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September Rental and Side Income Revisited

{ 23 comments }
rental income September 2011

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I posted our September Cash Flow earlier this week and many people are interested in the details, so this is the follow up post.

Rental Income

When I was going through the details, I realized that I missed some big parts of the rental balance sheet, namely property tax and insurance (my editor missed it, too). We pay property tax once a year so it doesn’t show up on the monthly statement. We also paid a year of insurance in advance on the 4 plex and that doesn’t show up on the cash flow either.

Here is the real rental balance sheet. Unfortunately, it’s in the red this month.

income expense cash flow
rental home
rent $1,450.00
mortgage $907.00
HOA $20.00
prop tax $287.83
insurance $20.00
$1,450.00 $1,234.83 $215.17
4 plex
rent $1,390.00
expense $1,465.00
mortgage $0.00
HOA $0.00
prop tax $366.67
insurance $83.33
$1,390.00 $1,915.00 -$525
September cash flow  $2,840  $3,149 -$309.83

There are some special circumstances this month for the 4 plex. We have 3 tenants right now, so it’s not full yet. One of the tenants is section 8 and the city’s portion of the payment will show up in October. Next month, we should see the rent go up to around $2,250 for 3 tenants. Also, you may notice the mortgage for the 4 plex was $0 in September. The first payment is in October, so it will show up next month. The expenses were also a bit higher than expected. About $900 out of the $1,465 was for repair, painting, and maintenance. That should come down soon after the tenants are settled in. There was some turnover during the short sale process and 2 of the 3 tenants just moved in.

Well, it’s not a great month for rental income after all. I’ll skip the tax deduction from mortgage interest, property tax, and depreciation, since I’m not sure how to calculate it into the monthly cash flow sheet. If anyone has any tips on how to do this, let me know. They are much easier to put into the yearly statement when I do tax.

Also, I already know October will be worse because we repaired the roof and the crawl space, and replaced a stove and a toilet. The goal is to get the last unit filled and finish the repairs this year. I think by December or January, things should start to look much better.

This is my 4plex projection for January 2012.

Jan-12 income expense cash flow
$2,950.00
expense $800.00
mortgage $1,190.00
HOA $0.00
prop tax $366.67
insurance $83.33
$2,950.00 $2,440.00 $510

We’ll revisit in February and see if I’m in the ball park.

Side Income

We had a mysterious $300 income in September and I finally figured out what they were. $100 was a refund for closing the 4-plex a few days later than expected so we didn’t have to pay as much interest. The $200 was from over payment on the insurance. I suppose this cancels out the -$310 negative cash flow from the rental income and we come out about even after all.

The rest of the side income.

$40 – credit card cash reward

$50 – Won from Yakezie 1st twit chat. This will go toward my first P2P account at prosper.com

$1831 – blog income

September was the best month for blog income so far. I think it’s a bit of an anomaly ,though because we closed two long- term advertising deals (12 month term) and they account for 70% of the income.

Another bad thing is that the income all comes from direct advertising. We made about $95 from Google adsense, but I won’t put that in the book until I receive the check. I really need to diversify our blog income structure and work harder on affiliate income. It would also be nice to raise the Google adsense income to at least a few hundred dollars a month. That will take time though.

That’s a wrap for September. Thanks for making me go through the details. Hope this won’t stop anyone from investing in real estate. Blogging is winning at the moment, but I think rental income will come on strong in a few years as rent goes up. That’s why it’s called a long term investment.  🙂

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{ 23 comments… add one }
  • Little House October 14, 2011, 6:58 am

    If you’re trying to boost blog income, contact Crystal. She’s been such a help for me since I haven’t had much time to make advertising contacts myself. At least you have November to look forward to on your rental income. Hopefully you’ll get that last unit rented by the end of the month!

    • retirebyforty October 14, 2011, 9:07 am

      I am already working with Crystal. She is great! I hope that last unit is rented soon. I hate vacancy, now that I’m a landlord. 🙁

  • Everyday Tips October 14, 2011, 7:24 am

    You have grown so much RB40, your adsense revenue will increase I am sure.

    I totally know what you mean about the variable blog income. Some months are fantastic, and others are less fantastic. However, it is the most lucrative hobby I have ever had! 🙂

    Have a great weekend.

    • retirebyforty October 14, 2011, 9:08 am

      Thank you! I was amazed when I made $500 and it’s more amazing every month! You also have a great weekend with your family. 🙂

  • Miss T @ Prairie Eco-Thrifter October 14, 2011, 7:30 am

    I have been trying Media.net instead of Adsense to see if it performs better. So far I haven’t noticed much change, but others have done really well with it. I guess all things take time.

