Our Rental Properties Generated $44,788 in Rental Income in 2020. Here’s Our Actual Cash Flow.

In a year where we sold one property and added another to our portfolio, our gross rent on 4 properties (6 doors total) was $44,788. After expenses and mortgage/interest/property tax payments, our properties netted $10,302 in cash flow (i.e. profit). 

Here’s my spreadsheet breaking down all income and expenses from our properties in 2020:

The quick summary of those numbers:

Gross rent: $44,788
Operating expenses: $17,464
Mortgage payments: $17,021
Cash flow: Income ($44,788) – Expenses/Debt Payments ($17,464 + $17,021) = $10,302

If you’re curious, here’s how prior years stacked up in terms of both rental income and cash flow:

  • 2017: 2 doors, $11,299 in gross rent, $3,383 cash flow
  • 2018: 3 doors, $28,289 in gross rent, $6,471 cash flow
  • 2019: 4 doors, $40,399 in gross rent, $6,853 cash flow (read my 2019 rental income report here)

In terms of investing activity during 2020, the highlights were:

  • Selling our Memphis property
  • Buying our first small multifamily, a 3-unit building in St. Louis. I’m planning on doing a writeup on this property sometime in 2021 after we’ve made some improvements and raised rents to market.
  • Doing a small cash out refinance on our Jacksonville property. More on this in the “Top Takeaways” section at the end of the post.

All in all, $10k in cash flow on essentially 3 homes is solid. My goal is to get this portfolio to $100k per year in cash flow and in 2020 we got 10% of the way there. But here’s the thing…

I could fool myself into thinking “all I need to do is 10x this portfolio (i.e. 30-40 units) and we’ll be good”. In reality, real estate expenses are lumpy. Some years have bigger expenses than others. This was a very easy year. We didn’t have any tenant turns or major repairs to deal with, which is why we did so well. Most years won’t look like this.

If we had 1 roof that needed to be replaced, our entire year’s cash flow would have gone out the window. So I think it’ll take at least 50-75 units to truly get to my $100k/year goal. We’ll see though. Now that I’m starting to focus on small multifamily, it’ll be interesting to see how that cash flow ends up looking compared to what my pro forma estimates it’ll be.

 

Lifetime Performance

It’s now been 4 years into this investing journey, and here’s what we have to show for it:

Like I mentioned last year, these numbers aren’t extraordinary, but the snowball is slowly starting to grow bigger. All the cash flow we earn from our properties has gone right back into acquiring new properties.

While this didn’t lead to much buying in 2020, we are now sitting on more cash to invest than I’ve ever had before. Demand is high and supply is super limited, meaning deals are getting harder to find. So we’re being patient and waiting for the right opportunities.

 

Top Takeaways From 2020

With another year of investing came a couple of new learnings for me:

  1. Focus on 1 market. If you look at our portfolio, we were all over the place on the first couple of properties. I thought I was being smart and diversifying, but this year I realized that was not a great move on my part. I’m now focused on 1 market (St. Louis) where I look at listings daily, actively network in, and continually learning about. It’s hard enough to learn a market you don’t live in as it is, let alone multiple. 

  2. Stay active in your market, even if you’re not currently buying. This one may seem obvious, but it wasn’t to me for the last couple of years after I ran out of cash to buy another property. I’d wait until I had enough cash and then started looking around for a deal. Now, I look at new listings daily whether I’m ready to buy or not. This helps me keep a pulse on the market and (hopefully) keeps my deal spotting skills sharp. Even though 99% of the stuff posted publicly doesn’t end up being a great deal, it still helps you learn your market and categorize listings as bad, average, good, or great deals. This is something I’ve taken to heart from author/friend/mentor Michael Zuber. The thought process here is if you only look at listings when you’re ready to buy, what looked like a great deal 6 months ago might actually just be an average deal now.

  3. Don’t blindly trust Zestimates. This year was my first time doing a cash out refi and the main lesson was don’t blindly trust Zestimates. It ended up only putting $5k back in our pockets because the appraisal came in way lower than expected. 

  4. Get enough insurance coverage. I was underinsured on a couple of properties and I’m lucky that a friend pointed this out to me. I ended up shopping my insurance premium around with a couple of brokers and am now paying almost the same as I was before, but with much better coverage.


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