$127,000 of Gross Revenue | Anno Darwinii 2.5

In this winter edition of Anno Darwinii, I’ll show the income from our real estate portfolio for the last year, plus give a quick update on the status of our most recent deals.  

$127,000 of Gross Revenue | Anno Darwinii 2.5

On the West Coast, the holiday season is tiptoeing along in between waves of the Covid pandemic.  My family has been happily enjoying Thanksgiving, cooler nights, and foggy SoCal mornings.  I’ve been also feeling grateful for our good fortune.

Although I complain about golden handcuffs and stress from work, I’m actually very thankful for my job.  It allowed me to obtain the three things I wanted by going into medicine:

  1. The chance to help people
  2. A reliable source of income
  3. Respect and prestige

In the last few years, it’s also allowed me to invest aggressively into stocks and real estate.  

On the topic of real estate, let’s get on with the update.  This is an edition of Anno Darwinii, the official report on the growth of my real estate empire that I publish every few months.  This is Anno Darwinii 2.5, which means it’s been two and a half years since our first real estate purchase.

Today, I’m going to highlight some of the numbers, because they’re starting to get big.  

Gross Revenue

In the last year, the gross revenue from our rental portfolio totalled $127,108.

Here’s an actual screenshot of our recent income report from Stessa:

This represents income from 10-12 units, depending on the month.  Specifically, the income is coming from:

  • Two single family homes
  • Four duplexes
  • 1-2 apartment units

All of these units are being rented on a long term basis, except for half of a duplex, which is being rented as a mid term furnished rental (month to month).  

Profit

In terms of profit, our real estate business is not netting any profits at the moment.  All of the income went to these expenses (among others):

  • Reinvestment into our other units under renovation
  • Mortgage payments, tax, and insurance
  • Repair and maintenance
  • Property management
  • Legal fees
  • Utilities

Thus, on paper, our real estate business is operating at a loss.  We would have profits if we stopped expanding our portfolio, but we’re in a growth stage right now.   So all of our real estate income gets pumped straight back into the empire.  

Indy Apartment Building #1

Indy Apartment Building #1. TheDarwinianDoctor.com

This is an 8 unit apartment building that we purchased in January 2021 for $431,000.  It was in horrible shape when we bought it, so we budgeted $285,000 to fix it up.  We also hoped to use that pot of money to add two more units to the basement, making it a 10 unit building.

Alas, not everything goes according to plan.  The renovation took months longer than expected, and we are just now putting the finishing touches on the first two floors of the building.  The good news is that the units look really fantastic.  There’s a lot of interest in the finished units and they’re already starting to get leased out.  

The basement is another matter entirely.  We spent a total of $300,000 to finish just the first 8 units, and are looking at another $100,000 to finish the basement.  It’s not entirely clear to us that it’s worth the money.  For now, we are collecting some more quotes before we decide on the best plan of action.  

Here are some before and after pictures:

Before

After

Video walkthrough of finished unit

Youtube video of a finished unit

Indy Apartment Building #2

This is a 7 unit apartment building that we purchased in mid 2021.  It’s a building that probably used to be one big house, that’s been chopped up into 7 small and strangely laid out units.  

It’s a good example of the pitfalls of long distance real estate investing, since a lot of the strange features only became clear when my wife visited the building after purchase.  Prior to the purchase, I relied on the walkthroughs from my realtor and project manager.  They haven’t steered me wrong before, but I fear we may have missed the mark on this one.  

So far we’ve done some minor updates to the units, but there is overall pretty low interest in the units.  

Our plan moving forward will include some mix of these options:

  • Updating all dated appliances
  • Adding granite countertops to all kitchens 
  • Converting some of the units to Airbnb
  • Adding a washer/dryer to the basement

While it’s easy to get frustrated at this purchase, my wife and I are seeing it more as a puzzle that we need to solve, instead of a bad deal. 

The empty lot

We are also spending a little bit of time thinking about the beautiful empty lot next door.  I’ve always been interested in ground up development, and this might be an option for us to dip our toes into this type of real estate investment.  

