expenses to get an idea of the true water and property tax expenses.
Ahh, so you noticed I wrote "Interest" and not "Mortgage". Mortgage payments are made up of Principal payments - a transaction from one pocket (my bank account) to another (the equity in my property), interest - the cost of financing, insurance escrow - giving money to the bank for them to pay a bill later, and taxes escrow - again, letting the bank pay your bills. three of these transactions affect your cash-flow, but not your net income.
I may include a cash-flow analysis later, but for now I'm focused on profit.
The Other Rental Expenses
I think these are pretty straight forward and don't need much explanation.
My Investment and Business Goals
It is important to have goals in order to drive your growth. I don't believe goals are set and stone and I strongly encourage people to revisit their goals and make adjustments to them. I'll revisit and update these goals as I move forward so I can keep track of the progress.
Where I See My Rental Investments and Businesses in 12 Months
Investments - I would like to invest in my first large multi-unit building. My goal is 10-20 units in size, effectively increasing my investments by 50-100%.
Business - I hope that my new startup idea will be profitable, earning at least $500-1000/month and the brand is starting to be established.
Website/Blog - I would like to have more than 5,000 unique visitors per month, my first book will be finished, and I'm generating at least enough revenue to cover the expenses.
6 Month Goals
My primary goal in the next 6 months is to find additional investors who would like to partner with me in order to achieve my goal of purchasing the large multi-unit building. I already have around 2/3 of the money needed, and just need to get over the hump.
3 Month Goals
- I plan to reorganize/restructure my LLCs so that the rental expenses are easier to manage, accounts flow together, risk is limited, and credit is more readily available so I can grow my rental income faster.
- I will do an extensive review of our insurance policies to make sure we have the proper coverage.
- Successfully find 1-2 new investors in China when I visit there.
- Identify the manufacturer of our first products.
- Get the website built, logos made, LLC formed etc....
- Get our products listed and selling on amazon just to build up reviews as a seller. I don't expect to earn anything while we do this.
- Since the blog is relatively new, I'd like to see some organic search traffic within the next 3 months.
- Start building some link-backs from other quality sites
- Get my e-book finished
Now It's Your Turn
You should create your goals. Share them with me and we can go over some ideas to get you on track.
Please don't forget to share this article!