In today’s Anno Darwinii post, I’ve got a cash flow update, a report on my problem properties, and pictures from the apartment building renovation.
It’s an interesting time to be a real estate investor. Housing demand is high and supply is low, which has created a perfect storm of dizzying prices. I’ve been approaching the market warily in my everlasting search for more property.
In the meantime, I’ve taken the time to stabilize our existing portfolio and move forward with renovations on the apartment building.
2020 cash flow: $9,729
Last update, we only had 3 properties stabilized, which means they were fully renovated and tenanted. Together, they generated about $9,729 of income in 2020. This was less than projected, but not bad at all. Every cent was pumped back into our real estate fund.
2021 projected cash flow: $28,883
In early 2021, we finished the BRRRR process on two of the three duplexes I picked up in 2020.
Check out this post for more on those two duplexes: Returning 17-50% via the BRRRR method for Duplex #2 and #4
With these properties now stabilized, rented out, and refinanced, the cash flow situation for 2021 is looking much more substantial.
Between these 8 doors, I project we should net almost $29,000 in 2021. That’s a big jump from 2020!
You may note that my Birmingham property is projected to be less negative this year! *Cue hesitant clapping* Here’s the update on that property, below:
The Birmingham turnkey
Last time I reported on this property, I was losing a lot of money every month. Even though I had a tenant in the property, she was either voluntarily or involuntarily not paying her rent. (This is called “economically vacancy.” This situation is different from normal vacancy, where there is no tenant living in the unit.)
Each month of economic vacancy cost me $830 of lost rent.
I’d like to assume that the tenant was just on hard times as a result of the pandemic. Certainly this is the unfortunate case for a lot of renters right now. Even if she was intentionally taking advantage of the national eviction moratorium, there really wasn’t much I could do about it.
Some good news
Then I got good news from my property manager at the end of February. The tenant disappeared!
While in most situations this would be a bad thing, I was happy. Why?
I had no real expectation that the tenant would ever have been able to pay me back for the missed rent. In total, the tenant missed about 6 months of rent, equal to $4980. What struggling tenant would ever be able to come up with that cash?
Not only did she leave without a fuss, she left the property in surprisingly good condition. There was minimal wear and tear, and I think she even mopped!
So in March, my property manager turned the property over with some minor repairs and paint. (We used the old tenant’s security deposit to fund the turnover costs.) Now, for the first time in over 6 months, the property’s generating income!
We were able to raise the rent from $830 to $875, and after all expenses are taken out, it’s cash flowing positive on a monthly basis! Well okay, it’s netting a whopping $84 a month. It’s not much, but it’s better than nothing.
I’m still a bit conflicted about what to do with the property. It’s not performing nearly as well as the BRRRRs I’ve done. Even assuming that the tenant stays the year, it’ll only yield 4% cash on cash for the term of the lease.
I’m increasingly tempted to sell the property and take the equity elsewhere.
The “problem child” duplex
I attempted to BRRRR this duplex also, but ran into a big appraisal shortfall. Rather than settle for leaving about $100,000 of equity locked in the property, I cancelled the refinance.
Since then, a few things have changed:
- We rented the right side for $1300/month in a 1 year lease
- We turned the left side into a cute furnished short term rental
- We added a fence to the backyard and seeded the lawn
Here are some pictures from the furnished side:
Visiting Indy? Come and stay in our 2 bedroom airbnb!
With all these changes, plus some good recent sales data in the neighborhood, we’re going to give the refinance another try.
Update on the 10 unit apartment building
Finally, renovations at the apartment building are underway. So far, my contractor has addressed the following items:
- Water heater installation
- Plumbing rough-in
- Roof patch and repair
While these six water heaters may just be a small part of the renovation, they represented the first signs of progress. Therefore, I feel warm and fuzzy whenever I see them stacked nicely side by side.
The roof renovation is one of those things that no tenant will ever see, but if the roof isn’t sound, it’ll create problems down the road. So I was happy also to see the pictures of the roof remediation too.
Next up for the apartment building: electrical work!
I hope you enjoyed this Anno Darwinii update on my real estate empire. In 2021, I project we should net about $29,000 from our stabilized units. Hopefully I’ll be able to stabilize the other 12 units in Indianapolis before year’s end as well.
Despite being in a very “hot” real estate market right now, I’m trying to consistently find and pursue deals. It keeps my analysis muscles toned and keeps my realtor engaged.
I figure that as long as I consistently buy deals every year, it’ll be similar to “dollar cost averaging” investments into the stock market. Some investments will be huge winners and some will be like my Birmingham property. But in the end, the overall trend will be positive.
I’m currently in the midst of vetting another small apartment building in Indianapolis. I’m also educating myself on short term rentals, and hoping to enter this space as well in the near future.
Suffice to say, there’ll be a lot of great content coming your way, so stay tuned!
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