Some options we’ve considered for the lot:

  • Sell the lot by itself
  • Build a single family home plus ADU and rent both
  • Build a quad-plex and rent it long or short term
  • Build a duplex and rent it long or short term

The Vacation Rental

This home has been taking up the majority of our attention these days. 

Since we purchased our vacation home in Palm Springs, it’s been one challenge after another.  First, we couldn’t find a pool builder who’d commit to building a pool earlier than spring 2022.  Next, we spent literally months before finalizing a renovation plan for the interior.

We had to come to grips with the fact that renovation in California is much more expensive than renovation in Indianapolis.  We’ll likely be spending about $300-350k to renovate the house and finish the backyard.  This is a good example of the crazy difference in costs you can see between a high cost of living area and a lower cost of living area.  

Here’s a short list of the major surprises that led to cost overruns:

  • No insulation in the walls
  • Not one, but two sewer lines 
  • Septic tank buried in the backyard

Here are a few pictures of the renovation:

Here’s some time lapse photos of our pool install in the backyard:

Conclusion

As our portfolio has grown, it’s become too big to neatly summarize in one post.  I doubt anyone’s even reading at this point.  (If you are, please drop a comment down below!)

From now on, my Anno Darwinii posts will give a high-level overview of our portfolio’s changes and income.  In addition to this, though, I’ll be doing short weekly updates on my real estate and business portfolios in a new series called “Building the Darwinian Empire.”

Have a great week!

–TDD

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Financial Samurai
9 months ago

I enjoyed the before and after pics! Always so satisfying. I’m doing a loooong remodel too on a rental. Hope it’ll be done in 2 months. Been 2 years! Lol

Sam

Financial Samurai
9 months ago

Covid delay by 1 year. And contract not organized.

Btw, you mention gross rent. When is the NEt rent after operating expenses and before tax?

IM-PCP
9 months ago

You’ve had quite the saga so far. Do you have a target income at which you will just sit back and let the rents flow in? Or is it still very far away?

Serena
Serena
9 months ago

What does ADU stand for? Enjoyed reading! And always love before and after photos. Not sure how you have time to do all this and your day job! How much time do you budget for the real estate?

Pat B
Pat B
9 months ago

Thanks for the honest detailed dive into your Realestate holdings and plan. Looks like a great deal of cash flowing opportunity once they are all in service. We started a similar path (slightly smaller scale) back in 2016 on the east coast when prices were different than today. For the first three years it just felt like a lot of work until I did a year end summary and found cash flow, equity gain from both sweat and paying down notes and significant market appreciation came together like the perfect storm. I would think you will experience even more significant exponential gains than we did. I appreciate your post.

Laxlover
Laxlover
9 months ago

Thank for the details and honesty! Had no problem reading to the end and would love more details- maybe doing one property at a time for the acquisitions this year. This shows us that Real Estate is a long game, but at the end there are so many advantages with cash flow, debt pay down and tax benefits. I am in the growth phase and always reminding myself of the real estate long game and luckily still working my doctor job, but enjoying all of it right now.

John S
9 months ago

I’ve been reading your blog for a long time and have loved hearing about your progress in building your real estate empire. The pivot to real estate has been fun to watch. I appreciate the authenticity you bring. Keep the updates coming!

Tartesos
Tartesos
9 months ago

Thanks for sharing this!
I’ve been In the same mindset since oct 2018 when we bought our first duplex, things were still cheap then! 85k cash flowing 300 after all expenses and still does.
I’ve been focusing on class c neighborhood rehabs locally and oh boy! Wish I had done it sooner, 2% + returns even during these times.
Don’t knock that out and don’t be afraid of the “hood”.
Congrats on your progress!

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rentalpropertydoc
rentalpropertydoc
9 months ago

Nice update. Exciting progress so far, and impressive to see how far you’ve come in just 2.5 years. Your mindset in approaching the “puzzles” is laudable.

I’m curious to learn more about how you’ve financed the multiple six figure reno projects, including the vacation home.

I know your W2 cash flow is significant and you are also reinvesting profits from the RE business, but that’s still a lot to finance in cash while presumably still funding other investment/savings buckets and day to day expenses.

Thanks for sharing your story!

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[…] Read about this and see the before and afters photos in the last episode of Anno Darwinii. […]

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