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In 2019, my properties brought in $40,399 in rental income.
But income is a vanity metric. We want to know how much of this was profit, right?
So here’s the breakdown (thread
)
But income is a vanity metric. We want to know how much of this was profit, right?
So here’s the breakdown (thread
)
Operating expenses came out to $19,508. This includes property tax, management, insurance, repairs, and HOA (only applicable on 1 property).
Mortgage payments came out to $14,218. All my loans were taken out at 75-80%, fixed rate for 30 years.
So cash flow (profit) came out to:
$40,399-$19,508-$14,218 = $6,673
This comes out to a 7.26% cash on cash return from all my cash invested through last year.
These numbers won’t blow anyone away, but there are a couple of important takeaways for me:
$40,399-$19,508-$14,218 = $6,673
This comes out to a 7.26% cash on cash return from all my cash invested through last year.
These numbers won’t blow anyone away, but there are a couple of important takeaways for me:
1. Turnovers kill cash flow.
We had a tenant leave last year after only staying in the property for 1 year and getting the property rent ready again set us back $3,500. But that’s part of this business.
We had a tenant leave last year after only staying in the property for 1 year and getting the property rent ready again set us back $3,500. But that’s part of this business.
2. These numbers prove buy & hold isn’t get rich quick.
It’s funny how people think u must be rich if u own property. Not true. If u don’t have a long-term mindset, you’ll give up too early. Rent growth, debt paydown, + (hopefully) some appreciation is what I’m banking on.
It’s funny how people think u must be rich if u own property. Not true. If u don’t have a long-term mindset, you’ll give up too early. Rent growth, debt paydown, + (hopefully) some appreciation is what I’m banking on.
3. The tax benefits of real estate will offset most, if not all, of my cash flow.
Get a good CPA. Once you have some assets, they are worth every penny.
Get a good CPA. Once you have some assets, they are worth every penny.
4. I need to buy better and take on properties with more meat on the bone.
I’ve primarily bought turnkey properties because they’re an easier way to get started. After a couple of years now, I’m ready to take on properties that require more work but can be bought at a discount.
I’ve primarily bought turnkey properties because they’re an easier way to get started. After a couple of years now, I’m ready to take on properties that require more work but can be bought at a discount.
5. Using financing seems like a cash flow killer, but it actually allows you to increase your cash flow and grow your portfolio faster.
Here’s a simple example I shared recently that explains this: https://twitter.com/emilshour/status/1253351216198942724
Here’s a simple example I shared recently that explains this: https://twitter.com/emilshour/status/1253351216198942724
