We Earned $231/hr From Our Rental Properties in 2018

The 2018 #s are in! The biggest # we track when it comes down to it is cash flow. While cash-on-cash return comes in at a close second for priority, the main focus for us is cash flow. And while I don’t go into net worth accumulation by someone else paying down your debt (i.e. the tenants) nor do I go into tax advantages, those are hugely beneficial and worthy of their own post. Today, just cash flow. There are several rules of thumb most people use when analyzing properties for cash flow: the 50% rule, the 1-2% rule, the $XXX/per door rule, the Lobster rule, the Alexa rule, the downward dog rule, all sorts of rules. Our primary focus is $100/per door/month and 50% rules.

Wait, before we go any further most of you know I’m involved in a 42 unit apartment complex. For this exercise the 42 unit is not being considered as we are still in process of stabilizing a heavily deferred maintenance property. I’m also not sure my partners want me sharing detailed info on that asset with the world wide webs so I’ll keep this exercise to the properties just my wife and I own. However, 2019 is looking VERY promising for the 42 unit.

Moves & Acquisitions

In 2018 we sold one property (our very first rental property in Pensacola – the one we’ll never sell!) and 1031 Exchanged into a 4 plex. Other than that our focus was geared toward stabilizing a couple acquisitions that were made in mid-late 2017.

Thank You PM Teams!

I can’t say enough about our PMs. Having a full-time job and growing family (ref: How I Balance), we have very little time to focus on managing these properties, plus managing our own rentals is just not what me or my wife want to do. Thus we hire professional property managers to manage all of our properties. We have a few different property managers based on our properties’ locations being in different cities, BUT those property managers are a huge part of why our hourly # is so high. All in all, we averaged about one hour a week working with our property managers. So 52 hours a year. Thank you Team! YOU GUYS ARE AWESOME!

The Numbers

Before we get started, here are a few definitions to ensure you and I are on the same page when it comes to The Numbers:

  • Expenses column includes mortgages (if applicable), insurance, taxes, property management fees, repairs, legal fees, miscellaneous operating expenses and capital expenses. Our expenses were high this year and I get into that in more detail below.
  • Revenue column includes rent, pet fees, and late fees.

Again, I can’t say enough about our PMs and the systems they have in place to keep us abreast with situations but overall they just handle them. So here is how I came to us earning $231/hr on our rental properties in 2018:

  • 52 Hours Worked for the Year (thankful for awesome PMs)
  • $12,038 Annual Cash Flow in 2018
  • $12,038 cash / 52 hours = $231.50/hr

One goal we want our assets to accomplish are $100 cash flow per door/per month. On average we were just shy of that in 2018 so I won’t spend any time discussing that here, but I do want to address the 50% rule.

Not Meeting the 50% Rule

For those of you not familiar, the 50% rule simply states that fifty percent of your rental income should cover all of your expenses (I’m grossly summarizing for the sake of this post). And since only 1 of our properties met the 50% rule, I feel the need to explain, just how close the rest of them were and the importance of keeping separate, sacred accounts for each property to cover vacancy and the more costly, unexpected capital expense items.

  • Little Yellow House: we actually sold this property in February 2018, so only two months into the year. The sell of this property yielded a 77.5% ROI for the life of us owning this property. The proceeds from this house were 1031 exchanged into the 4 Plex – Mobile. So while we experienced a negative cash flow for the 1st two months of 2018 with this property, all-in-all, it provided a great return from acquisition to exit.
  • Duplex – Gulf Breeze: We replaced one unit’s HVAC at a cost of approx. $3700. Not having to do so would have easily put this property above the 50% rule. Thankful for the reserve accounts we established. If you’re not establishing those reserve, sacred accounts for capital expenses and vacancy, DM me.
  • 4 Plex – Mobile, AL: this was the acquisition we 1031 exchanged into from the Little Yellow House. Almost completely turn key, but we had one tenant turnover and a few large repairs to make during the acquisition process – no worries though, we bought this at a bargain!
  • Mobile Home – Pensacola: this is the property from our First Tax Deed Auction. It had a rough 2018 with a tenant turnover, vacancy, a HVAC replacement and some fairly major plumbing issues resulting in >$3k in expenses. 2019 should be a strong, stable year for this one.

In closing, 2018 was a profitable year and I am anticipating 2019 to be much better. By that I mean I’m anticipating our cash flow to almost double as a result from just the two transactions. And while most investors don’t look at hourly earnings from rental properties, my W2 background has me thinking that way. If you’re not engaged with our group on Facebook, you’re missing out on conversing with us and 4,500 other W2 real estate investors. Join Us: Real Estate Investing for the W2 Employee

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Put Me in Coach! I’m Ready to Invest in Real Estate!

