Now that April 15th is a distant memory, we can take a look at our 4 plex cash flow without cringing about tax. Here is a brief recap. We purchased a 4-plex through a short sale process in October 2011. The previous owner put a stop to all repair and maintenance at one point because the 4 plex was underwater and it wasn’t generating positive cash flow. We made many repairs over the last few years, but there are still quite a few things left to fix. Fast forward to 2014, the local real estate market has recovered nicely and we decided to take profit and a short break from being a landlord. Yes, we did have a property manager, but it still took time and generated stress for us.
Let’s see how the 4 plex did in 2013.
We actually did pretty well on the rent. The place was almost 100% rented in 2013 and we increased rent a little bit. 2014 should be a bit higher, but not by much. One unit is rented to a section 8 tenant so we couldn’t raise the rent there. I heard rent is quite a bit higher in the neighboring 4 plex, but we’d probably need to overhaul the 70s era interior to raise the rent significantly.
We had a 12% increase in property tax. The appraised value increased only 3% as expected, but there were a bunch of bonds passed and other fees added. This was one of the reasons why I wanted to sell. The tax in that area is increasing faster than I’d like.
I think this went down because I moved the umbrella insurance elsewhere. It’s pretty much the same as 2012.
This was much better than 2012. The tenants were relatively happy and nobody moved out. This minimized cleaning and various turn over fees.
We fixed a few major items in 2013 and the repair cost was about the same as 2012. I think all the big problems are taken care of now so the repair cost should go down in 2014. The place is pretty old so I’m sure things will break. The appliances are getting old and probably will need to be replaced at some point.
I’m not sure why it’s so much higher this year. I probably broke out part of it into the professional fee in 2013.
We improved in the positive direction about $2,000. The 4 plex still isn’t cash flow positive, but it’s really close. Actually, about $4,500 of the mortgage payment went into the principal. So even if we’re not cash flow positive, it’s still a gain in our net worth for the year (about +$3,000.)
For 2014, the 4 plex should be very close to positive cash flow assuming nothing major goes kaput. That’s a big assumption on this property though… Instead, we’re putting the 4 plex up for sale to take the gain now. We’ll probably bank 45 to 50 thousand dollars in profit after paying all the taxes and fees. That’s not huge, but we really need to simplify our lives right now and take a little break from being a landlord.
From the financial stand point, it’s probably better to keep the 4 plex for the long term. I’m sure in 5 years, it’ll be cash flowing pretty well. In 30 years, it would be a great part of a retirement portfolio. The big problems for us are the repairs and property management bills. Those two items inflated the overhead and made it really difficult to make money. Next time, I’ll try an owner occupied duplex/triplex. I’d be able to manage and maintain the property myself and reduce the overhead significantly.
How about you? Would you take $50,000 profit now or wait a few more years?
Photo credit – Zillow. Have you checked your home price on Zillow lately? If you haven’t, you might be surprised at how much it’s worth now. Usually the price at Zillow is a bit inflated, though.