    Good luck in November with your rental income.

    • retirebyforty October 14, 2011, 9:08 am

      I haven’t had much luck with media.net either. They really want to be in your face with their ad and I don’t know if I like that.

    • Kellen October 14, 2011, 11:23 am

      I just got told (by media.net) to sign up for their service, but I haven’t posted any ads yet. Thanks for offering the feedback, I may hold off on putting it up…

      • retirebyforty October 14, 2011, 2:26 pm

        You can try adsense first to have something to compare to. Some people are doing great with media.net, but I’m doing about the same as adsense. I think the focus of the site matters a great deal. I’ll try media.net for a couple of months and see how it goes.

  • YFS @ YourFinancesSimplified October 14, 2011, 9:26 am

    Wow you just game me a blog idea!. I own 2 rental properties and soon to be a 3rd. But I’m curious why did you purchase the 4plex and rent it at a loss?

    • retirebyforty October 14, 2011, 10:04 am

      It’s not filled yet (3/4) and the delayed payment from section 8 makes this month balance sheet looks bad. Of course, I don’t want to have negative cash flow, but we need to repair quite a few things. Once everything stabilized then we should have positive cash flow.

  • 20'sFinances October 14, 2011, 10:09 am

    Even though there is some red here in the report, it is still a great month in general and if things do go up with the 4plex, you will be well on your way to financial freedom. Great work on the blog income. Those are some great numbers and I am sure you can improve to keep it a steady thing.

  • YFS @ YourFinancesSimplified October 14, 2011, 10:11 am

    “Delayed section 8 payment” What the deuce! My payments arrive right on time. I’m sure it was a mistake. As far as repairs go. Did you procure the property with a tenant already in it? I tend to shy away from situations like those since repair are inevitable and besides I don’t want to inherit a crappy tenant.

    • retirebyforty October 14, 2011, 10:33 am

      I’ll call the housing authority to check on that. This is my first time renting to a section 8 tenant. I guess I should NOT trust the property manager too much. Thanks for the heads up.
      There were 4 tenants when we started the process, but the short sale took over 6 months and 3 left during that time… There were quite a few delay maintenance since this was a short sale, but we lowered the asking price by $75k so I think that’s not a bad trade.

  • YFS @ YourFinancesSimplified October 14, 2011, 10:37 am

    I definitely would call to confirm that was the case. I had a really bad property manager at first. Even after firing him the section 8 payments arrived on time to the new landlord. I take 75k off the principal amount any day of the week over the tenants 🙂

  • krantcents October 14, 2011, 1:25 pm

    Good news on the side income. As far as your monthly expenses, you should include 1/12 of your annual expenses each month. You should also setup a reserve for maintenance and vacancy.

    • retirebyforty October 14, 2011, 2:27 pm

      Should I include 1/12 of the expense even when I paid it once a year? I think in the monthly cash flow report, I’ll just put -309 for rental income even if it doesn’t reflect the actual cash flow for that month.

  • Christa October 14, 2011, 1:37 pm

    Breaking even is great! You are making money by breaking even; just think how much equity you are building every single month!

  • Kellen October 14, 2011, 2:01 pm

    Looks like once you get it filled and get all your payments on time, your cash flow will start looking much better :).

    A bit confused about you putting the mortgage interest deduction in your cash flow worksheet – it makes sense to calculate your total profit using this, but your cash flow should be your cash flow. If you didn’t get any cash from it this month, then it wouldn’t be on there right?

    Are you paying property tax monthly (to your mortgage lender) or just once a year when it’s due?

    • retirebyforty October 14, 2011, 2:31 pm

      Hopefully, we can fill it this month! I’m not sure how to put the deduction on the balance sheet either. I’ll probably do a yearly post and include it there since it has real $$$ benefit.
      I pay once a year, that why it hasn’t shown up on previous cash flow posts. I think I’ll just do a rental income balance sheet separately and put -$309 in the rental income category next time.

  • youngandthrifty October 14, 2011, 3:32 pm

    Congrats on the side income (blogging income) That is fantastic!

    Hmmmmmm maybe I should contact Crystal too 🙂

  • Andy Hough October 14, 2011, 5:50 pm

    Most of my side income is from direct ads as well. I’ve been trying to diversify but it is hard to match the income from the direct ads.

  • Roshawn @ Watson Inc October 15, 2011, 8:45 pm

    This is such an interesting read. I love getting a “sneak peak” into what others are doing and how it is working out, so thank you for sharing these details.

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