Sabrina has spent the last 20 years on the real estate investing sidelines and today we cover an array of topics while she has the opportunity to ask her 5 most pressing questions as a newbie real estate investor.

Last week I had the pleasure of talking real estate investing strategies with Sabrina, our most recent Facebook Group Contest winner, and Chad Carson from www.CoachCarson.com. The contest was centered around Chad’s upcoming book release, Retire Early with Real Estate and when he found out about the contest, he offered up this one-on-one time with our winner. Thank you Chad!!!

Sabrina has spent the last 20 years on the real estate investing sidelines and today we cover an array of topics while she has the opportunity to ask her 5 most pressing questions as a newbie real estate investor:

  1. How can I use an FHA purchased property to make money?
  2. Is it best to have a mentor when you’re new to REI?
  3. What was your biggest challenge when starting out?
  4. If you knew then what you know now, what would you have done differently?
  5. What is your best advice to someone new to REI that has not yet completed a deal?

 

 

Links mentioned in the interview:

Time to Reflect, Time to Set 2018 Goals and Begin Pursuit

I love this time of year. Time to reflect and time to focus on setting goals for the New Year. I took the above photo at my parents’ over Christmas. Don’t recall ever experiencing a sunset quite like this growing up there but then again I probably wasn’t looking as a teenager. Wish the camera did it justice; “That’s beautiful Clark.”

2018 Goals

The last couple of years I have accomplished my REI goals early. Maybe the process I follow is just that good or maybe I’m not shooting high enough. This year I’ve decided to test that theory and shoot for some lofty goals. They are:

  1. Increase Annual Passive Rental Income by $2,000/month
  2. Increase Social Media Following: 10k IG Followers, 1k FB Likes, 1k Blog Subscribershelp me reach my goal! Follow, Like, Subscribe!
  3. Graduate Cardone University
  4. Knock The Dust Off The Gray Matter

REI Strategies. Lessons Learned. How-Tos. No Spam…Learn More. 

A sneak peek into the process I follow, with my goals set, I now create a 2018 Playbook of drills and tactics to help accomplish them. This process takes a while as I really dive in but typically yields 3-4 pages of waterfall steps, with each step gaining granularity in detail toward a daily or weekly activity to help accomplish my goals. This year I started this process in November and used most of December to fine tune the super simple spreadsheet I create for tracking (keeping myself accountable) those daily activities. Call it batting practice or daily workouts but I’ve followed this process the last couple years and I’m extremely happy with the results. I may write a more detailed post on the process I follow soon (still refining), but for now, email me [ jay@helmsREI.com] to learn more.


Last item on the 2018 list is expand the knowledge base. Knock the dust off the gray matter. Following the lead of the most successful CEOs who read 60+ books/year, I’ve identified 8 Must Reads for 2018. I’ll consume an additional 50+ hours of real estate related podcasts over the coming year, but these books keep popping up on my radar.

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8 Must Read in 2018

Ok, there’s 9 in this screenshot but Grant Cardone’s Millionaire Booklet isn’t new and is one I’ll listen to 3-4 times throughout the year. Such a simple, quick & easy read. And if the below looks like a screenshot from iBooks, it is! I hardly have time to sit down and turn a page but I make the most of the windshield time the day job brings me.

2017 Year End Review

2017 Goals (accomplished all by September 2017):


Most Popular Blog:


Most Engaged Instagram (photo credit: Mrs. HelmsREI):


And, I wrote an impromptu Christmas poem during the first trek of our Christmas vacation:

 

Happy New Year!

#HelmsREI

Results from Certified Letter to Unknown Occupant [Letter]

 

Shortly after the letter was delivered via Certified USPS mail (signature on delivery), I received a phone call. Although short-lived, I was excited to learn the current occupant was willing to sign a lease.
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Back in November I wrote a blog titled My First Tax Deed Purchase and described the situation of an unknown person living in a property I just acquired through the Escambia County Tax Deed Auction in Pensacola, FL.

REI Strategies. Lessons Learned. How-Tos. No Spam…Learn More. 

After consulting with my attorney, I rectified the situation by drafting the letter below. This is a copy of the actual letter I sent to the person occupying the property.

Shortly after the letter was delivered via Certified USPS mail (signature on delivery), I received a phone call. Although short-lived, I was excited to learn the current occupant was willing to sign a lease. Two months after signing the lease the eviction process began. Related Articles below go into more detail on how the evicted tenant destroyed this Pensacola property and our improvement efforts afterwards. Spoiler Alert: we rid the kid filled neighborhood of one of the most worthless human beings I’ve ever met. A drug dealer/user who allegedly was stealing his mother’s disability checks.  

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#REI  #RealEstateInvesting #HelmsREI